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

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Question 111

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Carter Co. sells two products, Arks and Bins. Last year Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are: What was Carter Co.'s sales mix last year?

A) 20% Arks, 80% Bins
B) 12% Arks, 28% Bins
C) 70% Arks, 30% Bins
D) 40% Arks, 20% Bins

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

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Question 112

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The point where the sales line and the total costs line intersect on the cost-volume-profit chart represents:

A) the maximum possible operating loss
B) the maximum possible operating income
C) the total fixed costs
D) the break-even point

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

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Question 113

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If fixed costs are $450,000, the unit selling price is $75, and the unit variable costs are $50, what are the old and new break-even sales (units) if the unit selling price increases by $10?

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.

The difference between the current sales revenue and the sales at the break-even point is called the:

If fixed costs are $650,000 and the unit contribution margin is $30, the sales necessary to earn an operating income of $30,000 are 14,000 units.

Which of the following costs is a mixed cost?

The contribution margin ratio is:

If a business had a capacity of $10,000,000 of sales, actual sales of $6,000,000, break-even sales of $4,200,000, fixed costs of $1,800,000, and variable costs of 60% of sales, what is the margin of safety expressed as a percentage of sales?

The range of activity over which changes in cost are of interest to management is called the relevant range.

Costs that remain constant in total dollar amount as the level of activity changes are called:

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 company 10-K 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?

If fixed costs are $350,000, the unit selling price is $29, and the unit variable costs are $20, what is the break-even sales (units) if the variable costs are decreased by $4?

If direct materials cost per unit increases, the break-even point will increase.

Currently, the unit selling price is $50, the variable cost, $34, and the total fixed costs, $108,000. A proposal is being evaluated to increase the selling price to $54.

Garmo Co. has an operating leverage of 5. Next year's sales are expected to increase by 10%. The company's operating income will increase by 50%.

If fixed costs are $1,500,000, the unit selling price is $250, and the unit variable costs are $130, what is the amount of sales required to realize an operating income of $200,000?