Question 1

Practical capacity is theoretical or ideal capacity reduced by normal and anticipated work stoppages, such as machine breakdowns.

Accepted Answer

A) True 
 B)False

Question 2

The Raquet Business is considering the manufacture of a new type of tennis ball. Each tennis ball would sell for $3.75 and would require $1.75 in variable costs. In addition, annual fixed costs associated with the project would total $64,000.
a. Use the contribution margin approach to calculate:
(1) the breakeven point in units
(2) the breakeven point in dollars
b. Determine the operating income or loss at a sales volume of 30,000 tennis balls.
c. Determine the number of tennis balls that must be sold to earn a profit of $80,000.

Accepted Answer

a. (1) $64,000 / ($3.75 - $1.7

Question 3

J & C Stacy Enterprises is expecting to earn a profit of $180,000 in 20xx. The company manufactures wrought iron lamps. Each lamp requires variable costs of $13 for direct materials, $9 for direct labor, and $12 for overhead. Total variable costs are thus $34 per lamp. Fixed costs for 20xx are expected to be $630,000. Each lamp will sell for $79.
a. Determine how many lamps the company must sell to earn its targeted profit, and convert this amount to sales dollars.
b. Compute breakeven sales in dollars.
c. Explain the dollar difference between breakeven sales dollars and the sales dollars necessary to earn the targeted profit. Use the contribution margin as part of your explanation.

Accepted Answer

a.
 Proof:
Units in

Question 4

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 5

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?

Accepted Answer

a. variable costs
b. decrease

Question 6

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 7

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 8

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 9

If a company wishes to evaluate the likelihood of success with a new product line, the breakeven point will provide information about the average amount of profit the company will make.

Accepted Answer

A) True 
 B)False

Question 10

Native American Pottery expects to earn a profit of $95,000 in 20xx. The company manufactures ornamental ceramic tiles. Each lot of 100 blocks requires variable costs of $5.00 for direct materials, $3.50 for direct labor, and $4.50 for overhead. Total variable costs are thus $13 per lot. Fixed costs for 20xx are expected to be $130,000. Each hundred-block lot will sell for $33.
a. Determine how many lots of ceramic tiles the company must sell to earn its targeted profit, and convert this amount to sales dollars.
b. Compute breakeven sales in dollars.
c. Explain the dollar difference between breakeven sales dollars and the sales dollars necessary to earn the targeted profit. Use the contribution margin as part of your explanation.

Accepted Answer

a.
   Proof:
Units i

Question 11

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 12

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 13

Cost-volume-profit analysis cannot be used to estimate a targeted profit for service businesses.

Accepted Answer

A) True 
 B)False

Question 14

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 hav

Question 15

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 16

Walton's Warehouse reported sales of $640,000, a contribution margin of $8 per unit, fixed costs of $314,000, and a profit of $30,000. How many units did Walton's Warehouse sell?

Accepted Answer

A)  3,750 units 
B)  23,375 units 
C)  43,000 units 
D)  62,625 units 
A)  3,750 units 
B)  23,375 units 
C)  43,000 units 
D)  62,625 units

Question 17

Which of the following would not require the use of cost behavior analysis?

Accepted Answer

A)  Transferring production costs from one department to another 
B)  Projecting anticipated costs of a new project 
C)  Buying an existing business 
D)  Changing an existing product or service 
A)  Transferring production costs from one department to another 
B)  Projecting anticipated costs of a new project 
C)  Buying an existing business 
D)  Changing an existing product or service

Question 18

Tigor Enterprises has sales revenue of $340,000 for 20xx. Its product sells for $12 and has a 20 percent contribution margin. Fixed costs are $32,000. What is Tigor Enterprises' operating income for 20xx?

Accepted Answer

A)  $45,000 
B)  $29,000 
C)  $41,000 
D)  $36,000 
A)  $45,000 
B)  $29,000 
C)  $41,000 
D)  $36,000

Question 19

Denapasa Manufacturing leases a vacuum cleaning system for a basic monthly fee plus an additional cost per hour used above a given minimum for each month. Given below is the information for the most recent six-month period on the number of machine hours of use and the total cost under this lease.
 $\begin{array}{|l|l|l|}
\hline \text { Montl } & \text { Macluine Hours } & \text { Total Cost } \
 \hline 7 & 6,300 & \$ 58,200 \
\hline 8 & 4,400 & 49,935 \\hline 9 & 4,700 & 52,390 \
\hline 10 & 5,200 & 54,440 \
\hline 11 & 5,600 & 56,620 \
\hline 12 & 5,000 & 53,800 \
\hline
\end{array}$ You are to provide information for planning on the variable and fixed cost elements in this lease. Use the high-low method to (a) determine the variable cost per machine hour and (b) compute the fixed and variable costs for months 7 and 8.

Accepted Answer

a.
 \(\begin{array}{|l|l|l|}
\hline & \t

Question 20

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

Practical capacity is theoretical or ideal capacity reduced by normal and anticipated work stoppages, such as machine breakdowns.

The breakeven point is

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

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?

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?

If a company wishes to evaluate the likelihood of success with a new product line, the breakeven point will provide information about the average amount of profit the company will make.

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?

The high-low method

Cost-volume-profit analysis cannot be used to estimate a targeted profit for service businesses.

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

At the breakeven point, the contribution margin

Walton's Warehouse reported sales of $640,000, a contribution margin of $8 per unit, fixed costs of $314,000, and a profit of $30,000. How many units did Walton's Warehouse sell?

Which of the following would not require the use of cost behavior analysis?

Tigor Enterprises has sales revenue of $340,000 for 20xx. Its product sells for $12 and has a 20 percent contribution margin. Fixed costs are $32,000. What is Tigor Enterprises' operating income for 20xx?

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

The Changing Business Environment - a Managers Perspective

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, Incl Target Costing and Transfer Pricing

Quality Management and Measurement

Financial Analysis of Performance

Filters

Exam 5: Cost Behavior Analysis

Practical capacity is theoretical or ideal capacity reduced by normal and anticipated work stoppages, such as machine breakdowns.

The breakeven point is

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

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?

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?

If a company wishes to evaluate the likelihood of success with a new product line, the breakeven point will provide information about the average amount of profit the company will make.

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?

The high-low method

Cost-volume-profit analysis cannot be used to estimate a targeted profit for service businesses.

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

At the breakeven point, the contribution margin

Walton's Warehouse reported sales of $640,000, a contribution margin of $8 per unit, fixed costs of $314,000, and a profit of $30,000. How many units did Walton's Warehouse sell?

Which of the following would not require the use of cost behavior analysis?

Tigor Enterprises has sales revenue of $340,000 for 20xx. Its product sells for $12 and has a 20 percent contribution margin. Fixed costs are $32,000. What is Tigor Enterprises' operating income for 20xx?

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

The Changing Business Environment - a Managers Perspective

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, Incl Target Costing and Transfer Pricing

Quality Management and Measurement

Financial Analysis of Performance

Filters