Exam 21: Cost-Volume-Profit Analysis

Carrolton, Inc. currently sells widgets for $80 per unit. The variable cost is $30 per unit, and total fixed costs equal $240,000 per year. Sales are currently 20,000 units annually. ?The company is considering a 20% drop in selling price that it believes will raise units sold by 20%. Assuming all costs stay the same, what is the impact on income if this change is made?

Match the following terms with their definitions. -Vary in proportion to changes in activity levels

Kaden Company's fixed costs are $46,800, the unit selling price is $42, and the unit variable costs are $24. What are the break-even sales (units)?

If the unit selling price is $40, the volume of sales is $3,000,000, sales at the break-even point amount to $2,500,000, and the maximum possible sales are $3,300,000, the margin of safety is 11,500 units.

A rental cost of $20,000 plus $0.70 per machine hour of use is an example of a mixed cost.

Use this information for Timmer Corporation to answer the questions that follow. Timmer Corporation just started business in January. There were no beginning inventories. During the year, it manufactured 12,000 units of product and sold 10,000 units. The selling price of each unit was $20. Variable manufacturing costs were $4 per unit, and variable selling and administrative costs were $2 per unit. Fixed manufacturing costs were $24,000, and fixed selling and administrative costs were $6,000. -What would be the difference in Timmer's net income for the year if it used variable costing instead of absorption costing?

Global Publishers has collected the following data for recent months: ?Required (a) Using the high-low method, find the variable cost per unit and total fixed costs. (b) What is the estimated cost for a month in which 19,000 issues are published?If required, round answer to the nearest cent.

Variable costs as a percentage of sales are equal to 100% minus the contribution margin ratio.

When units manufactured exceed units sold, variable costing income

A mixed cost has characteristics of both variable and fixed costs.

For the past year, Pedi Company had fixed costs of $70,000, unit variable costs of $32, and a unit selling price of $40. For the coming year, no changes are expected in revenues and costs, except that property taxes are expected to increase by $10,000. Determine the break-even sales (units) for (a) the past year and (b) the coming year.

Spice Inc.'s unit selling price is $60, unit variable costs are $35, fixed costs are $125,000, and current sales are 10,000 units. How much will operating income change if sales increase by 8,000 units?

The graph of a variable cost when plotted against its related activity base appears as a

For purposes of analysis, mixed costs are

The manufacturing costs of Mocha Industries for three months of the year are provided below.​ Using the high-low method, determine the (a) variable cost per unit and (b) the total fixed costs. If required, round answer to the nearest cent.

A company has a margin of safety of 25%, a contribution margin ratio of 30%, and sales of $1,000,000. (a)What is the break-even point in sales dollars? (b)What is the operating income? (c)If neither the relationship between variable costs and sales nor the amount of fixed costs is expected to change in the next year, how much additional operating income can be earned by increasing sales by $110,000?

Given the following cost and activity observations for George Company's utilities, use the high-low method to calculate George's variable utilities cost per machine hour.

If sales total $2,000,000, fixed costs total $800,000, and variable costs are 60% of sales, the contribution margin ratio is 40%.

Given the following costs and activities for Dance Company, use the high-low method to calculate Dance's variable electrical costs per machine hour.​

The reliability of cost-volume-profit analysis does not depend on the assumption that costs can be accurately divided into fixed and variable components.