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

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Question 111

Multiple Choice

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Match the following terms with their definitions. -Vary in proportion to changes in activity levels

A) Relevant range
B) Break-even point
C) Contribution margin
D) Fixed costs
E) Variable costs

F) C) and D)
G) A) and B)

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Question 112

Multiple Choice

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

A) Total fixed costs increase
B) Unit selling price increases
C) Unit variable cost decreases
D) Total fixed costs decrease

E) None of the above
F) B) and D)

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Question 113

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If a business sells four products, it is not possible to estimate the break-even point.

Which of the graphs in Figure 21-1 illustrates the nature of a mixed cost?

Only a single line, which represents the difference between total sales revenues and total costs, is plotted on the cost-volume-profit chart.

A low operating leverage is normal for highly automated industries.

Copper Hill Inc.manufactures laser printers within a relevant range of production of 70,000 to 100,000 printers per year.The following partially completed manufacturing cost schedule has been prepared: Complete the preceding cost schedule, identifying each cost by the appropriate letter a through o.

Cost-volume-profit analysis cannot be used if which of the following occurs?

Racer Industries has fixed costs of $900,000.Selling price per unit is $250, and variable cost per unit is $130. Required: A How many units must Racer sell in order to break even? B How many units must Racer sell in order to earn a profit of $480,000? C A new employee suggests that Racer Industries sponsor a 10K marathon as a form of advertising.The cost to sponsor the event is $7,200.How many more units must be sold to cover this cost?

Break-even analysis is one type of cost-volume-profit analysis.

If fixed costs are $850,000 and variable costs are 60% of sales, what is the break-even point dollars?

Which of the following is not an assumption underlying cost-volume-profit analysis?

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

Bryce Co.sales are $914,000, variable costs are $498,130, and operating income is $196,000.What is the contribution margin ratio?

Assuming no other changes, operating income will be the same under both the variable and absorption costing methods when the number of units manufactured equals the number of units sold.

Louis Company sells a single product at a price of $65 per unit.Variable costs per unit are $45 and total fixed costs are $625,500.Louis is considering the purchase of a new piece of equipment that would increase the fixed costs to $800,000, but decrease the variable costs per unit to $42. Required: If Louis Company expects to sell 44,000 units next year, should they purchase this new equipment?

If sales are $820,000, variable costs are 55% of sales, and operating income is $260,000, what is the contribution margin ratio?

Match the following terms a-e with their definitions. -Contribution margin divided by income from operations

The manufacturing cost of Carrie Industries for the first three months of the year are provided below: Using the high-low method, determine the a variable cost per unit, and b the total fixed cost.

Trail Bikes, Inc.sells three Deluxe bikes for every seven Standard bikes.The Deluxe bike sells for $1,800 and has variable costs of $1,200.The Standard bike sells for $600 and has variable costs of $200. Required a If Trail Bikes has fixed costs that total $1,702,000, how many bikes must be sold in order for the company to break even? b How many of these bikes will be Deluxe bikes and how many will be the Standard bikes?