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

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Question 51

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The difference between sales price per unit and variable cost per unit is the:

A) Gross profit from sales.
B) Gross margin per unit.
C) Fixed cost per unit.
D) Margin of safety per unit.
E) Contribution margin per unit.

F) All of the above
G) C) and E)

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Question 52

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A term describing a firm's normal range of operating activities is:

A) Relevant range of operations.
B) Break-even level of operations.
C) Margin of safety of operations.
D) Relevant operating analysis.
E) High-low level of operations.

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

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Question 53

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Under variable costing, only costs that change in total with changes in production levels are included in product costs.

The margin of safety can be expressed in dollars or as a percent of sales.

In cost-volume-profit analysis, the unit contribution margin is:

An important tool in predicting the volume of activity, the costs to be incurred, the sales to be made, and the profit to be earned is:

The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. If Burkett Corporation achieves the budgeted level of sales, what will be its margin of safety in dollars?

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

A cost that changes in total in proportion to changes in volume of activity is a(n) :

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. 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 break-even point in composite units.

Three important assumptions in cost-volume-profit analysis are that (1) ________ per unit is constant, (2) ________ per unit is constant, and (3) ________ are constant in total.

A company has fixed costs of $320,000 and a contribution margin per unit of $15. If the company wants to earn a target $40,000 pretax income, how many units must be sold (rounded to the nearest whole unit) ?

A company's normal operating range, which excludes extremely high or low operating levels that are not likely to occur, is called the:

The contribution margin per unit is the price at which a unit must be sold in order for the company to break even.

A method that estimates cost behavior by using just the highest and lowest volume levels is called the:

During its most recent fiscal year, Raphael Enterprises sold 200,000 electric screwdrivers at a price of $15 each. Fixed costs amounted to $400,000 and pretax income was $600,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?

Discuss how CVP analysis can be useful in planning.

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

A ________ cost is one that includes both fixed and variable cost components; a ________ cost is one that reflects a step pattern.

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 break-even point in composite units for the current sales mix (round to the nearest unit) is: