Question 1

Dilly LLC,wants to make a profit of $30,000.It has variable costs of $66 per unit and fixed costs of $20,000.How much must it charge per unit if 5,000 units are sold?

Accepted Answer

A)  $51 
B)  $36 
C)  $66 
D)  $76 
A)  $51 
B)  $36 
C)  $66 
D)  $76

Question 2

You have calculated,using the high-low method,a variable cost per machine hour of $0.80 for your production power costs.Power costs at 6,000 machine hours are $5,400; at 9,000 machine hours,they are $7,800.What are the total fixed costs that you would use to estimate production power costs for your company at any level within your relevant range?

Accepted Answer

A)  $600 
B)  $6,400 
C)  $2,400 
D)  $4,800 
A)  $600 
B)  $6,400 
C)  $2,400 
D)  $4,800

Question 3

The breakeven point is

Accepted Answer

A)  where fixed and variable costs reach the upper level of the relevant range. 
B)  the level of activity where all fixed costs are recovered. 
C)  where total revenue equals total costs. 
D)  where fixed costs meet variable costs. 
A)  where fixed and variable costs reach the upper level of the relevant range. 
B)  the level of activity where all fixed costs are recovered. 
C)  where total revenue equals total costs. 
D)  where fixed costs meet variable costs.

Question 4

Service businesses do not have any overhead costs.

Accepted Answer

A) True 
 B)False

Question 5

How many units must BAC Company sell to break even if the selling price per unit is $8.50,variable costs are $4.00 per unit,and fixed costs are $9,000?

Accepted Answer

A)  1,000 
B)  1,059 
C)  2,000 
D)  2,250 
A)  1,000 
B)  1,059 
C)  2,000 
D)  2,250

Question 6

Breakeven sales in dollars can be obtained without knowing the contribution margin per unit.

Accepted Answer

A) True 
 B)False

Question 7

Is breakeven analysis a tool that can be used for a service-oriented business? Explain your answer.

Accepted Answer

Yes.A service organization does not have

Question 8

Which of the following statements most accurately explains the behavior of costs?

Accepted Answer

A)  There is no norm; rather, costs can be fixed, variable, or a combination of both. 
B)  The majority of costs are variable per unit of production. 
C)  The majority of costs are fixed per unit of production. 
D)  Costs can be fixed or variable but usually not a combination of both. 
A)  There is no norm; rather, costs can be fixed, variable, or a combination of both. 
B)  The majority of costs are variable per unit of production. 
C)  The majority of costs are fixed per unit of production. 
D)  Costs can be fixed or variable but usually not a combination of both.

Question 9

Using the high-low method and the information below,compute the monthly total fixed costs for SKP Corporation. $$\begin{array} { l cc } 
\text { Month } & \text { TelephoneHours Used } & \text { Telephone Expense: } \
\text { April } & 100 & \$ 4,500 \
\text { May } & 110 & 4,800 \
\text { June } & 150 & 5,400
\end{array}$$

Accepted Answer

A)  $1,800 
B)  $2,700 
C)  $3,640 
D)  $4,500 
A)  $1,800 
B)  $2,700 
C)  $3,640 
D)  $4,500

Question 10

Using the contribution margin approach,find the breakeven point in units for Consumer Products if the selling price per unit is $12,the variable cost per unit is $6,and the fixed costs are $8,040.

Accepted Answer

A)  670 
B)  1,200 
C)  1,340 
D)  6,000 
A)  670 
B)  1,200 
C)  1,340 
D)  6,000

Question 11

Ben & Harry Co.sold 100,000 units last year with the following results:
 $$\begin{array} { l r } 
\text { Sales revenue } & \$ 400,000 \
\text { Variable costs } & 160,000 \
\text { Contribution margin } & \$ 240,000 \
\text { Fixed costs } & 100,000 \
\text { Operating income }  & \$ 140,000 \
\end{array}$$ 
a. Management thinks that a 5 percent reduction in the unit sales price and a $31,000 increase in fixed advertising costs will create a 30 percent increase in unit sales. Assess this proposal and make a recommendation on what action should be taken.
b. Assume that the marketing manager thinks that the unit sales price should not be changed. Instead, he recommends a $0.40 per unit increase in sales commissions coupled with some increase in advertising to generate the 30 percent increase in unit sales and a 20 percent increase in operating income. Assess this proposal and determine the maximum amount of money that can be spent on advertising if the targeted profit is to be achieved.

Accepted Answer

a.If the changes are made,the following

Question 12

If a company wants to know how many units of a certain product it must sell to make a desired level of profit,it should add the amount of profit to the numerator in the breakeven analysis.

Accepted Answer

A) True 
 B)False

Question 13

A crystal goblet sells for $50 per goblet.The contribution margin per goblet is $14.Total monthly fixed costs are estimated to be $120,400.The monthly breakeven point in goblets is

Accepted Answer

A)  8,600 goblets. 
B)  17,200 goblets. 
C)  4,300 goblets. 
D)  60,200 goblets. 
A)  8,600 goblets. 
B)  17,200 goblets. 
C)  4,300 goblets. 
D)  60,200 goblets.

Question 14

Excerpts from a cost-volume-profit analysis indicate fixed costs of $49,000,a contribution margin per unit of $35,a selling price of $90,and a sales level of 4,000 units.What must be the targeted level of profit?

Accepted Answer

A)  $81,000 
B)  $106,000 
C)  $140,000 
D)  $91,000 
A)  $81,000 
B)  $106,000 
C)  $140,000 
D)  $91,000

Question 15

During this past year,a small publishing company sold 60,000 copies of Super Travel paperbacks (its only product)at $5 per book; total fixed costs were $14,000; and total variable costs were $3 per book.What is this company's breakeven point in units?

Accepted Answer

A)  9,800 units 
B)  7,000 units 
C)  28,000 units 
D)  14,000 units 
A)  9,800 units 
B)  7,000 units 
C)  28,000 units 
D)  14,000 units

Question 16

The high-low method

Accepted Answer

A)  calculates variable costs per unit by dividing the difference in the high and low activity levels by the high and low costs. 
B)  assumes that the fixed portion of the mixed cost is the lowest monthly cost incurred during the period under consideration. 
C)  allows differentiation between fixed and variable costs when dealing with mixed costs. 
D)  combines the fixed and variable portions of a cost to determine the total cost. 
A)  calculates variable costs per unit by dividing the difference in the high and low activity levels by the high and low costs. 
B)  assumes that the fixed portion of the mixed cost is the lowest monthly cost incurred during the period under consideration. 
C)  allows differentiation between fixed and variable costs when dealing with mixed costs. 
D)  combines the fixed and variable portions of a cost to determine the total cost.

Question 17

A contribution margin income statement is formatted to emphasize cost behavior rather than organizational functions.

Accepted Answer

A) True 
 B)False

Question 18

Explain what cost-volume-profit analysis is and how managers use it.Give examples of some purposes for which it might be used.

Accepted Answer

Cost-volume-profit analysis is an analys

Question 19

A new product,an easy to store guitar stand,is being planned,with the following cost estimates: variable cost per unit,$9,and total fixed costs,$58,000.The projected sales price is $13 each.
a. Using the contribution margin approach, compute the number of units that must be sold to break even.
b. Using the same approach and assuming that fixed costs can be reduced by $8,000, how many units must be sold to produce a profit of $65,000?
c. Given the original information and the projection that 50,000 units can be sold, compute the selling price that the producer must use to obtain a profit of $150,000.

Accepted Answer

a.
 \[\begin{aligned}
\text { Breakeven

Question 20

Suppose a company rents a building for $250,000 a year for the purpose of manufacturing between 80,000 and 140,000 units (the relevant range of activity).The rental cost per unit of production will __________ as production levels increase.

Accepted Answer

A)  behave in a nonlinear fashion 
B)  increase 
C)  decrease 
D)  remain fixed 
A)  behave in a nonlinear fashion 
B)  increase 
C)  decrease 
D)  remain fixed

Exam 20: Cost Behavior Analysis

Dilly LLC,wants to make a profit of $30,000.It has variable costs of $66 per unit and fixed costs of $20,000.How much must it charge per unit if 5,000 units are sold?

The breakeven point is

Service businesses do not have any overhead costs.

How many units must BAC Company sell to break even if the selling price per unit is $8.50,variable costs are $4.00 per unit,and fixed costs are $9,000?

Breakeven sales in dollars can be obtained without knowing the contribution margin per unit.

Is breakeven analysis a tool that can be used for a service-oriented business? Explain your answer.

Which of the following statements most accurately explains the behavior of costs?

Using the high-low method and the information below,compute the monthly total fixed costs for SKP Corporation. Month TelephoneHours Used Telephone Expense: April 100 \ 4,500 May 110 4,800 June 150 5,400

Using the contribution margin approach,find the breakeven point in units for Consumer Products if the selling price per unit is $12,the variable cost per unit is $6,and the fixed costs are $8,040.

If a company wants to know how many units of a certain product it must sell to make a desired level of profit,it should add the amount of profit to the numerator in the breakeven analysis.

A crystal goblet sells for $50 per goblet.The contribution margin per goblet is $14.Total monthly fixed costs are estimated to be $120,400.The monthly breakeven point in goblets is

Excerpts from a cost-volume-profit analysis indicate fixed costs of $49,000,a contribution margin per unit of $35,a selling price of $90,and a sales level of 4,000 units.What must be the targeted level of profit?

During this past year,a small publishing company sold 60,000 copies of Super Travel paperbacks (its only product)at $5 per book; total fixed costs were $14,000; and total variable costs were $3 per book.What is this company's breakeven point in units?

The high-low method

A contribution margin income statement is formatted to emphasize cost behavior rather than organizational functions.

Explain what cost-volume-profit analysis is and how managers use it.Give examples of some purposes for which it might be used.

Suppose a company rents a building for $250,000 a year for the purpose of manufacturing between 80,000 and 140,000 units (the relevant range of activity).The rental cost per unit of production will __________ as production levels increase.

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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