Question 1

Adding the contribution margin as a component to cost-volume-profit computations will not change the resulting amount of breakeven units in a given situation.

Accepted Answer

A) True 
 B)False

Question 2

The variable cost per unit ____________ as the number of sales increase.

Accepted Answer

A)  decreases 
B)  changes 
C)  remains constant 
D)  increases 
A)  decreases 
B)  changes 
C)  remains constant 
D)  increases

Question 3

Mixed costs are fixed and variable costs that are recorded in the same general ledger account.

Accepted Answer

A) True 
 B)False

Question 4

If Oui Watches sells 300 watches at $48 per watch and has variable costs of $20 per watch and fixed costs of $4,000,what is the projected profit?

Accepted Answer

A)  $4,000 
B)  $4,400 
C)  $8,400 
D)  $12,000 
A)  $4,000 
B)  $4,400 
C)  $8,400 
D)  $12,000

Question 5

In terms of cost behavior,telephone expense and direct materials are classified as

Accepted Answer

A)  variable and fixed, respectively. 
B)  fixed and variable, respectively. 
C)  mixed and fixed, respectively. 
D)  mixed and variable, respectively. 
A)  variable and fixed, respectively. 
B)  fixed and variable, respectively. 
C)  mixed and fixed, respectively. 
D)  mixed and variable, respectively.

Question 6

At the breakeven point,the contribution margin

Accepted Answer

A)  is at a maximum. 
B)  minus total fixed costs equals a positive number. 
C)  equals fixed costs. 
D)  is at a minimum. 
A)  is at a maximum. 
B)  minus total fixed costs equals a positive number. 
C)  equals fixed costs. 
D)  is at a minimum.

Question 7

If fixed costs are increased,then a breakeven analysis with an adjustment for profit will yield an increase in the number of sales or targeted sales units.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A)  Product sales mix will not change during the period. 
B)  The breakeven point will be reached and surpassed during the period. 
C)  Cost behavior can be determined accurately. 
D)  Productivity is constant within the relevant range. 
A)  Product sales mix will not change during the period. 
B)  The breakeven point will be reached and surpassed during the period. 
C)  Cost behavior can be determined accurately. 
D)  Productivity is constant within the relevant range.

Question 9

Theoretical capacity refers to

Accepted Answer

A)  extra machinery and equipment kept on hand. 
B)  the maximum productive output possible. 
C)  an output level that allows for normal work stoppages. 
D)  the operating capacity that will meet expected sales demand. 
A)  extra machinery and equipment kept on hand. 
B)  the maximum productive output possible. 
C)  an output level that allows for normal work stoppages. 
D)  the operating capacity that will meet expected sales demand.

Question 10

When fixed costs are $46,500,the variable cost is $12 per unit,and the product sells for $22 per unit,the breakeven point is

Accepted Answer

A)  4,650 units. 
B)  9,300 units. 
C)  2,325 units. 
D)  6,975 units. 
A)  4,650 units. 
B)  9,300 units. 
C)  2,325 units. 
D)  6,975 units.

Question 11

If targeted sales are 12,000 units,the sales price per unit is $70,fixed costs are $130,000,and variable costs are $40 per unit,then planned profit must be $230,000.

Accepted Answer

A) True 
 B)False

Question 12

For profit planning purposes,the following equation is used: Target Sales Units = (FC + P)÷ CM per Unit.

Accepted Answer

A) True 
 B)False

Question 13

Cost behavior analysis is not useful to a service business.

Accepted Answer

A) True 
 B)False

Question 14

Last year,RC Rancho's revenue was $120,000,000,variable costs were $90,000,000 and fixed costs were $15,000,000.RC Rancho's contribution margin ratio was 25 percent.

Accepted Answer

A) True 
 B)False

Question 15

Depreciation calculated using the production or units of output method is an example of a fixed cost.

Accepted Answer

A) True 
 B)False

Question 16

Retleb Manufacturing Company noticed that,during its busiest month of 20xx,maintenance costs totaled $15,400,resulting from the production of 32,000 units.During its slowest month,$12,600 in maintenance costs were incurred,resulting from the production of 24,000 units.Using the high-low method,what maintenance cost would the company expect to incur at a volume of 20,000 units?

Accepted Answer

A)  $7,000 
B)  $11,200 
C)  $8,400 
D)  $2,800 
A)  $7,000 
B)  $11,200 
C)  $8,400 
D)  $2,800

Question 17

Dapper Hat Makers is in the business of designing and producing specialty hats.The material used for derbies costs $4.50 per unit,and Dapper pays each of its two full-time employees $250 per week.If the employees make 50 derbies in one week,what is the fixed cost per derby? (Round to two decimal places where necessary.)

Accepted Answer

A)  $4.50 
B)  $5.00 
C)  $10.00 
D)  $14.50 
A)  $4.50 
B)  $5.00 
C)  $10.00 
D)  $14.50

Question 18

Ryan's Landscaping sells a quality brand of hoes,shovels,and rakes in a sales mix of 2:4:2.The company's fixed costs are $61,600.Product data include the following:
 $\begin{array}{lrr}
&\text {Unit Sales }&\text { Unit Variable }\
&\text {Price}&\text {Costs}\ 
\text { Hoes } & \$ 12 & \$ 8 \
\text { Shovels } & 15 & 7 \
\text { Rakes } & 16 & 8
\end{array}$ 
a. Compute the weighted-average contribution margin.
b. Determine the weighted-average breakeven point.
c. Calculate the breakeven point for each product.
d. Determine the breakeven point in sales dollars.

Accepted Answer

None

Question 19

The graphical approach to cost-volume-profit analysis generally yields more precise results than using a formula.

Accepted Answer

A) True 
 B)False

Question 20

Projected cost information for a new product to be produced by Kolier Manufacturing is as follows:
 $\begin{array}{lr}
\text { Expected variable unit costs: }\
\text { Direct materials } & \$ 10.90 \
\text { Direct labor } & 7.18 \
\text { Overhead } & 1.92 \
\text { Selling costs } & 4.00
\end{array}$

$\begin{array}{lr}
\text { Annual fixed costs: }\ 
\text { Taxes on property used } & \$ 8,870 \
\text { Depreciation on building and equipment } & 18,920 \
\text { Advertising } & 38,840 \
\text { Other } & 2,070
\end{array}$ The product is to be sold for $49. 
a. Compute the number of units that must be sold to earn a profit of $80,000.
b. Compute the number of units that must be sold if advertising costs rise by $12,000 and a targeted profit of $120,000 is to be obtained.
c. Use the original information and sales of 10,000 units to compute the new selling price that the company must use to obtain a profit of $200,000.
d. The most in annual sales that could be projected is 20,000 units. Determine the added amount that could be spent on fixed advertising costs if the highest possible selling price that management believes can be charged is $50 and if there is a targeted profit of $225,000.

Accepted Answer

a.
 Units sold to obtain @#LAT-DLM& per unit 
@#LAT-DLM&prof

Exam 20: Cost Behavior Analysis

Adding the contribution margin as a component to cost-volume-profit computations will not change the resulting amount of breakeven units in a given situation.

The variable cost per unit ____________ as the number of sales increase.

Mixed costs are fixed and variable costs that are recorded in the same general ledger account.

If Oui Watches sells 300 watches at $48 per watch and has variable costs of $20 per watch and fixed costs of $4,000,what is the projected profit?

In terms of cost behavior,telephone expense and direct materials are classified as

At the breakeven point,the contribution margin

If fixed costs are increased,then a breakeven analysis with an adjustment for profit will yield an increase in the number of sales or targeted sales units.

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

Theoretical capacity refers to

When fixed costs are $46,500,the variable cost is $12 per unit,and the product sells for $22 per unit,the breakeven point is

If targeted sales are 12,000 units,the sales price per unit is $70,fixed costs are $130,000,and variable costs are $40 per unit,then planned profit must be $230,000.

For profit planning purposes,the following equation is used: Target Sales Units = (FC + P)÷ CM per Unit.

Cost behavior analysis is not useful to a service business.

Last year,RC Rancho's revenue was $120,000,000,variable costs were $90,000,000 and fixed costs were $15,000,000.RC Rancho's contribution margin ratio was 25 percent.

Depreciation calculated using the production or units of output method is an example of a fixed cost.

The graphical approach to cost-volume-profit analysis generally yields more precise results than using a formula.

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Supplement - Closing Entries and the Work Sheet

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Long-Term Liabilities

Contributed Capital

Investments

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

The Changing Business Environment - a Managers Perspective

Cost Concepts and Cost Allocation

Costing Systems- Job Order Costing

Costing Systems- Process Costing

Value-Based Systems- Abm and Lean

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

Pricing Decisions,incltarget Costing and Transfer Pricing

Quality Management and Measurement

Financial Analysis of Performance

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