Exam 18: Cost-Volume-Profit

Moresan Co. gathered the following information on power costs and factory machine usage for the last six months: Instructions Using the high-low method of analyzing costs, answer the following questions and show computations to support your answers. (a) What is the estimated variable portion of power costs per factory machine hour? (b) What is the estimated fixed power cost each month? (c) If it is estimated that 10,000 factory machine hours will be run in July, what is the expected total power cost for July?

Wendy Industries produces only one product. Monthly fixed expenses are $12,000, monthly unit sales are 4,000, and the unit contribution margin is $10. How much is monthly net income?

A fixed cost is a cost which

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?

In the month of April, Avante Salon gave 2,500 haircuts, shampoos, and permanents at an average price of $40. During the month, fixed costs were $20,000 and variable costs were 75% of sales. Instructions (a) Determine the contribution margin in dollars, per unit, and as a ratio. (b) Using the contribution margin technique, compute the break-even point in dollars and in units. (c) Compute the margin of safety dollars and as a ratio.

Both variable and fixed costs are included in calculating the contribution margin.

Taveras Industries developed the following information for the product it sells: For the year ended December 31, 2016, Taveras produced and sold 100,000 units of product. Instructions (a) Prepare a CVP income statement using the contribution margin format for Taveras Industries for 2016. (b) What was the company's break-even point in units in 2016? Use the contribution margin technique. (c) What was the company's margin of safety in dollars in 2016?

The activity that causes changes in the behavior of costs is referred to as the activity

Nelson Manufacturing has the following data: Variable costs are 60% of the unit selling price. The contribution margin ratio is 40%. The unit contribution margin is $500. The fixed costs are $500,000. Which of the following does not express the break-even point?

Cost behavior analysis applies to

An example of a mixed cost is

Which of the following is not a plausible explanation of why variable costs often behave in a curvilinear fashion?

An assumption of CVP analysis is that all costs can be classified as either variable or fixed.

Which of the following would be the least controllable fixed costs?

To which function of management is CVP analysis most applicable?

Werth & Garza Manufacturing's sales slumped badly in 2016 due to so many people purchasing gifts online. The company's income statement showed the following results from selling 500,000 units of product: net sales $2,125,000; total costs and expenses $2,500,000; and net loss $375,000. Costs and expenses consisted of the following: Management is considering the following alternative for 2016: Purchase new automated equipment that will change the proportion between variable and fixed expenses to 45% variable and 55% fixed. Instructions (a) Compute the break-even point in dollars for 2016. (b) Compute the break-even point in dollars under the alternative course of action.

Which of the following would not be an acceptable way to express contribution margin?

Cost behavior analysis is a study of how a firm's costs

Total fixed costs are ___________ over various levels of activities, whereas total variable costs __________________ directly and ________________ with changes in the activity level.

In applying the high-low method, which months are relevant?