Contribution margin income statements for two competing companies are provided below: $\begin{array}{c} \begin{array}{|l|} \hline \\ \hline \text {Revenue}\\ \hline \text {Less variable costts}\\ \hline \text {Contribution margin}\\ \hline \text {Less fixed costs}\\ \hline \text {Net income}\\ \hline \end{array} \begin{array}{l|} \hline \text { Yin Company }\\ \hline \$ 750,000 \\ \hline 300,000 \\ \hline \$ 450,000 \\ \hline 405,000 \\ \hline \$ 45,000\\ \hline \end{array} \begin{array}{l|} \hline\text { Yang Company }\\ \hline \$ 750,000 \\ \hline 525,000 \\ \hline \$ 225,000 \\ \hline 180,000 \\ \hline \$ 45,000\\ \hline \end{array} \end{array}$ Required: 1)Show each company's cost s

Answers will vary 1) @#IMG-DLM& 2)Magnitude of ope

The following income statement is provided for Vargas,Inc. \[\begin{array} { | l | r | } \hline \text { Sales reverue } ( 2,500 \text { urits } \mathrm { x } \$ 60 \text { per urit) } & \$ 150,000 \\ \hline \text { Cost of goods sold (varable; } 2,500 \text { urits } \times \$ 20 \text { per urit) } & ( 50,000 ) \\ \hline \text { Cost of goods sold (fived) } & ( 8,000 ) \\ \hline \text { Gross margin } & 92,000 \\ \hline \text { Admiristrative salaries } & ( 42,000 ) \\ \hline \text { Depreciation } & ( 10,000 ) \\ \hline \text { Supplies } ( 2500 \text { units } \times \$ 4 \text { per urit) } & ( 10,000 ) \\ \hline \text { Net income } & \$ 30,000\\ \hline \end{array}\] What is this company's magnitude of operating leverage?

A) 3.07 B) 0.33 C) 3.00 D) 1.67 A) 3.07 B) 0.33 C) 3.00 D) 1.67

The following income statement is provided for Grant,Inc. $\begin{array}{c} \begin{array}{|l|} \hline \text {Sales revenue \( (1,500(a, \$ 30 $ per unit)}\\ \hline \text {Variable costs $ (1,500 @ \$ 14 $ per unit)}\\ \hline \text {Fixed costs}\\ \hline \text {Net income}\\ \hline \end{array} \begin{array}{r|} \hline\$ 55,000 \\ \hline21,000 \\ \hline16,000 \\ \hline \$ \quad 8,000\\ \hline \end{array} \end{array}\) What is this company's magnitude of operating leverage?

A) 0.33 B) 1.31 C) 2.00 D) 3.00 A) 0.33 B) 1.31 C) 2.00 D) 3.00

Based on the following cost data,items labeled (a)and (b)in the table below are which of the following amounts,respectively? $\begin{array}{|l|r|r|} \hline \text { Number of units: } & 1,500 & 3,000 \\ \hline \text { Total cost: } & & \\ \hline \text { Vanable } & \$ 7,500 & \$ 15,000 \\ \hline \text { Fixed } & \$ 6,000 & \$ 6,000 \\ \hline & & \\ \hline \text { Cost per unit: } & & \\ \hline \text { Vanable } & \$ 5 & \text { (a) } \\ \hline \text { Fixed } & \$ 4 & \text { (b) } \\ \hline \end{array}$

A) (a)= $3.00;(b)= $3.00 B) (a)= $5.00;(b)= $4.00 C) (a)= $2.50;(b)= $2.00 D) (a)= $5.00;(b)= $2.00 A) (a)= $3.00;(b)= $3.00 B) (a)= $5.00;(b)= $4.00 C) (a)= $2.50;(b)= $2.00 D) (a)= $5.00;(b)= $2.00

Income statements for three companies are provided below: $\begin{array}{c} \begin{array}{|l|} \hline\\ \hline \text {Sales (20 urits)}\\ \hline \text {Less variable costs}\\ \hline \text {Less fixed costs}\\ \hline \text {Net income}\\ \hline \end{array} \begin{array}{l|} \hline\text { Company A }\\ \hline\$1,000\\ \hline600\\ \hline200\\ \hline\$200\\ \hline \end{array} \begin{array}{l|} \hline\text { Company B }\\ \hline\$1,000\\ \hline300\\ \hline500\\ \hline\$200\\ \hline \end{array} \begin{array}{l|} \hline\text { Company C }\\ \hline\$1,000\\ \hline-\\ \hline800\\ \hline\$200\\ \hline \end{array} \end{array}$ Required: (a)Prepare new income statements for the firms assuming each sells one additional unit (i.e.each firm sells 21 units) (b)Briefly describe the effect of cost s

Answers will vary (a)Income statements \

Exam 2: Cost Behavior, Operating Leverage, and Profitability Analysis

The higher the magnitude of a company's operating leverage,the more benefit the company will receive from a given percentage increase in revenue.

(True/False)

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Question 41

Select the correct statement from the following.

(Multiple Choice)

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Question 42

Select the incorrect statement regarding cost s

(Multiple Choice)

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Question 43

What is an activity base,and how does the activity base relate to a variable cost?

(Essay)

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Question 44

How is operating leverage related to cost s

(Essay)

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Question 45

Contribution margin income statements for two competing companies are provided below: Revenue Less variable costts Contribution margin Less fixed costs Net income Yin Company \ 750,000 300,000 \ 450,000 405,000 \ 45,000 Yang Company \ 750,000 525,000 \ 225,000 180,000 \ 45,000 Required: 1)Show each company's cost s

(Essay)

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Question 46

The following income statement is provided for Vargas,Inc. Sales reverue (2,500 urits \ 60 per urit) \ 150,000 Cost of goods sold (varable; 2,500 urits \times\ 20 per urit) (50,000) Cost of goods sold (fived) (8,000) Gross margin 92,000 Admiristrative salaries (42,000) Depreciation (10,000) Supplies (2500 units \times\ 4 per urit) (10,000) Net income \ 30,000 What is this company's magnitude of operating leverage?

(Multiple Choice)

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Question 47

How does total variable cost respond when volume increases?

(Essay)

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Question 48

Which of the following costs typically include both fixed and variable components?

(Multiple Choice)

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Question 49

As activity increases,the fixed cost per unit increases while the variable cost per unit remains constant.

(True/False)

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Question 50

Assume that the management of Dairy Deli wants to expand operations. To help evaluate the risks involved in opening an additional store, the company president wants to know the amount of fixed cost a new store will likely incur. Management uses the regression method to analyze the company’s mixed costs. In terms of interpreting the results:

(Multiple Choice)

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Question 51

Assuming that cost behavior did not change over the two-year period,what is the amount of the company's variable cost of goods sold per unit?

(Multiple Choice)

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Question 52

The following income statement is provided for Grant,Inc. Sales revenue (1,500(a, \ 30 per unit) Variable costs (1,500@\ 14 per unit) Fixed costs Net income \ 55,000 21,000 16,000 \ 8,000 What is this company's magnitude of operating leverage?

(Multiple Choice)

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Question 53

Larry's Lawn Care incurs significant gasoline costs.This cost would be classified as a variable cost if the total gasoline cost:

(Multiple Choice)

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Question 54

Select the correct statement regarding fixed costs.

(Multiple Choice)

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Question 55

Based on the following cost data,items labeled (a)and (b)in the table below are which of the following amounts,respectively? Number of units: 1,500 3,000 Total cost: Vanable \ 7,500 \ 15,000 Fixed \ 6,000 \ 6,000 Cost per unit: Vanable \ 5 (a) Fixed \ 4 (b)

(Multiple Choice)

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Question 56

Variable costs will become fixed outside the relevant range.

(True/False)

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Question 57

Income statements for three companies are provided below: Sales (20 urits) Less variable costs Less fixed costs Net income Company A \1 ,000 600 200 \2 00 Company B \1 ,000 300 500 \2 00 Company C \1 ,000 - 800 \2 00 Required: (a)Prepare new income statements for the firms assuming each sells one additional unit (i.e.each firm sells 21 units) (b)Briefly describe the effect of cost s

(Essay)

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Question 58

Assuming that cost behavior did not change over the two-year period,what is Li Company's contribution margin in Year 2?

(Multiple Choice)

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Question 59

A cost that is considered variable for one activity base may be considered fixed for a different activity base.

(True/False)

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Question 60

The higher the magnitude of a company's operating leverage,the more benefit the company will receive from a given percentage increase in revenue.

Select the correct statement from the following.

Select the incorrect statement regarding cost s

What is an activity base,and how does the activity base relate to a variable cost?

How is operating leverage related to cost s

How does total variable cost respond when volume increases?

Which of the following costs typically include both fixed and variable components?

As activity increases,the fixed cost per unit increases while the variable cost per unit remains constant.

Assuming that cost behavior did not change over the two-year period,what is the amount of the company's variable cost of goods sold per unit?

The following income statement is provided for Grant,Inc. Sales revenue (1,500(a, \ 30 per unit) Variable costs (1,500@\ 14 per unit) Fixed costs Net income \ 55,000 21,000 16,000 \ 8,000 What is this company's magnitude of operating leverage?

Larry's Lawn Care incurs significant gasoline costs.This cost would be classified as a variable cost if the total gasoline cost:

Select the correct statement regarding fixed costs.

Based on the following cost data,items labeled (a)and (b)in the table below are which of the following amounts,respectively? Number of units: 1,500 3,000 Total cost: Vanable \ 7,500 \ 15,000 Fixed \ 6,000 \ 6,000 Cost per unit: Vanable \ 5 (a) Fixed \ 4 (b)

Variable costs will become fixed outside the relevant range.

Assuming that cost behavior did not change over the two-year period,what is Li Company's contribution margin in Year 2?

A cost that is considered variable for one activity base may be considered fixed for a different activity base.

Management Accounting and Corporate Governance

Analysis of Cost,Volume,and Pricing to Increase Profitability

Cost Accumulation,Tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

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