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

The Wolter Company has provided the following information: Income tax rate 50\% Selling price per unit \ 6.60 Variable cost per unit \ 5.00 Total fixed costs \ 46,000.00 Required: A) Compute the break-even point in units. B) Compute the sales volume in units necessary to generate an after-tax net income of $10,000. C) Compute the sales volume in units necessary to generate an after-tax net income of $20,000.

Assume the following information for Richard Company: Selling price per unit \ 100 Variable cost per unit \ 80 Total fixed costs \ 80,000 After-tax net income \ 40,800 Taxrate 40\% How many units must be sold to achieve the after-tax net income?

The break-even point is when enough units are sold that total contribution margin equals total variable costs.

An increase in the sales price per unit will cause a decrease in the break-even point.

Janitors clean the factory at the end of each workday.The wages of the janitors are used to determine the cost of the only manufactured product in the factory.What is a good cost driver for the wages of the janitors?

Worbel Company has variable costs of $5 per unit and a selling price of $10 per unit.Fixed costs are $100,000.Planned unit sales for 2015 are 25,000 units.Actual unit sales for 2014 were 22,000.What is the margin of safety in dollars for 2015?

Berea Company expects to sell 19,000 units.Total fixed costs are $84,000 and the contribution margin per unit is $6.00.Berea's tax rate is 40%.What is the margin of safety in units?

Franklin Company produces only one product.The selling price is $100 per unit and the variable cost is $60 per unit.Total fixed costs are $120,000. Required: A) Compute break-even point in units. B) Compute break-even point in dollars.

Within the relevant range,the total amount of ________ cost changes in direct proportion to changes in the cost driver.Within the relevant range,the total amount of ________ cost does not change in direct proportion to changes in the cost driver.

Consider the following activity: The installation of seats by an airplane manufacturer in a commercial airplane.What is an appropriate cost driver for the labor resources used for this activity?

Operating leverage is the sensitivity of a firm's ________ to changes in ________.

Suppose a Super 9 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.If the hotel is one-half full throughout the entire year,what is the amount of net income for one year?

Assume Hull Company has the following information available: Selling price per unit \1 00 Variable cost per unit \4 5 Fixed costs per year \4 00,000 Expected sales per year (units) 20,000 If fixed costs increase by $200,000,what is the break-even point in units?

Gokey Company has a contribution-margin ratio of 0.30.Targeted net income is $76,800 and targeted sales volume in dollars is $480,000.What are total fixed costs?

Companies with high levels of operating leverage are less risky than companies with low levels of operating leverage.

Cost of goods sold is the cost of the merchandise that a company acquires or produces and then sells.

Which statement is FALSE?

Gnat Company,a producer of electronic devices,has the following information: Selling price per unit \5 .00 Variable cost per unit \3 .00 Total fixed costs \9 00,000.00 The contribution-margin ratio is ________.

The horizontal axis on the CVP graph is the dollars of cost and revenue.

Which of the following is NOT an underlying assumption of cost-volume-profit analysis?