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

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Question 61

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The ratio of the volumes of the various products sold by a company is called the ______________________________.

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Question 62

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A company's product sells at $12 per unit and has a $5 per unit variable cost. The company's total fixed costs are $98,000. -The break-even point in units is: A.5,158 B.7,000 C.8,167 D.14,000 E.19,600

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Question 63

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Curvilinear costs are also known as nonlinear costs.

The relevant range of operations excludes extremely high and low levels of production that are not likely to occur.

A __________ cost is one that includes both fixed and variable cost components; a ______________ cost is one that reflects a step pattern.

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 dollars is:

Cost-volume-profit analysis is a precise tool for perfectly predicting the profit consequences of cost changes, price changes, and volume changes.

What are the contribution margin and net income under the revised conditions?

Gabel Industries has collected the following data in order to analyze the behavior of their costs: $\begin{array}{|c|c|c|}\hline \text { Month } & \text { Units Produced } & \text { Total Cost } \\\hline \text { January } & 8,750 & \$ 40,500 \\\hline \text { February } & 13,750 & \$ 41,500 \\\hline \text { March } & 12,500 & \$ 45,000 \\\hline \text { April } & 17,500 & \$ 41,500 \\\hline \text { May } & 23,750 & \$ 45,500 \\\hline \text { June } & 11,500 & \$ 38,500 \\\hline\end{array}$ a.Using the high-low method, calculate the variable cost per unit and the estimated fixed costs. b.Using the resulting relationship, predict the costs if they produce 18,500 units in a future period.

The contribution margin per unit expressed as a percentage of the product's selling price is the:

Tanner Inc. has incurred the following overhead costs over a six-week period: $\begin{array}{|c|c|c|}\hline \text { Week } & \text { Machine Hours } & \text { Overhead Cost } \\\hline 1 & 68 & \$ 1,190 \\\hline 2 & 62 & \$ 1,004 \\\hline 3 & 72 & \$ 918 \\\hline 4 & 46 & \$ 710 \\\hline 5 & 94 & \$ 1,025 \\\hline 6 & 48 & \$ 965 \\\hline\end{array}$ -Calculate the approximate fixed cost component of Tanner's overhead costs using the high-low method.

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) :

The high-low method of deriving an estimated cost line uses all the data points available.

A firm sells two different products, A and A.Total fixed costs for this firm are $1,260,000.Additional selling prices and cost information for both products follow: $\begin{array}{lcc} & \text { Selling } & \text { Variable } \\\underline{\text { Product } }& \underline{\text { Price per }} &\underline {\text { Costsper }} \\& \underline{\text { Unit }} & \underline{\text { Unit }} \\\mathrm{A} & \$ 72 & \$ 40 \\\mathrm{B} & 48 & 28\end{array}$ Required: a.Calculate the contribution margin per composite unit. b.Calculate the break-even point in units of each individual product. c.If pretax income before taxes of $294,000 is desired, how many units of A and B must be sold? B.For each unit of B, the firm sells two units of

A cost-volume-profit chart is also known as a(n)

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 dollar amount of sales needed to achieve a targeted after-tax income is computed by dividing the sum of fixed costs plus the desired after-tax income plus income taxes by the contribution margin ratio.

Jet Company's break-even point is 5,000 units.The company's fixed costs are $240,000, and its total variable costs are $85,000.The unit sales price is:

A company has a goal of earning $100,000 in after-tax income.The company must pay $28,000 in income tax if it achieves the goal.The contribution margin ratio is 30%.What dollar amount of sales must be achieved to reach the goal if fixed costs are $64,000?

Conan Company has total fixed costs of $112,000.Its product sells for $35 per unit and variable costs amount to $25 per unit.Next year Conan Company wishes to earn a pretax income that equals 10% of fixed costs.How many units must be sold to achieve this target income level?