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Exam 5: Cost Behavior Cost-Volume-Profit Analysis

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Question 121

True/False

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There are only two methods to derive an estimated line of cost behavior; the high-low method and the scatter diagram.

A) True
B) False

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Question 122

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Which one of the following statements is not true?

A) Total fixed costs remain the same regardless of volume within the relevant range.
B) Total variable costs change with volume.
C) Total variable costs decrease as the volume increases.
D) Fixed costs per unit increase as the volume decreases.
E) Variable costs per unit remain the same regardless of the volume.

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

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Question 123

Multiple Choice

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Curvilinear costs always increase:

Variable costs per unit increase proportionately with increases in volume of activity.

Use the following information to determine the break-even point in sales dollars:

Cost-volume-profit analysis is used to predict future costs to be incurred, volumes of activity, sales to be made, and profit to be earned.

Which of the following costs are most likely to be classified as fixed?

Under absorption costing, fixed overhead costs are excluded from product costs.

During its most recent fiscal year, Dover, Inc. had total sales of $3,200,000. Contribution margin amounted to $1,500,000 and pretax income was $400,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?

Barclay Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's break-even point in total sales dollars.

Select cost information for Klondike Corporation is as follows: Based on this information:

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

There are at least three different methods to separate costs into fixed and variable. These methods are the ________, ________, and ________ methods.

The excess of expected sales over the sales level at the break-even point is known as the:

Scatter diagrams plot volume (units) on the vertical axis and cost on the horizontal axis.

When using the high-low method for estimating cost behavior, the slope, or variable cost per unit, is calculated by ________.

Use the following information to determine the margin of safety in dollars:

Cost-volume-profit analysis can be used to compute expected income from predicted sales and cost levels.

A firm provides the following sales data: Expected unit sales.. 5,000 Unit variable cost….. $10 Unit selling price…. $16 Total fixed cost……. $12,000 Required: (a) Calculate the break-even point in dollar sales. (b) Calculate the margin of safety in dollar sales.

While the total amount of fixed cost remains constant with the level of production, fixed cost per unit changes as volume changes.