Exam 4: Cost Behavior and Cost-Volume-Profit Analysis

Carrolton, Inc.currently sells widgets for $80 per unit.The variable cost is $30 per unit and total fixed costs equal $240,000 per year.Sales are currently 20,000 units annually. The company is considering a 20% drop in selling price that it believes will raise units sold by 20%.Assuming all costs stay the same, what is the impact on income if this change is made?

The relevant activity base for a cost depends upon which base is most closely associated with the cost and the decision-making needs of management.

Contribution margin is

Match the following terms with their definitions. -Where a business's revenues exactly equal costs

The adoption of variable costing for managerial decision making is based on the premise that fixed factory overhead costs are related to productive capacity of the manufacturing plant and are normally not affected by the number of units produced.

Harley Company has sales of $500,000, variable costs are 75% of sales, and operating income is $40,000.What is Harley's operating leverage?

Steven Company has fixed costs of $160,000.The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products are provided below. The sales mix for product X and Y is 60% and 40%, respectively.Determine the break-even point in units of X and Y.

A company with a break-even point at $900,000 in sales revenue had fixed costs of $225,000.When actual sales were $1,000,000 variable costs were $750,000.Determine a the margin of safety expressed in dollars, b the margin of safety expressed as a percentage of sales, c the contribution margin ratio, and d the operating income.

The fixed cost per unit varies with changes in the level of activity.

Reynold's Grocery has fixed costs of $350,000, the unit selling price is $29, and the unit variable costs are $20.What is the break-even sale units if the variable costs are decreased by $4?

What was Carter Co.'s variable cost of E?

Rental charges of $40,000 per year plus $3 for each machine hour over 18,000 hours is an example of a fixed cost.

If fixed costs are $450,000, the unit selling price is $75, and the unit variable costs are $50, what are the old and new break-even sales units if the unit selling price increases by $10?

Match the following terms with their definitions. -Remain the same in total dollar amount as the level of activity changes

The Grant Company has sales of $300,000, and the break-even point in sales dollars if $225,000.Determine the company's margin of safety percentage.

Given the following cost and activity observations for Smithson Company's utilities, use the high­low method to calculate Smithson's fixed costs per month.Do not round your intermediate calculations.

Variable costs are costs that vary in total in direct proportion to changes in the activity level.

The point where the profit line intersects the horizontal axis on the profit-volume chart represents

If direct materials cost per unit decreases, the amount of sales necessary to earn a desired amount of profit will decrease.

Match the following terms with their definitions. -A specific activity range over which the cost changes are of interest.