Exam 3: Defining and Using Cost Estimates

A manufacturing cost is a cost incurred in manufacturing companies that can be directly tied to making the product it sells.

Breeze Company has a contribution margin of $4,000 and fixed costs of $1,000. If the total contribution margin increases by $1,000, operating profit would:

Cost-volume-profit analysis is an analytic tool used to get a first-pass estimate of how changes in a business will ultimately affect profits and sustainability.

An example of a variable cost at a college would be the registration department.

MetalCraft produces three inexpensive socket wrench sets that are popular with do-it-yourselfers. Budgeted information for the upcoming year is as follows. Total fixed costs for the socket wrench product line is $961,000. If the company's actual experience remains consistent with the estimated sales volume percentage distribution, and the firm desires to generate total operating income of $161,200, how many Model No. 153 socket sets will MetalCraft have to sell?

The relevant range refers to the activity levels over which:

Taylor Corporation is determining the cost behavior of several items in order to budget for the upcoming year. Past trends have indicated the following dollars were spent at three different levels of output. In establishing a budget for 14,000 units, Taylor should treat Costs A, B, and C, respectively, as:

Overhead cost is the sum of the overall direct and indirect costs of making a product or providing a service.

Bolger and Co. manufactures large gaskets for the turbine industry. Bolger's per-unit sales price and variable costs for the current year are as follows. Sales price per unit $300 Variable costs per unit 210 Bolger's total fixed costs aggregate $360,000. As Bolger's labor agreement is expiring at the end of the year, management is concerned about the effect a new agreement will have on its unit breakeven point. The controller performed a sensitivity analysis to ascertain the estimated effect of a $10 per unit direct labor increase and a $10,000 reduction in fixed costs. Based on this data, it was determined that the breakeven point would:

Which one of the following refers to a cost that remains the same as the volume of activity decreases within the relevant range?

Telephone bills that charge a monthly fee and then a cost per minute of long distance are examples of mixed costs.

The basic profit equation is: Profit = Sales less Total Costs, or (Price) x (Volume Sold) minus (Variable cost) x (volume sold) minus total fixed costs, or IB = PVS - [(VCUVS) + TFC].

How is the degree of operating leverage useful?

Rogers Company has the following data for 2018: -How much sales revenue must be earned if the company wants to earn an after-tax profit equal to 15%of sales? Assume the tax rate is 40%. (Round to the nearest dollar.)

Phillips & Company produces educational software. Its unit cost structure, based upon an anticipated production volume of 150,000 units, is as follows. Sales price $160 Variable costs 60 Fixed costs 55 The marketing department has estimated sales for the coming year at 175,000 units, which is within the relevant range of Phillips' cost structure. Phillips' breakeven volume (in units) and anticipated operating income for the coming year would amount to:

Indirect costs can be tied to one specific outcome or set of products, while direct costs are shared among many different outcomes or products.

What is meant by a product's contribution margin (CM) ratio?

Manchester Airlines is in the process of preparing a contribution margin income statement that will allow a detailed look at its variable costs and profitability of operations. Which of the following cost combinations should be used to evaluate the variable cost per flight of the company's Boston-Las Vegas flights?

What does the term "breakeven point" mean?

A period cost is incurred every period (normally a month) regardless of whether or not the company is open for business.