Deck 21: Cost-Volume-Profit Analysis

Question 1

Which of the following statements is CORRECT with respect to total variable costs,within the relevant range?

A) They will decrease as production decreases.
B) They will increase as production decreases.
C) They will decrease as production increases.
D) They will remain the same as production levels change.

Answer 1

A

Question 2

Which of the following is the term for a cost that does NOT change in total despite wide changes in volume?

A) Fixed cost
B) Mixed cost
C) Variable cost
D) Sunk cost

Answer 2

A

Question 3

Assume that John's mobile phone service provider charges $7 per month and $0.3 per minute per call.If John's current bill is $90,how many calling minutes did John use?

A) 277 minutes
B) 254 minutes
C) 300 minutes
D) 330 minutes

Answer 3

A

Question 4

Which of the following is the term for a cost that is part variable and part fixed?

A) Fixed cost
B) Sunk cost
C) Mixed cost
D) Variable cost

Question 5

Venus Ltd has fixed costs of $300,000.Total costs,both fixed and variable,are $480,000 when 30,000 units are produced.Calculate the total costs if the volume increases to 65,000 units.

A) $780,000
B) $480,000
C) $1,350,000
D) $690,000

Question 6

Orleans Company has a normal range of production volumes between 100 000 units and 180 000 units per month.That is considered the relevant range for production cost analysis.If the company expands significantly beyond 180 000 units per month,which of the following would be the most likely expectation?

A) Both the fixed costs and the variable cost per unit may change.
B) The fixed costs and the variable cost per unit will not change.
C) The fixed costs will remain the same, but the variable cost per unit may change.
D) The fixed costs may change, but the variable cost per unit will remain the same.

Question 7

Nancy was reviewing the water bill for her dog day care and spa and determined that her highest bill,$4100,occurred in May when she washed 400 dogs and her lowest bill,$2700,occurred in November when she washed 250 dogs.What was the variable cost per dog associated with Nancy's water bill?

A) $9.33
B) $10.80
C) $10.25
D) $6.75

Question 8

Anthony Company's highest point of total cost was $75,000 in June.Their point of lowest cost was $50,000 in December.The company makes a single product.Production volume in June and December were 13,000 and 8000 units,respectively.What is the fixed cost per month?

A) $34,375
B) $35,000
C) $10,000
D) $50,000

Question 9

Which of the following is the term for a cost that changes in total in direct proportion to a change in volume?

A) Fixed cost
B) Sunk cost
C) Variable cost
D) Mixed cost

Question 10

Jezebel Company incurred fixed costs of $330,000.Total costs,both fixed and variable,are $490,000 when 60,000 units are produced.It sold 40,000 units during the year.Calculate the variable cost per unit.

A) $2.67
B) $4.00
C) $5.50
D) $8.17

Question 11

Porterhouse Company has both fixed and variable production costs.If volume goes up by 20%,how would that affect the total of all costs? (Assume all volumes are within the relevant range.)

A) Would go down
B) Would go up 20%
C) Would remain the same
D) Would go up by some amount less than 20%

Question 12

First Buy Company provided the following manufacturing costs for the month of June.
$$\begin{array} { | l | l | } \hline \text { Direct labour cost } & \$ 138,000 \\\hline \text { Direct materials cost } & 85,000 \\\hline \text { Equipment depreciation (straight-line) } & 27,000 \\\hline \text { Factory insurance } & 21,000 \\\hline \text { Factory manager's salary } & 12,800 \\\hline \text { Tanitor's salary } & 5200 \\\hline \text { Packaging costs } & 19,000 \\\hline \text { Property taxes } & 16,100 \\\hline\end{array}$$
From the above information,calculate First Buy's total variable costs.

A) $242,000
B) $223,000
C) $324,100
D) $228,200

Question 13

Which of the following is NOT a fixed cost?

A) Property rates
B) Direct materials cost
C) Salary of plant manager
D) Straight-line depreciation

Question 14

Anthony Company's highest point of total cost was $80,000 in June.Their point of lowest cost was $55,000 in December.The company makes a single product.Production volume in June was 16,000 units; production volume in December was 8000 units.What is the variable cost per unit?

A) $10.00 per unit
B) $5.00 per unit
C) $2.00 per unit
D) $3.13 per unit

Question 15

Which of the following statements is CORRECT with respect to variable cost per unit,within the relevant range?

A) It will decrease as production increases.
B) It will remain the same as production levels change.
C) It will increase as production decreases.
D) It will decrease as production decreases.

Question 16

First Buy Company provided the following manufacturing costs for the month of June.
$$\begin{array} { | l | l | } \hline \text { Direct labour cost } & \$ 139,000 \\\hline \text { Direct materials cost } & 83,000 \\\hline \text { Equipment depreciation (straight-line) } & 29,000 \\\hline \text { Factory insurance } & 20,000 \\\hline \text { Factory manager's salary } & 13,100 \\\hline \text { Tanitor's salary } & 5000 \\\hline \text { Packaging costs } & 18,900 \\\hline \text { Property taxes } & 16,000 \\\hline\end{array}$$
From the above information,calculate First Buy's total fixed costs.

A) $58,100
B) $324,000
C) $77,000
D) $83,100

Question 17

Anthony Company has fixed costs of $32,000 per month.Highest production volume during the year was in January when 140,000 units were produced,85,000 units were sold and total costs of $640,000 were incurred.In June,the company produced only 55,000 units.What was the total cost incurred in June?

A) $640,000
B) $414,118
C) $400,900
D) $270,700

Question 18

The phone bill for an accounting firm consists of both fixed and variable costs.Refer to the four-month data below and apply the high-low method to answer the question.
$$\begin{array} { | l | l | l | } \hline & \text { Minutes } & \text { Total Bill } \\\hline \text { Tanuary } & 470 & \$ 3300 \\\hline \text { February } & 210 & \$ 2690 \\\hline \text { March } & 170 & \$ 2630 \\\hline \text { April } & 320 & \$ 2880 \\\hline\end{array}$$
If the company uses 390 minutes in May,how much will the total bill be?

A) $2251.90
B) $3343.90
C) $3121.60
D) $2418.80

Question 19

Which of the following statements is CORRECT with respect to total fixed costs,within the relevant range?

A) They will decrease as production increases.
B) They will decrease as production decreases.
C) They will increase as production decreases.
D) They will remain the same as production levels change.

Question 20

Porterhouse Company has both fixed and variable production costs.If volume goes up by 20%,how would that affect the total variable costs? (Assume all volumes are within the relevant range.)

A) Would go down
B) Would remain the same
C) Would go up 20%
D) Would go up by some amount less than 20%

Question 21

Margaret sells hand-knit scarves at a flea market.Each scarf sells for $35.Margaret pays $60 to rent a vending space for one day.The variable costs are $20 per scarf.How many scarves should she sell each day in order to break even?

A) 4 scarves
B) 35 scarves
C) 7 scarves
D) 3 scarves

Question 22

Within the relevant range for production costs,the total fixed costs and the variable cost per unit remain the same.

Question 23

Perfect Fit Company sells hand-sewn shirts for $55 per shirt.It incurs monthly fixed costs of $7000.The contribution margin ratio is calculated to be 20%.What is the variable cost per shirt?

A) $70.00 per shirt
B) $55 per shirt
C) $44.00 per shirt
D) $66.00 per shirt

Question 24

Margaret sells hand-knit scarves at the flea market.Each scarf sells for $50.Margaret pays $30 to rent a vending space for one day.The variable costs are $15 per scarf.What total revenue amount does she need to earn to break even?

A) $93
B) $100
C) $45
D) $43

Question 25

Colin was a professional classical guitar player until his motorcycle accident that left him disabled.After long months of therapy,he hired an experienced luthier (maker of stringed instruments)and started a small shop to make and sell Spanish guitars.The guitars sell for $720 and the fixed monthly operating costs are as follows:
$$\begin{array} { | l | l | } \hline \text { Rent and electricity and gas } & \$ 1400 \\\hline \text { Wages and benefits to luthier } & 2500 \\\hline \text { Other expenses } & 300 \\\hline\end{array}$$
Colin's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales,$0.60 went to cover his fixed costs,and that anything past that point was pure profit.
What is the amount of revenue Colin should earn each month to break even?

A) $7834
B) $5500
C) $6500
D) $11,750

Question 26

Colin was a professional classical guitar player until his motorcycle accident that left him disabled.After long months of therapy,he hired an experienced luthier (maker of stringed instruments)and started a small shop to make and sell Spanish guitars.The guitars sell for $1300 and the fixed monthly operating costs are as follows:
$$\begin{array} { | l | l | } \hline \text { Rent, electricity and gas } & \$ 1000 \\\hline \text { Wages and benefits to luthier } & 2900 \\\hline \text { Other expenses } & 540 \\\hline\end{array}$$
Colin's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales,$0.50 went to cover his fixed costs and that anything past that point was pure profit.
How many guitars does Colin have to sell each month to break even?

A) 6 guitars
B) 7 guitars
C) 5 guitars
D) 4 guitars

Question 27

The mixed cost per unit is constant throughout the relevant range of activity.

Question 28

If all other factors are constant,an increase in fixed costs will increase the breakeven point.

Question 29

Variable costs change in direct proportion to a change in volume.

Question 30

Pluto Company sold 2100 units in October at a price of $45 per unit.The variable cost is $25 per unit.Calculate the total contribution margin.

A) $52,500
B) $42,000
C) $94,500
D) $147,000

Question 31

The variable cost per unit is assumed to be constant within a particular relevant range of activity.

Question 32

Fixed costs per unit decrease as production levels decrease.

Question 33

Both the income statement approach and the contribution margin approach will yield the same answer for calculating breakeven points.

Question 34

Young Company has provided the following information:
$$\begin{array} { | l | l | } \hline \text { Price per unit } & \$ 60 \\\hline \text { Variable cost per unit } & 12 \\\hline \text { Fixed costs per month } & \$ 20,000 \\\hline\end{array}$$
What is the amount of sales in dollars required for Young to break even?

A) $4000
B) $20,000
C) $100,000
D) $25,000

Question 35

Peterson Company has both fixed and variable costs.If the volume doubles,the total of all costs combined will double.

Question 36

Fixed costs divided by the contribution margin per unit equals the breakeven point in unit sales.

Question 37

Roberts Company has fixed costs of $12,000.Their contribution margin ratio is 50% and ratio of selling expenses to sales is 30%.What is the breakeven point in sales dollars?

A) $24,000
B) $3600
C) $2400
D) $40,000

Question 38

The breakeven point represents the sales volume at which the company's net profit is zero.

Question 39

Peterson Company has both fixed and variable costs.If the volume doubles,the total variable costs will double.

Question 40

Pluto Company sold 2000 units in October at a price of $40 per unit.The variable cost is $25 per unit.The monthly fixed costs are $14,000.What is the operating profit earned in October?

A) $16,000
B) $50,000
C) $80,000
D) $30,000

Question 41

Which of the following statements is CORRECT if total fixed costs decrease while the sales price per unit and variable costs per unit remain constant?

A) The contribution margin increases.
B) The contribution margin decreases.
C) The breakeven point decreases.
D) The breakeven point increases.

Question 42

CVP graphs can help managers quickly estimate the profit or loss earned at different levels of sales volume.

Question 43

Which of the following will lower the breakeven point assuming no other changes?

A) An increase in total fixed costs
B) An increase in the sales price per unit
C) An increase in the variable costs per unit
D) A decrease in the sales price per unit

Question 44

Jenna Manufacturers produces flooring material.The monthly fixed costs are $18,000 per month.The unit selling price is $85 and variable cost per unit is $40.If Jenna's managers create a CVP graph from volume levels of zero to 500 units,at what sales level (in units)will the revenue and total cost lines intersect?

A) 450 units
B) 400 units
C) 144 units
D) 212 units

Question 45

James Company sells glass vases at a wholesale price of $3 per unit.The variable cost of manufacture is $0.37 per unit.The monthly fixed costs are $7500.James's current sales are 28,000 units per month.If James wants to increase operating profit by 25%,how many additional units,must James sell? (Round your intermediate calculations to two decimal places.)

A) 66,140 glass vases
B) 82,675 glass vases
C) 6287 glass vases
D) 7500 glass vases

Question 46

Which of the following statements is CORRECT if the variable cost per unit increases while the sale price per unit and total fixed costs remain constant?

A) The breakeven point increases.
B) The breakeven point decreases.
C) The breakeven point remains the same.
D) The contribution margin increases.

Question 47

On a CVP graph,there is a point where the two diagonal lines intersect.Which of the following statements accurately describes that point?

A) It is the point where total revenues equal fixed costs.
B) It is the point where fixed costs equal variable costs.
C) It is the point where total costs equal total revenues.
D) It is the point where total revenues equal total variable costs.

Question 48

Arturo Company's model A generator sells for $456 and model B sells for $390.The variable cost of model A is $404 and of model B is $320.If Arturo Company's sales incentives reward sales of the goods with highest contribution margin,the sales force will be motivated to push sales of model A more aggressively than model B.

Question 49

The breakeven point on a CVP graph is the point where the sales revenue line intersects the total cost line.

Question 50

In a CVP graph,what does the line which begins at the lower left corner represent?

A) Total fixed cost
B) Total sales revenue
C) Total variable cost
D) Both the total variable cost and the total sales revenue

Question 51

Colin was a professional classical guitar player until his motorcycle accident that left him disabled.After long months of therapy,he hired an experienced luthier (maker of stringed instruments)and started a small shop to make and sell Spanish guitars.The guitars sell for $800 and the fixed monthly operating costs are as follows:
$$\begin{array} { | l | l | } \hline \text { Rent and electricity and gas } & \$ 1100 \\\hline \text { Wages and benefits to luthier } & 2900 \\\hline \text { Other expenses } & \$ 10 \\\hline\end{array}$$
Colin's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales,$0.60 went to cover his fixed costs,and that anything past that point was pure profit.
Colin is planning to increase the selling price to $860.What impact will the increase in selling price have on the contribution margin ratio?

A) It will go down from 68% to 60%.
B) It will stay the same.
C) It will go up 63%.
D) It will go up 60%.

Question 52

Colin was a professional classical guitar player until his motorcycle accident that left him disabled.After long months of therapy,he hired an experienced luthier (maker of stringed instruments)and started a small shop to make and sell Spanish guitars.The guitars sell for $740 and the fixed monthly operating costs are as follows:
$$\begin{array} { | l | l | } \hline \text { Rent, electricity and gas } & \$ 850 \\\hline \text { Wages and benefits to luthier } & 3000 \\\hline \text { Other expenses } & \$ 20 \\\hline\end{array}$$
Colin's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales,$0.70 went to cover his fixed costs,and that anything past that point was pure profit.
Colin is planning to increase the selling price to $850.What impact will the increase in selling price have on the breakeven point in units?

A) It will go down from 11 to 9 units.
B) It will stay the same.
C) It will go up from 9 to 12 units.
D) It will go down from 9 to 7 units.

Question 53

On a CVP graph,in the area where the revenue line appears below the total cost line,the vertical distance separating the two lines represents what?

A) Variable costs
B) Net profit
C) Contribution margin
D) Loss

Question 54

Jame Company sells glass vases at a wholesale price of $3 per unit.The variable cost of manufacture is $1.75 per unit.The fixed costs are $13,500 per month.Jame sold 8600 units during this month.Calculate Jame's operating profit (loss)for this month.

A) ($2750)
B) ($13,500)
C) $2750
D) $15,050

Question 55

Moylan Company has provided the following information:
$$\begin{array} { | l | l | } \hline \text { Sales } & \$ 781,000 \\\hline \text { Variable expenses } & 5 07,000 \\\hline \text { Fixed expenses } & 216,000 \\\hline\end{array}$$
Which of the following statements is true,if the sales volume increases by 10%?

A) Operating profit will increase by $5800.
B) Contribution margin will increase by $78,100.
C) Operating profit will increase by $27,400.
D) Fixed expenses will increase by $21,600.

Question 56

Some companies use contribution margin rather than sales revenues as the basis of incentives for motivating sales persons because it will lead them to sell more of the higher margin goods.

Question 57

Colin was a professional classical guitar player until his motorcycle accident that left him disabled.After long months of therapy,he hired an experienced luthier (maker of stringed instruments)and started a small shop to make and sell Spanish guitars.The guitars sell for $700 and the fixed monthly operating costs are as follows:
$$\begin{array} { | l | l | } \hline \text { Rent and electricity and gas } & \$ 1210 \\\hline \text { Wages and benefits to luthier } & 3100 \\\hline \text { Other expenses } & 600 \\\hline\end{array}$$
Colin's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales,$0.85 went to cover his fixed costs,and that anything past that point was pure profit.
Colin wishes to earn $5100 of operating profit each month.Calculate the amount of sales revenue required to achieve the target profit.

A) $6000
B) $11,777
C) $4910
D) $5100

Question 58

Evans Company has estimated the following amounts for its next fiscal year:
$$\begin{array} { | l | l | } \hline \text { Total fixed expenses } & \$ 834,500 \\\hline \text { Sale price per unit } & 41 \\\hline \text { Variable expenses per unit } & 28 \\\hline\end{array}$$
What will happen to the breakeven point (in units)if Evans can reduce fixed expenses by $23,500?

A) The breakeven point will decrease by 840 units.
B) The breakeven point will decrease by 574 units.
C) The breakeven point will decrease by 1808 units.
D) The breakeven point will increase by 574 units.

Question 59

Breakeven is the point where the sales revenues are exactly equal to the fixed costs.

Question 60

Breakeven is the point where the sales revenues are exactly equal to the total variable costs plus the total fixed costs.

Question 61

Dorothy Products sells its products for $40 per unit.Additional data for the month of April 2016 are as follows:
$$\begin{array} { | l | l | } \hline \text { Beginning inventory } & { 0 \text { units } } \\\hline \text { Units produced } & 15,000 \\\hline \text { Units sold } & 10,000 \\\hline \text { Ending inventory } & 2400 \\\hline \text { Direct materials } & \$ 5 \text { per unit } \\\hline \text { Direct labour } & \$ 4 \text { per unit } \\\hline \text { Variable manufacturing overhead } & \$ 16,000 \\\hline \text { Fixed manufacturing overhead } & \$ 20,000 \\\hline \text { Operating expenses } & \$ 33,000 \\\hline\end{array}$$
Calculate the product cost per unit produced using absorption costing.

A) $11.20 per unit
B) $11.40 per unit
C) $10.33 per unit
D) $9.00 per unit

Question 62

Allston Products sells a special kind of effects pedal for musical performers.Each unit sells for $22.00.Additional data for the month of April 2017 are as follows:
$$\begin{array} { | l | c |l| } \hline \text { Direct materials } & \$ 4.00& \text { per unit } \\\hline \text { Direct labour } & \$ 8.00& \text { per unit } \\\hline \text { Variable manufacturing overhead } & \$ 20,000 &\text { per month } \\\hline \text { Fixed manufacturing overhead } & \$ 14,000 &\text { per month } \\\hline \text { Operating expenses } & \$ 21,000& \text { per month } \\\hline & \\\hline \text { Beginning inventory } & 0 &\text { units } \\\hline \text { Units produced } & 8,000& \text { units } \\\hline \text { Units sold } & 7,500& \text { units } \\\hline \text { Ending inventory } & 500& \text { units } \\\hline\end{array}$$
Which of the following statements is true?

A) Absorption costing produces operating profit that is $12,750 higher than variable costing.
B) Absorption costing produces operating profit that is $875 lower than variable costing.
C) Absorption costing produces operating profit that is $875 higher than variable costing.
D) Absorption costing produces operating profit that is $12,750 lower than variable costing.

Question 63

The combination of products that make up total sales,and the proportion of sales among the products is referred to as 'sales mix'.

Question 64

Browning Company sells two products-X and Y.Product X is sold for $29 per unit and has a variable cost per unit of $15.Product Y is sold for $32 per unit and has a unit variable cost of $21.Total fixed costs for the company are $20,000.Browning Company typically sells three units of Product X for every unit of Product Y.What is the breakeven point in total units?

A) 754 units
B) 1509 units
C) 377 units
D) 1131 units

Question 65

A company sells products in two size packages-regular and long.The two products sell in equal numbers.The contribution margin of the regular is $12 and the contribution margin of the long size is $18.The weighted average contribution margin is $15.

Question 66

Pep Soda,a local convenience store,sells soft drinks.It sells two large drinks for every small drink.A large drink sells for $1.80 with a variable cost of $0.70.A small drink sells for $1.00 with a variable cost of $0.30.The weighted average contribution margin is: (Round your intermediate calculations and final answer to two decimal places.)

A) $0.70 per drink.
B) $0.97 per drink.
C) $1.45 per drink.
D) $2.90 per drink.

Question 67

If variable costs go down,and all other factors remain the same,the margin of safety will become larger.

Question 68

If a company reduces its fixed costs,the net profit will increase in the exact same amount as the cost reduction.

Question 69

Which of the following accurately describes variable costing?

A) Only variable manufacturing costs are assigned to products.
B) Both variable and fixed manufacturing costs are assigned to products.
C) Only fixed manufacturing costs are assigned to products.
D) Both manufacturing and non-manufacturing costs are assigned to products.

Question 70

If fixed costs go up and all other factors remain the same,the margin of safety will become smaller.

Question 71

Allston Products sells a special kind of effects pedal for musical performers.Each unit sells for $20.00.Additional data for the month of April 2016,are as follows:
$\begin{array}{|l|c|c|}\hline \text { Direct materials } & \$ 4 & \text { per unit } \\\hline \text { Direct labour } & \$ 8 & \text { per unit } \\\hline \text { Variable manufacturing overhead } & \$ 23,000 & \text { per month. } \\\hline \text { Fixed manufacturing overhead } & \$ 15,000 & \text { per month } \\\hline \text { perating expenses } & \$ 21,000 & \text { per month } \\\hline\\\hline \text { Beginning inventory } & 0 & \text { units } \\\hline \text { Units produced } & 10,000 & \text { units } \\\hline \text { Units sold } & 3500 & \text { units } \\\hline \text { Ending inventory } & 700 & \text { units } \\\hline \end{array}$

Using absorption costing,how much is the net operating profit for April?

A) $23,998
B) $12,450
C) $31,997
D) $14,700

Question 72

If variable costs go up,and all other factors remain the same,the business will have to sell more units to break even.

Question 73

Mist Company sells two products-A and B.Mist predicts that it will sell 5500 units of A and 2000 units of B during the next period.The unit contribution margins are $3.75 and $5.00,respectively.What is the weighted-average unit contribution margin?

A) $5.00 per product
B) $4.08 per product
C) $4.38 per product
D) $3.75 per product

Question 74

For the next year,Hall Company predicts the sale of 15 000 units of a product with a contribution margin of $6 per unit and 30 000 units of another product with a contribution margin of $9 per unit.The weighted-average contribution margin per unit is $8.

Question 75

Allston Products sells a special kind of effects pedal for musical performers.Each unit sells for $20.00.Additional data for the month of April 2017,are as follows:
$$\begin{array} { | l | l | l | } \hline \text { Direct materials } &\$ 4.00& \text { per unit } \\\hline \text { Direct labour } & \$ 8.00 &\text { per unit } \\\hline \text { Variable manufacturing overhead } & \$ 20,000 & \text { per month } \\\hline \text { Fixed manufacturing overhead } & \$ 17,000 & \text { per month } \\\hline \text { Operating expenses } & \$ 24,000 & \text { per month } \\\hline & & \\\hline \text { Beginning inventory } &0 & \text { units } \\\hline \text { Units produced } & 3000 & \text { units } \\\hline \text { Units sold } & 5500 & \text { units } \\\hline \text { Ending inventory } & 700 & \text { units } \\\hline\end{array}$$
Using variable costing,how much is the net operating profit for April?

A) $11,250
B) $32,000
C) $34,998
D) $8015

Question 76

Dorothy Products sells its products for $20 per unit.Additional data for the month of April 2016 are as follows:
$$\begin{array} { | l | l | } \hline \text { Beginning inventory } & \text { 0 units } \\\hline \text { Units produced } & 8300 \\\hline \text { Units sold } & 7800 \\\hline \text { Ending inventory } & 550 \\\hline \text { Direct materials } & \$ 5 \text { per unit } \\\hline \text { Direct labour } & \$ 10 \text { per unit } \\\hline \text { Variable manufacturing overhead } & \$ 22,000 \\\hline \text { Fixed manufacturing overhead } & \$ 14,000 \\\hline \text { Operating expenses } & \$ 25,000 \\\hline\end{array}$$
Using variable costing,calculate the product cost per unit produced.

A) $17.65 per unit
B) $20.66 per unit
C) $15.00 per unit
D) $16.75 per unit

Question 77

If a company uses standard absorption costing,how could a business manager exploit that accounting method in order to boost profit without violating the accounting standards?

A) By building up inventory levels, fixed manufacturing costs could be 'stored up' in inventory, the cost of sales would be lower and profit would be higher.
B) By reducing inventory levels, the manager could show higher sales revenues, and thus report higher profit.
C) By coding administrative costs to inventory, the manager could report lower total expenses and thus report higher profit.
D) By adopting just-in-time inventory management, the manager could reduce the costs of financing and storing inventory which would in turn help boost profit.

Question 78

If production exceeds units sold,which of the following statements is CORRECT?

A) A higher net profit will result under an absorption costing income statement.
B) A lower net profit will result under an absorption costing income statement.
C) The same net profit will result under both a variable costing and absorption costing income statement.
D) A higher net profit will result under a variable costing income statement.

Question 79

A small business produces a single product and reports the following data:
$$\begin{array} { | l | l | l | } \hline \text { Price } & \$ 10.59 & \text { per unit } \\\hline \text { Variable cost } & \$ 5 & \text { per unit } \\\hline \text { Fixed cost } & \$ 24,000 & \text { per month } \\\hline \text { Volume } & 13,000 & \text { per month } \\\hline\end{array}$$
If the company reduces its price to $7.75,it believes that the volume will go up to 15,000 units.
How would this change affect operating profit?

A) It will go up by $48,670.
B) It will go up by $31,420.
C) It will go down by $48,670.
D) It will go down by $31,420.

Question 80

Jackson Company has provided the following information regarding the two products that it sells:
$$\begin{array} { | l | l | l | } \hline & { \text { Jet Boats } } &{ \text { Ski Boats } } \\\hline \text { Sales price per unit } & \$ 16,000 & \$ 40,000 \\\hline \text { Variable cost per unit } & \$ 4900 & \$ 17,000 \\\hline\end{array}$$
Annual fixed costs are $310,000.
How many units must be sold in order for Jackson to breakeven,assuming that Jackson sells five jet boats for every two ski boats sold? Round intermediary dollar amounts to the nearest dollar and round unit amounts up to the next whole unit.

A) 39 jet boats and 16 ski boats
B) 7 jet boats and 16 ski boats
C) 16 jet boats and 7 ski boats
D) 13 jet boats and 6 ski boats