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Exam 5: Cost Behavior and Cost-Volume-Profit Analysis

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Question 41

True/False

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The break-even point is the sales level at which a company neither earns a profit nor incurs a loss.

A) True
B) False

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Question 42

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Fuschia Company's contribution margin per unit is $12. Total fixed costs are $84,000. What is Fuschia's break-even point in units?

A) 7,000.
B) 26,520.
C) 57,600.
D) 5,760.
E) 70,000.

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

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Question 43

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The margin of safety is the excess of:

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the number of units of Product A McCoy must sell to break even.

Margin 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. Should Margin reduce its per unit sales price and pay for the additional advertising? (Support your answer with calculations.)

In Keegan Corporation's most recent fiscal year, the company reported pretax earnings of $215,000. Fixed costs totaled $325,800, the unit selling price of the firm's only product was $60, and the variable costs per unit were 40% of the selling price. Based on this information, the firm's break-even point in units was:

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 firm produces and sells a product with a contribution margin of $32 per unit. The firm is presently selling 90,000 units and earning $320,000 in pre-tax income. If the firm desires to increase its pre-tax income to $ 400,000, how many more units must it sell?

When graphing cost-volume-profit data on a CVP chart:

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?

A manufacturer reports the following information below for its first three years in operation. Income for year 3-year period using absorption costing is:

Least-squares regression is a statistical method for identifying cost behavior.

The following information is available for a company's cost of sales over the last five months. Using the high-low method, the estimated total fixed cost is:

What are the cost behaviors per unit and in total for variable cost and fixed costs within the relevant range?

A cost with a flat cost line within a relevant range that shifts to another level when volume significantly changes is a(n) :

Seaquest Company's contribution margin income statement is presented below. Sales for the current period consisted of 5,000 units. Determine the company's break-even point in dollars.

The following information is available for a company's cost of sales over the last five months. Using the high-low method, the estimated variable cost of sales per unit sold is:

Johnston Co. anticipates total fixed costs of $120,000 and variable costs equal to 40% of sales. What is the pretax income if sales are $650,000?

To determine the slope of the variable cost from a scatter diagram, divide the change in units by the change in cost.

A scatter diagram is useful for identifying extreme data points or outliers.