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

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Question 131

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The least-squares regression method is:

A) A graphical method to identify cost behavior.
B) An algebraic method to identify cost behavior.
C) A statistical method to identify cost behavior.
D) The only identify cost estimation method allowed by GAAP.
E) A cost estimation method that only uses the two extreme values.

F) A) and B)
G) None of the above

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Question 132

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A product sells for $200 per unit, and its variable costs are 65% of sales. The fixed costs are $420,000. What is the break-even point in sales dollars?

A) $2,100.
B) $6,000.
C) $420,000.
D) $646,154.
E) $1,200,000.

F) C) and E)
G) D) and E)

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Question 133

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Cost-volume-profit analysis is a predictive tool for identifying the impact of future cost changes, price changes, and volume of activity changes.

Barclay Bikes 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 composite units (rounded to the nearest whole unit) .

Morse Company reports total contribution margin of $48,000 and pretax net income of $12,000 for the current month. The degree of operating leverage is:

The absorption costing method is required for external financial reporting.

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

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 4:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the number of units of Product Z McCoy must sell to break even.