Exam 2: Introduction to Cost Behavior and Cost Volume Relationships

The following information is for Center Corporation: Total fixed costs \ 313,500 Variable costs per unit \ 99 Selling price p er unit \ 154 If management has a targeted net income of $59,400 (ignore income taxes), then sales revenue should be:

When analyzing cost, think of:

Which value chain function would include depreciation on transportation cost?

If the contribution- margin ratio is 0.30, targeted net income is $76,800, and targeted sales volume in dollars is $480,000, then total fixed costs are:

A small margin of safety may indicate a risky situation.

Cost behavior pertains to how costs affect the activities of an organization.

Highly leveraged companies are less risky than companies with low leverage.

The assumed relationship between the cost and its cost driver

An increase in sales price would cause a decrease in the break- even point.

The relationship between sales and variable costs

Assume the following cost information for Zachary Company: Selling price per unit \ 144 Variable costs per unit \ 80 Total fixed costs \ 80,000 Tax rate 40\% must be sold to earn an after- tax net income of $40,800.

Total fixed expenses / unit contribution margin

Total contribution margin / total sales

Sales mix concept is relevant for all companies, regardless of the number of units produced.

Oakdale Municipal Hospital has variable costs of $80 million per year. These costs represent approximately 80% of the total revenues. There are 50,000 patient- days estimated for next year. Required: a. What is the break- even point expressed in total revenue? b. What is the average daily revenue per patient necessary to breakeven?

If the sales price per unit is $34, the unit variable cost is $19, and the break- even point is 10,000 units, then the total fixed costs are:

Relevant range applies to:

The income statement can be expressed as: Sales - Variable Expenses - Fixed Expenses = Net Income

Cuyahoga County Hospital has overall variable costs of 75% of total revenues and fixed costs of $40 million per year. There are 40,000 patient- days estimated for next year. The average daily revenue per patient necessary to breakeven is:

The break- even point is located at the intersection of the total revenue line and the total expenses line on a cost- volume- profit graph.