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Exam 9: Costvolumeprofit Analysis and Relevant Costing

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Question 21

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The correct statement is:

A) contribution margin contributes to profits.
B) contribution margin contributes to fixed costs.
C) contribution margin contributes to variable costs.
D) Both A and B.

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Question 22

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Use the information below to answer the following questions. Sales Extraordinaire sells one particular photo frame. It estimates that it can sell as many frames as it produces. $\begin{array} { l r } \text { Sales price per unit } & \$ 5.00 \\\text { Variable cost per unit } & \$ 2.00 \\\text { Fixed costs per annum } & \$ 9,000\end{array}$ -Refer to the table above.The sale of 5,000 photo frames would result in:

A) a profit of $5,000.
B) a profit of $6,000.
C) a loss of $2,000.
D) a loss of $3,000.

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Question 23

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Fixed costs are best defined as:

Semi-fixed costs are best defined as:

Use the information below to answer the following questions. Sales Extraordinaire sells one particular photo frame. It estimates that it can sell as many frames as it produces. $\begin{array} { l r } \text { Sales price per unit } & \$ 5.00 \\\text { Variable cost per unit } & \$ 2.00 \\\text { Fixed costs per annum } & \$ 9,000\end{array}$ -Refer to the table above.The break-even point in units is:

Relevant costs for decision-making are those costs that:

Xon Company needs 1,000 components for one of its products.It can subcontract production of the components to the Eon Company for $40 each.The business can produce the components internally for a total variable cost of $30 per component.Xon Company has spare capacity.What will be the impact on Xon's profit if Eon's offer is accepted?

Wombat World is a small zoo displaying native animals.The entrance fee is $15 per person.Variable costs of running the zoo are $8 per visitor and fixed costs are $200,000 per annum.The number of visitors that would be needed to make a profit of $20,000 per annum is:

Variable costs are best defined as:

An operating loss indicates:

If total costs are $20,000 at an output of 2,000 units and $25,000 at an output of 2,500 units,variable costs per unit are:

Use the information below to answer the following questions. Unique Tables manufacture coffee tables made of recycled timber. Market research has suggested that there will be strong demand for the tables. Due to this, management is debating whether to lease a new turning machine to meet increased production. To assist in their decision-making, the management accountant has supplied the following information: $\begin{array} { l c c } & \text { Without } & \text { With } \\& \text { turning machine } & \text { turning machine } \\\text { Expected level of sales } & 1,500 \text { units } & 1,500 \text { units } \\\text { Sales price per urit } & \$ 150 & \$ 150 \\\text { Variable costs per urit } & \$ 120 & \$ 110 \\\text { Fixed costs } & \$ 7,500 & \$ 15,000\end{array}$ -Refer to the table above.The operating gearing for Unique Tables is:

Where several products are produced and there is a scarce factor,the rule for deciding on the optimum product mix is:

Break-even point is represented graphically as:

Management may justifiably hesitate to close a service because of:

If total costs are $80,000 at an output of 12,000 units and $95,000 at 15,000 units,fixed costs are:

The vertical axes on a break-even chart and a profit-volume chart respectively are:

A business may prefer to make a product that it could subcontract at a cheaper price because:

On a profit-volume chart,the output where the graph line crosses the axis is the output where:

Variable costs per unit are also known as: