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Exam 19: Cost Behavior and Cost-Volume-Profit Analysis

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Question 101

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As production increases, what would you expect to happen to fixed cost per unit?

A) Increase
B) Decrease
C) Remain the same
D) Either increase or decrease, depending on the variable costs

E) B) and C)
F) A) and B)

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Question 102

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If sales are $400,000, variable costs are 80% of sales, and operating income is $40,000, what is the operating leverage?

A) 0
B) 7.500
C) 2.0
D) 1.333

E) A) and B)
F) A) and C)

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Question 103

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

With the aid of computer software, managers can vary assumptions regarding selling prices, costs, and volume and can immediately see the effects of each change on the break-even point and profit. This is called:

If fixed costs are $256,000, the unit selling price is $36, and the unit variable costs are $20, what is the break-even sales (units) ?

A firm operated at 80% of capacity for the past year, during which fixed costs were $330,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit was:

Given the following cost and activity observations for Smithson Company's utilities, use the high-low method to calculate Smithson's fixed costs per month. Do not round your intermediate calculations.

The Tom Company reports the following data. Determine Tom Company's operating leverage.

Rental charges of $40,000 per year plus $3 for each machine hour over 18,000 hours is an example of a fixed cost.

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

If fixed costs are $750,000 and variable costs are 60% of sales, what is the break-even point in sales dollars?

Rusty Co. sells two products, X and Y. Last year Rusty sold 5,000 units of X's and 35,000 units of Y's. Related data are: What was Rusty Co.'s sales mix last year?

Cost behavior refers to the manner in which a cost changes as the related activity changes.

Assume that Corn Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year. The unit contribution margins for Products A and B are $30 and $60 respectively. Corn has fixed costs of $378,000. The break-even point in units is:

Cost behavior refers to the methods used to estimate costs for use in managerial decision making.

The fixed cost per unit varies with changes in the level of activity.

If fixed costs are $700,000 and the unit contribution margin is $17, what amount of units must be sold in order to realize an operating income of $100,000?

Global Publishers has collected the following data for recent months: Required: a. Using the high-low method, find variable cost per unit, total fixed costs, and the total cost equation. b. What is the estimated cost for a month in which 19,000 issues are published?

For the current year ending January 31, Harp Company expects fixed costs of $188,500 and a unit variable cost of $51.50. For the coming year, a new wage contract will increase the unit variable cost to $55.50. The selling price of $70.00 per unit is expected to remain the same. Round your answer to the nearest whole number.

Given the following information: Variable cost per unit = $5.00 July fixed cost per unit = $7.00 Units sold and produced in July 25,000 What is total estimated cost for August if 30,000 units are projected to be produced and sold?