Exam 18: Cost Behavior and Cost-Volume-Profit Analysis

A product is sold for $45 and has variable costs of $33 per unit. The total fixed costs for the firm are $180,600. If the firm desires to earn a pretax income of $77,400, how many units must be sold?

A visual inspection of a scatter diagram may be used to identify the approximate relation between past cost and volume.

A company manufactures a product and sells it for $120 per unit. The total fixed costs of manufacturing and selling the product are expected to be $155,250, and the variable costs are expected to be $75 per unit. What is the company's break-even point in (a) units and (b) dollar sales?

As the level of output activity increases, fixed cost per unit remains constant.

__________________ is the amount by which the unit selling price of a product exceeds its per unit variable cost.

Boston Co. is considering the production and sale of a new product with the following sales and cost data: unit sales price, $300; unit variable costs, $180; total fixed costs, $270,000; and projected sales, $900,000. What is the margin of safety: (a) In dollar sales? (b) As a percent of sales?

The margin of safety is the excess of:

Tanner Inc. has incurred the following overhead costs over a 6 week period: -Calculate the approximate fixed cost component of Tanner's overhead costs using the high-low method.

Degree of operating leverage (DOL) is defined as total contribution margin in dollars divided by pretax income.

Tanner Inc. has incurred the following overhead costs over a 6 week period: -Using the high-low method, calculate the variable cost component of these overhead costs (round to the nearest two decimal places).

A company wishes to earn a pretax income equal to 35% of total fixed costs. Its product sells for $50.75 per unit. Total fixed costs equal $156,800 and variable costs per unit are $32.50. How many units must this company sell to meet its goal? (Round answer to complete units.)

Define variable cost, fixed cost, and mixed cost.

The difference between sales price per unit and variable cost per unit is the:

A firm sells two products, A and B. For every unit of A the firm sells, two units of B are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow: -The weighted average contribution margin is:

Unit contribution ratio is calculated by dividing sales price per unit by the unit contribution margin.

A graphic depiction of the break-even point is known as a cost-volume-profit (CVP) chart.

The ratio of the volumes of the various products sold by a company is called the ______________________________.

Mueller Corp. manufactures compact discs that sell for $5.00. Fixed costs are $28,000 and variable costs are $3.60 per unit. Mueller can buy a newer production machine that will increase fixed costs by $8,000 per year, but will decrease variable costs by $0.40 per unit. What effect would the purchase of the new machine have on Mueller's break-even point in units?

A cost-volume-profit (CVP) chart is a graph that plots volume on the horizontal axis and costs and sales on the vertical axis.

A firm produces and sells a product with a contribution margin of $32 per unit. The firm is presently selling 90,000 units and earning $240,000 in after-tax income. Taxes are $80,000 at a 25% tax rate. If the firm desires to increase its after-tax income to $300,000, how many more units must it sell?