Exam 5: Merchandising Operations and the Multiple-Step Income Statement

Hollis Industries produces flash drives for computers, which it sells for $20 each.Each flash drive costs $12 of variable costs to make.During April, 1,000 drives were sold.Fixed costs for March were $2 per unit for a total of $1,000 for the month.How much is the contribution margin ratio?

Cunningham, Inc.sells MP3 players for $60 each.Variable costs are $40 per unit, and fixed costs total $90,000.What sales are needed by Cunningham to break even?

Chung, Inc.sells 100,000 wrenches for $18 per unit.Fixed costs are $525,000 and net income is $375,000.What should be reported as variable expenses in the CVP income statement?

Fixed costs are $2,400,000 and the contribution margin per unit is $150.What is the break-even point?

Murphy Company produces flash drives for computers, which it sells for $20 each.Each flash drive costs $8 of variable costs to make.During April, 700 drives were sold.Fixed costs for April were $4 per unit for a total of $2,800 for the month.How much does Murphy's operating income increase for each $1,000 increase in revenue per month?

Wilton Co.reported the following results from the sale of 5,000 hammers in May: sales $200,000, variable costs $120,000, fixed costs $60,000, and net income $20,000.Assume that Wilton increases the selling price of hammers by 10% on June 1.How many hammers will have to be sold in June to maintain the same level of net income?

The break-even point is where total sales equal total variable costs.

A variable cost is a cost that

If volume increases, all costs will increase.

Why is identification of a relevant range important?

An activity index might be referred to as a cost

The contribution margin ratio of 40% means that 60 cents of each sales dollar is available to cover fixed costs and to produce a profit.

The high-low method is used in classifying a mixed cost into its variable and fixed elements.

Which of the following is not a fixed cost?

A CVP income statement shows contribution margin instead of gross profit.

A mixed cost contains

Which is the true statement?

The increased use of automation and less use of the work force in companies has caused a trend towards an increase in

Stephanie, Inc.sells its product for $40.The variable costs are $18 per unit.Fixed costs are $16,000.The company is considering the purchase of an automated machine that will result in a $2 reduction in unit variable costs and an increase of $5,000 in fixed costs.Which of the following is true about the break-even point in units?

Gribble Company's high and low level of activity last year was 60,000 units of product produced in May and 20,000 units produced in November.Machine maintenance costs were $104,000 in May and $40,000 in November.Using the high-low method, determine an estimate of total maintenance cost for a month in which production is expected to be 45,000 units.