Exam 5: Cost Behavior Analysis

Excerpts from a cost-volume-profit analysis indicate fixed costs of $30,000, a variable cost per unit of $36, a selling price of $60, and a sales level of $125,000. The targeted level of profit must be

The following graphical breakeven analysis is for Nicronea's new line of desktop computers. Questions related to the graph should be answered in the spaces provided. a. Production at point J would be at a __________. b. The area depicting profitable operations is __________. c. The fixed costs area is within letters __________. d. The total revenue area is within letters ___________. e. The breakeven point for sales units is at letter __________. f. Letter A represents __________. g. The line H-B represents what C-V-P element? ___________. h. Total cost of operations is reflected in line __________.

Cost behavior is the way prices are adjusted due to changes in costs.

In breakeven analysis adjusted for a profit factor, increasing the unit sales price will decrease the number of units needed to meet the targeted profit.

A scatter diagram helps to determine if a linear relationship exists between a cost item and its related activity measure.

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

SHARE is trying to determine how many clients must be serviced in order to cover its monthly service overhead. Using the high-low method, it has determined that the variable cost per client is $800 and that the monthly fixed overhead is $28,000. - Assuming an average fee of $1,200 per client, the breakeven point per month is

If the contribution margin on a new product line is $15, fixed costs are $165,000, and the total market for the product is 22,000 units, then the breakeven analysis would recommend that the company

Contribution Margin Income Statement is prepared to present for external users of financial information.

Edward Cheezer's makes and sells frozen four-cheese pizzas, New York-style. The expected selling price is $10 per pizza. The projected variable cost per pizza is $6. The estimated fixed costs per month are $10,000. -The number of pizzas that must be sold to obtain a monthly profit of $20,000 is

Regression analysis can be performed using one or more activities to predict costs.

A project breaks even when total revenue less all costs is equal to zero.

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

Contribution Margin Income Statement divides costs into product and period costs.

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.

Which of the following is not an assumption underlying cost-volume-profit analysis?

Fixed costs always remain constant.

Total variable and fixed costs will be the same regardless of how many units are produced.

Depreciation calculated using the production or units of output method is an example of a fixed cost.