Exam 2: Introduction to Cost Behavior and Cost Volume Profit Relationships

The degree of operating leverage for Murphy Company is 8.0 at 80,000 units of sales.At 80,000 units of sales,the net profit is $10,000.If the sales volume decreases to 72,000 units,what is the net profit?

Step Company has total variable costs of 80% of total revenues and fixed costs of $20 million per year.What is the break-even point expressed in total revenue dollars?

The degree of operating leverage for a firm equals the ratio of ________ to ________.

Which of the following costs is a variable cost?

The following information for Zippy Company is: Sales \1 ,000,000 Variable Selling Expenses 23,000 Fixed Selling Expenses 33,000 Variable Administrative Expenses 39,000 Fixed Administrative Expenses 10,000 Variable Cost of Goods Sold 300,000 Fixed Cost of Goods Sold 100,000 What is the gross margin for this company?

The break-even point on the cost-volume-profit graph is where the ________.

If the total amount of fixed costs increases,what is the effect on the break-even point? (Assume no other changes.)

Suppose Sunnyside Hotel has annual fixed costs applicable to its rooms of $1.0 million for its 300-room hotel.Average daily room rents are $60 per room,and average variable costs are $10 for each room rented.It operates 365 days per year.What is the break-even point in number of rooms rented?

Costs that change abruptly at different levels of activity because the resources are available only in indivisible chunks are called ________.

The following information is available for Company ZZ: Sales \ 1,000,000 Variable Selling Expenses 22,000 Fixed Selling Expenses 33,000 Variable Administrative Expenses 30,000 Fixed Administrative Expenses 10,000 Variable Cost of Goods Sold 400,000 Fixed Cost of Goods Sold 100,000 If sales increase to $1,500,000,what is operating income?

What happens when the cost-driver activity level increases within the relevant range?

As cost-driver level decreases in the relevant range,fixed costs per unit of cost driver ________,but total fixed costs ________.

Two types of costs that each combine fixed cost and variable cost behaviors are ________ and ________.

Gross margin focuses on sales in relation to variable costs.

Selling expenses are found in the cost of goods sold.

Wehr Corporation produces one product.Total fixed costs are $600,000. The unit selling price is $60.00 and the unit variable cost is $45.00. Required: A) Compute the contribution margin per unit. B) Compute the contribution-margin ratio. C) Compute the break-even point in units. D) Compute the break-even point in dollars.

Nealy Company has the following information available: Revencie \5 00,000 Variable production costs \1 00,000 Fixed production costs \1 00,000 Variable selling costs \ 50,000 Fixed selling costs \ 50,000 What is the contribution margin?

Stefanko Manufacturing has prepared the following income statement: Sales \4 50,000 Cost of goods sold 200,000 Gross margin 250,000 Operating expenses 196,000 Operating income \5 4,000 According to company records,$100,000 of Cost of Goods Sold and $100,000 of Operating Expenses are fixed. Required: A) Compute the contribution margin. B) Compute the contribution margin ratio. C) Compute the break-even point in sales dollars.

An assumption of the CVP analysis is that the sales mix can fluctuate.

The Eastman Family Restaurant is open 24 hours per day.Fixed costs are $24,000 per month.Variable costs are estimated at $9.60 per meal.The average revenue is $12 per meal.The restaurant wished to earn a profit before taxes of $6,000 per month. Required: A) Compute the number of meals that must be served to earn a profit before taxes of $6,000 per month. B) Assume that fixed costs increase to $30,000 per month. How many additional meals must be served to earn a profit before taxes of $6,000 per month?