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Exam 11: Cost Behavior and Cost-Volume-Profit Analysis

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Question 31

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Which ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?

A) Margin of safety ratio
B) Contribution margin ratio
C) Costs and expenses ratio
D) Profit ratio

E) A) and D)
F) C) and D)

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Question 32

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If sales are $200,000, variable costs are 56% of sales, and operating income is $30,000, what is the contribution margin ratio?

A) 42%
B) 37%
C) 44%
D) 15%

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

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Question 33

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Given the following costs and activity observations for Pike Company's utilities, use the high-low method to calculate Pike Company's variable utilities costs per machine hour. $\begin{array}{l}\begin{array} { l l l } \text { Machine Hours}&\text { Cost }\\15,000 & \$ 3,100 & \text { March } \\10,000 & 2,700 & \text { April } \\12,000 & 2,900 & \text { May } \\18,000 & 3,500 & \text { June}\end{array}\end{array}$

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

Which of the following graphs illustrates the behavior of a total fixed cost within the specified relevant range?

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

If fixed costs are $350,000, the unit selling price is $80, and the unit variable cost is $30, what is the break-even sales (in units) ?

Which of the following statements is true regarding fixed and variable costs?

If fixed costs are $850,000 and the unit contribution margin is $50, profit is zero when 15,000 units are sold.

If a business sells two products, it is not possible to estimate the break-even point.

A change in fixed costs as a result of increase in yearly insurance premium will decrease the break-even point.

The relevant range is useful for analyzing cost behavior for management decision-making purposes.

Direct materials cost is an example of a fixed cost of production.

Variable costs as a percentage of sales is equal to 100% minus the contribution margin ratio.

Snower Corporation sells product G for $150 per unit, the variable cost per unit is $105, and the fixed costs are $720,000. What is the sales (in dollars) required to realize income from operations of $40,000?

Kennedy Co. sells two products, Arks and Bins. Last year, Kennedy sold 32,000 units of Arks and 18,000 units of Bins. Related data are: Use the above given data to solve the following questions: Refer to the information provided for Kennedy Co. What was Kennedy's overall product's unit variable cost?

Wiles Inc.'s unit selling price is $40, the unit variable costs is $30, fixed costs are $135,000, and current sales are 10,000 units. How much would operating income change if sales increase by 5,000 units?

The graph of a variable cost per unit when plotted against its related activity base appears as a:

Direct materials and direct labor costs are examples of variable costs of production.

If a business had sales of $4,000,000, fixed costs of $1,200,000, a margin of safety of 25%, and a contribution margin ratio of 40%, what was the break-even point?