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

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Question 91

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Gladstone Co. has expected sales of $326,000 for the upcoming month and its monthly break even sales are $300,000. What is the margin of safety as a percent of sales, rounded to the nearest whole percent?

A) 9%.
B) 108%.
C) 52%.
D) 8%.
E) 92%.

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

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Question 92

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Cost-volume-profit analysis cannot be used when a firm produces and sells more than one product.

A) True
B) False

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Question 93

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The ratio (proportion) of the sales volumes for the various products sold by a company is called the:

What is the high-low method? Briefly describe how it is applied.

Goldfarb Company manufactures and sells toasters. Each toaster sells for $23.75 and the variable cost per unit is $16.25. Goldfarb's total fixed costs are $25,000, and budgeted sales are 8,000 units. What is the contribution margin per unit?

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 contribution margin per unit is:

Glover Headgear produces specialty logo baseball caps for a variety of customers. Selected cost data for Glover follows: direct materials cost $17,000; depreciation on factory equipment, $21,000; direct labor, $16,000; factory lease, $24,000. If Glover sells 6,100 caps at an average price of $12 for each cap, what is the company's contribution margin in total dollars?

Maroon Company's contribution margin ratio is 24%. Total fixed costs are $84,000. What is Maroon's break-even point in sales dollars?

The ________ is the sales level at which a company neither earns a profit nor incurs a loss.

The high-low method can be used to estimate the cost equation using just two points.

Fielder Productions reports the following information: Total contribution margin………………… $32,000 Total fixed costs…………………………… $28,000 Required: (a) Calculate Fielder's degree of operating leverage (DOL). (b) If sales increase by 6%, what is the expected percentage increase in pretax income?

As production volume activity increases, variable cost per unit remains constant.

Curvilinear costs always increase:

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

A firm sells two products, Regular and Ultra. For every unit of Regular sold, two units of Ultra are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow. The contribution margin per composite unit is:

An important assumption in multiproduct CVP analysis is a changing sales mix.

Madison Corporation sells three products (M, N, and O) in the following sales mix: 3:1:2. Unit price and cost data are: Total fixed costs are $340,000. The contribution margin per composite unit for the current sales mix (round to the nearest cent) is:

Contribution margin per unit is the amount by which a product's unit selling price exceeds its variable cost per unit.

A step-wise variable cost can be separated into a fixed component and a variable component.

The following data relate to a product sold by Hallstone Company: (a) Calculate the number of units expected to be sold. (b) Calculate the expected total dollar sales.