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Exam 4: Cost Behavior and Cost-Volume-Profit Analysis

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Question 101

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Define operating leverage.Explain the relationship between a company's operating leverage and how a change in sales is expected to impact profits.

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Operating leverage is the relationship b...

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Question 102

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If sales total $2,000,000, fixed costs total $800,000, and variable costs are 60% of sales, the contribution margin ratio is 60%.

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Question 103

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Cost-volume-profit analysis can be presented in both equation form and graphic form.

If fixed costs are $300,000, the unit selling price is $31, and the unit variable costs are $22, what is the break-even sale units if fixed costs are reduced by $30,000?

If fixed costs are $600,000 and the unit contribution margin is $40, what is the break-even point if fixed costs are increased by $90,000?

The Waterfall Company sells a product for $150 per unit.The variable cost is $80 per unit, and fixed costs are $270,000. Determine the a break-even point in sales units, and b break-even points in sales units if the company desires a target profit of $36,000.Round your answer to the nearest whole number.

Match the following terms a-e with their definitions. -The relative distribution of sales among products sold by a company

If fixed costs are $500,000 and variable costs are 60% of break-even sales, profit is zero when sales revenue is $930,000.

The dollars available from each unit of sales to cover fixed cost and profit is the unit variable cost.

Which of the following conditions would cause the break-even point to increase?

In a cost-volume-profit chart, the

Given the following cost data, what type of cost is shown?

The Dean Company has sales of $500,000, and the break-even point in sales dollars of $300,000.Determine the company's margin of safety percentage.

Match the following terms a-e with their definitions. -Indicates the possible decrease in sales that may occur before operating loss results

Spice Inc.'s unit selling price is $60, the unit variable costs are $35, fixed costs are $125,000, and current sales are 10,000 units.How much will operating income change if sales increase by 8,000 units?

The cost graphs in the illustration below shows various types of cost behaviors. For each of the following costs, identify the cost graph that best describes its cost behavior as the number of units produced and sold increases: a Sales commissions of $6,000 plus $0.05 for each item sold. b Rent on warehouse of $12,000 per month. c Insurance costs of $2,500 per month. d Per-unit cost of direct labor. e Total salaries of quality control supervisors.One supervisor must be added for each additional work shift. f Total employer pension costs of $0.35 per direct labor hour. g Per-unit straight-line depreciation costs. h Per-unit cost of direct materials. i Total direct materials cost. j Electricity costs of $5,000 per month plus $0.0004 per kilowatt-hour. k Per-unit cost of plant superintendent's salary. l Salary of the night-time security guard of $3,800 per month. m Repairs and maintenance costs of $3,000 for each 2,000 hours of factory machine usage. n Total direct labor cost. o Straight-line depreciation on factory equipment.

For the coming year, River Company estimates fixed costs at $109,000, the unit variable cost at $21, and the unit selling price at $85.Determine a the break-even point in units of sales, b the unit sales required to realize operating income of $150,000 and c the probable operating income if sales total $500,000. Round units to the nearest whole number and percentage to one decimal place.

Which of the graphs in Figure 21-1 illustrates the behavior of a total fixed cost?

Given the following cost data, what type of cost is shown?

Which of the following is not an example of a cost that varies in total as the number of units produced changes?