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Exam 18: Cost Behavior and Cost-Volume-Profit Analysis

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Question 41

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A company's normal operating range, which excludes extremely high and low volumes that are not likely to occur, is called the:

A) Margin of safety.
B) Contribution range.
C) Break-even point.
D) Relevant range.
E) High-low point.

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Question 42

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Total contribution margin in dollars divided by pretax income is the:

A) Degree of operating leverage.
B) Contribution margin ratio.
C) Margin of safety.
D) Sales mix.
E) Break-even point in units.

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Question 43

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A method that estimates cost behavior by connecting the costs linked to the highest and lowest volume levels on a scatter diagram with a straight line is called the:

A product sells for $200 per unit, and its variable costs per unit are $130. The fixed costs are $420,000. What is the break-even point in dollar sales?

Break-even analysis cannot be applied in a multiproduct situation.

A cost that remains constant over a limited range of volume, but increases by a lump sum when volume increases beyond a maximum amount, is a(n) :

A company manufactures and sells spotlights. Each spotlight sells for $145. The variable cost per unit is $98, and the company's total fixed costs are $235,000. Predicted sales are 15,000 units. What is the contribution margin per unit?

Contribution margin ratio is calculated as the ________________ divided by _____________.

An important assumption in the analysis of a multiproduct situation is that the sales mix is known and remains constant.

A firm expects to sell 25,000 units of its product at $11 per unit. Pretax income is predicted to be $60,000. If the variable costs per unit are $6, total fixed costs must be:

Macleod Company's product has a contribution margin per unit of $62.50 and a contribution margin ratio of 25%. What is the per unit selling price of the product?

A term describing a firm's normal range of operating activities is:

Briefly describe a CVP chart, including its major components.

Hess Co. manufactures a product that sells for $12 per unit. Total fixed costs are $96,000 and variable costs are $7 per unit. Hess can buy a newer production machine that will increase total fixed costs by $22,800 but variable costs will be decreased by $0.40 per unit. What effect would the purchase of the new machine have on Hess's break-even point in units?

The ______________________ is the sales level at which a company neither earns a profit nor incurs a loss.

Narrows Co. is considering the production and sale of a new product line with the following sales and cost data: unit sales price $125; unit variable costs $75; and total fixed costs of $140,000. Calculate the break-even point: (a) In units. (b) In dollar sales.

On a typical cost-volume-profit graph, unit sales are shown on the horizontal axis and both dollars of sales and dollars of costs are represented on the vertical axis.

Thomas Company has total fixed costs of $360,000 and variable costs of $14 per unit. If the unit sales price is reduced from $24 to $20 and advertising is increased by $10,000, sales will increase from 40,000 to 65,000 units. -What are the contribution margin and net income under the current conditions?

During the past year a company had total fixed costs of $70,000. Its product sold for $9 per unit. Variable costs during this time equaled $5 per unit. Next year the company is anticipating a 4% increase in total fixed costs and a $1 per unit decrease in variable costs, but would like to maintain its current selling price per unit. How many units must the company sell next year to earn $1,000,000? (Round answer to complete units.)

Assume that sales are predicted to be $3,750, the expected contribution margin is $1,500, and a net loss of $250 is anticipated. The break-even point in sales dollars is: