Exam 20: Cost Behavior Analysis

Operating income is determined by deducting all fixed costs related to production,selling,and administration from contribution margin.

In a graph of variable costs,the slope of the line is dependent on the variable costs per unit.

Unit fixed costs vary inversely with activity or volume.

A digitized music tuner has been a staple in Smooth Sounds' product line for several years.Annual fixed costs of production and administration related to this product in the past have been $643,500.Variable costs of production and sales have been $17 per unit.The selling price in the past has been $28 per unit.Based on the appearance of competing products on the market,management has asked you to do the following: a. Compute the breakeven point in units and sales dollars for the present product. b. Compute the breakeven point in units and sales dollars if the variable costs increased by $3 per unit and the fixed costs increased by $14,375 per month. c. Using the information from (b), an expected additional monthly advertising charge of $10,000, and a monthly sales rate of 15,000 units, compute the competitive selling price that the company must obtain in order to have a profit of $32,000 per month.

Which of the following is a fixed cost?

The graph below depicts two different types of costs.Questions related to the graph should be answered in the spaces provided. a. The line H-B represents what type of cost? ______________________ b. Production at point J versus point L would __________ total variable costs. c. Production at point J versus point L would __________ per unit fixed costs. d. What is a possible reason that line G-A increases at point A to a new horizontal line? e. What kind of cost is depicted by the line from point G to point A?

Total costs that change in direct proportion to changes in productive output,or any other volume measure,are called variable costs.

Christian Company's sales revenue for 20xx was $144,000.Christian's product sells for $5.50 and has a 30 percent contribution margin.Christian has fixed costs of $33,000. What is Christian Company's breakeven point in sales dollars?