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

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Question 61

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The contribution margin ratio is the percent by which the margin of safety exceeds the break-even point.

A) True
B) False

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Question 62

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A company manufactures and sells a product for $120 per unit.The company's fixed costs are $68,760,and its variable costs are $90 per unit.The company's break-even point in sales dollars is:

A) $91,680.
B) $68,760.
C) $2,292.
D) $275,040.
E) $206,280.

F) A) and D)
G) B) and E)

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Question 63

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Dubashi Windows manufactures two standard size windows,J and R,in the ratio of 5:3.J has a selling price of $150 per unit and R has a selling price of $200 per unit.The variable cost of J is $75.00 and the variable cost of R is $90.00.Fixed costs are $352,500.Compute the (a)contribution margin per composite unit,(b)break-even point in composite units,(c)number of units of each product that will be sold at the break-even point.

Gladstone Co.has expected sales of $326,000 for the upcoming month and its monthly break even sales are $300,000.What is the margin of safety as a percent of sales,rounded to the nearest whole percent?

A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials,$10 per unit,Direct labor,$6 per unit,Variable overhead,$70,000,and Fixed overhead,$120,000. -Of the 10,000 units produced,9,200 were sold,and 800 remain in inventory at year-end.Under absorption costing,the value of the inventory is:

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

The following information describes a product expected to be produced and sold by Garr Company: Required: (a)Calculate the contribution margin ratio. (b)Calculate the break-even point in dollar sales. (c)What dollar amount of sales would be necessary to achieve a pretax income of $120,000?

Cost-volume-profit analysis requires management to classify all costs as either fixed or variable with respect to production or sales volume within the relevant range of operations.

A company manufactures a product and sells it for $120 per unit.The total fixed costs of manufacturing and selling the product are expected to be $155,250,and the variable costs are expected to be $75 per unit.What is the company's break-even point in (a)units and (b)dollar sales?

Morse Company reports total contribution margin of $48,000 and pretax net income of $12,000 for the current month.The degree of operating leverage is:

Mason Company manufactures and sells shoelaces for $2.00 per pair.Its variable cost per unit is $1.70.Mason's total fixed costs are $10,500.How many pairs must Mason sell to break even?

Dividing a mixed cost into its separate fixed and variable cost components cannot be done in cost-volume-profit analysis.

The absorption costing method is required for external financial reporting.

Wang Co.manufactures and sells a single product that sells for $450 per unit; variable costs are $270 per unit.Annual fixed costs are $800,000.Current sales volume is $4,200,000. -Compute the break-even point in dollars.

Managers can use variable costing information for internal decision making,but they must use absorption costing for external reporting purposes.

Barclay Bikes manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500.The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models.If the firm's annual fixed costs total $6,500,000,calculate the firm's break-even point in composite units (rounded to the nearest whole unit) .

During its most recent fiscal year,Raphael Enterprises sold 200,000 electric screwdrivers at a price of $15 each.Fixed costs amounted to $400,000 and pretax income was $600,000.What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?

________ is a statistical method of identifying an estimated line of cost behavior.

Cost-volume-profit analysis is based on necessary assumptions.Which of the following is not one of these assumptions?

The contribution margin ratio is the percent of each sales dollar that remains after deducting the unit variable cost.