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Exam 22: Cost-Volume-Profit

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Question 31

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A company desires to sell a sufficient quantity of products to earn a profit of $180,000. If the unit sales price is $20, unit variable cost is $12, and total fixed costs are $360,000, how many units must be sold to earn net income of $180,000?

A) 101,250 units
B) 67,500 units
C) 54,000 units
D) 40,500 units

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Question 32

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Harvey's variable costs are 30% of sales. The company is contemplating an advertising campaign that will cost $22,000. If sales are expected to increase $40,000, by how much will the company's net income increase?

A) $18,000
B) $28,000
C) $12,000
D) $6,000

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Question 33

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For purposes of CVP analysis, mixed costs must be classified into their fixed and variable elements.

Costs will not change in total within the relevant range of activity.

The break-even point is where total sales equal total variable costs.

An increase in the level of activity will have the following effects on unit costs for variable and fixed costs: Unit Variable Cost Unit Fixed Cost

Blanton Company is planning to sell 600,000 units for $1.50 per unit. The contribution margin ratio is 20%. If Blanton will break even at this level of sales, what are the fixed costs?

McCauley Bagpipes produces two models: Model 24 has sales of 500 units with a contribution margin of $40 each; Model 26 has sales of 350 units with a contribution margin of $50 each. If sales of Model 26 increase by 100 units, how much will profit change?

Changes in the level of activity will cause unit variable and unit fixed costs to change in opposite directions.

Which of the following is not true about the graph of a mixed cost?

In CVP analysis, the term cost includes manufacturing costs, and selling and administrative expenses.

A company sells a product which has a unit sales price of $5, unit variable cost of $3 and total fixed costs of $120,000. The number of units the company must sell to break even is

Variable costing is not acceptable in reporting to stockholders under generally accepted accounting principles.

Brown Company produces flash drives for computers, which it sells for $20 each. Each flash drive costs $6 of variable costs to make. During March, 1,000 drives were sold. Fixed costs for March were $4.20 per unit for a total of $4,200 for the month. If variable costs decrease by 10%, what happens to the break-even level of units per month for Brown Company?

Sales (50,000 units) $1,000,000, direct materials and direct labor $500,000, other variable costs $50,000, and fixed costs $180,000. What is Boswell break-even point in units?

The graph of variable costs that behave in a curvilinear fashion will

The amount of revenue remaining after deducting total variable costs is called the _________________________.

In applying the high-low method, what is the unit variable cost?

Givenchy Company sells 100,000 wrenches for $12.00 per unit. Fixed costs are $350,000 and net income is $250,000. What should be reported as variable expenses in the CVP income statement?

Gaultier Company had actual sales of $800,000 when break-even sales were $600,000. What is the margin of safety ratio?