Exam 5: Cost Behavior Analysis

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

Margin of safety is the excess of actual sales over break even sales.

The following are monthly totals taken from the log of a color photocopying machine used by the Kinlo's Printing Company. Cost was based on a flat fee plus a declining cost per copy made after a minimum number of copies had been made each month. Month Number of Copies Made Total Cost January 35,200 \ 10,800 Feburuary 30,400 9,600 March 32,900 10,225 Apri 40,300 12,075 May 38,400 11,600 June 48,900 14,225 To differentiate the variable and fixed costs in the use of this machine for future planning, use the high-low method to (a) determine the variable cost per copy and (b) compute the fixed and variable costs for the months of February and June.

The equation for finding the breakeven point may be written as

Plunda Co. is planning production for the coming year. The information to be used is based on a projection of cost information for the current year. Projections of the following costs are as follows: Variable costs per unit: Direct materials \ 15.80 Direct labor 11.60 Overhead 18.40 Selling costs 8.20 Fixed cost estimates: Production costs \ 212,400 Selling and achninistrative costs 417,600 Plunda Co. sells its product for $90.00 per unit. Compute the following, showing your calculations: a. The breakeven point in sales units b. The breakeven point in sales dollars c. The sales level in both sales units and dollars if a profit of $122,400 is projected

The engineering method of separating costs

The breakeven point is the level of activity at which fixed costs are recovered.

Campground, Inc., is considering the production and sale of propane lamps. Annual fixed costs associated with the project are expected to total $60,000. In addition, each lamp would sell for $12 and would require $7 in variable costs. Calculate (a) the breakeven point in units, (b) the breakeven point in dollars, (c) the number of lamps that must be sold to earn a profit of $120,000, and (d) the operating income or loss at a sales volume of 16,000 lamps.

The typical relationship between variable costs and volume may be described best as follows:

If fixed costs are $80,000, the contribution margin is $25 per unit, and the targeted profit is $30,000, then the required unit sales are

The level of operating capacity that is needed to meet expected sales demand is called

Normal capacity is the average annual level of operating capacity needed to meet expected sales demand.

Manix Company has gathered the following data: Unit SalesPrice Unit Variable Costs Unit Sales Product 1 \ 18.00 \ 10.00 24,500 Product 2 27.00 17.00 17,500 Product 3 35.00 28.00 28,000 Fixed costs are $233,280. The weighted-average breakeven point is

Any cost can be classified as either a variable cost or a fixed cost.

A crystal goblet sells for $50 per goblet. The contribution margin per goblet is $14. Total monthly fixed costs are estimated to be $120,400. The monthly breakeven point in goblets is

Cost-volume-profit analysis is not appropriate for service businesses.

Given the following cost and activity observations for Notwen Company's maintenance costs, use the high-low method to calculate Notwen's monthly fixed costs for maintenance. Cost Units Produced January \ 130,000 25,000 Febuary 180,500 35,000 March 151,100 28,000

Within the relevant range, fixed and variable costs behave differently.

Mixed costs are fixed and variable costs that are recorded in the same general ledger account.

For profit planning purposes, the following equation is used: Target Sales Units = (FC + P) / CM per Unit.