Exam 4: Cost Behavior and Cost-Volume-Profit Analysis

Gladstorm Enterprises sells a product for $60 per unit. The variable cost is $20 per unit, while fixed costs are $85,000. Determine the (a) break-even point in sales units, and (b) break-even point in sales units if the selling price increased to $80 per unit. Round your answer to the nearest whole number.

A firm operated at 80% of capacity for the past year, during which fixed costs were $330,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit was:

Cordell, Inc. has an operating leverage of 3. Sales are expected to increase by 9% next year. What is the expected change in operating income next year?

Spice Inc.'s unit selling price is $60, the unit variable costs are $35, fixed costs are $125,000, and current sales are 10,000 units. How much will operating income change if sales increase by 8,000 units?

Cost behavior refers to the manner in which:

(a) If Swannanoa Company's budgeted sales are $1,000,000, fixed costs are $350,000, and variable costs are $600,000, what is the budgeted contribution margin ratio? (b) If the contribution margin ratio is 30%, sales are $900,000 and fixed costs are $200,000, what is the operating profit?

If the volume of sales is $6,000,000 and sales at the break-even point amount to $4,800,000, the margin of safety is 25%.

Bobby Company has fixed costs of $160,000. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products are provided below.

Cost-volume-profit analysis can be presented in both equation form and graphic form.

Most operating decisions of management focus on a narrow range of activity called the:

A rental cost of $20,000 plus $.70 per machine hour of use is an example of a mixed cost.

Because variable costs are assumed to change in direct proportion to changes in the activity level, the graph of the variable costs when plotted against the activity level appears as a circle.

If fixed costs are $700,000 and the unit contribution margin is $17, what amount of units must be sold in order to realize an operating income of $100,000?

A cost that has characteristics of both a variable cost and a fixed cost is called a:

Even if a business sells six products, it is possible to estimate the break-even point.

Harold Corporation just started business in January 2012. They had no beginning inventories. During 2012 they manufactured 12,000 units of product, and sold 10,000 units. The selling price of each unit was $20. Variable manufacturing costs were $4 per unit, and variable selling and administrative costs were $2 per unit. Fixed manufacturing costs were $24,000 and fixed selling and administrative costs were $6,000. What would be the Harold Corporations net income for 2012 using absorption costing?

If sales total $2,000,000, fixed costs total $800,000, and variable costs are 60% of sales, the contribution margin ratio is 60%.

Cost-volume-profit analysis cannot be used if which of the following occurs?

Which of the following is an example of a cost that varies in total as the number of units produced changes?

Which of the graphs in Figure 20-1 illustrates the behavior of a total fixed cost?