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

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Question 21

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Match the following terms with their definitions. -Where a business's revenues exactly equal costs

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

F) B) and E)
G) A) and D)

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Question 22

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The contribution margin ratio is

A) the same as the variable cost ratio
B) the same as profit
C) the portion of equity contributed by the stockholders
D) the same as the profit-volume ratio

E) B) and D)
F) C) and D)

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Question 23

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

A mixed cost has characteristics of both a variable and a fixed cost.

Zeke Company sells 25,000 units at $21 per unit. Variable costs are $10 per unit, and fixed costs are $75,000. The contribution margin ratio and the unit contribution margin are

A low operating leverage is normal for highly automated industries.

If fixed costs are $400,000 and the unit contribution margin is $20, what amount of units must be sold in order to have a zero profit?

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

Understanding how costs behave is useful to management for all the following reasons except

Given the following information: Variable cost per unit = $5.00 July fixed cost per unit = $7.00 Units sold and produced in July = 28,000 What is total estimated cost for August if 30,000 units are projected to be produced and sold?

Cost behavior refers to the manner in which

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?

Explain how variable costing net income will be different than absorption costing net income under the following situations: 1) A company had no beginning or ending inventory. During the year, it produced and sold 10,000 units. 2) A company had no beginning inventory. During the year, it produced 10,000 units and sold 8,000 units. 3) A company had 2,000 units in beginning inventory. During the year, it produced 10,000 units and sold 12,000 units.

Match the following terms with their definitions. -The excess of sales revenues over variable costs

Costs that vary in total in direct proportion to changes in an activity level are called

The contribution margin ratio is the same as the profit-volume ratio.

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

If the contribution margin ratio for France Company is 45%, sales were $425,000, and fixed costs were $100,000, what was the income from operations?

If variable costs per unit decreased because of a decrease in utility rates, the break-even point would

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