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Exam 11: Cost-Volume-Profit Analysis

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Question 51

True/False

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

A) True
B) False

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Question 52

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Which of the following conditions would cause the break-even point to increase?

A) Increase in total fixed costs
B) Increase in unit selling price
C) Decrease in unit variable cost
D) Decrease in total fixed costs

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

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Question 53

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Which of the following activity bases would be the most appropriate for gasoline costs of a delivery service such as UPS?

The graph of the variable costs when plotted against the activity level appears as a line parallel to horizontal axis.

Calculate the break-even sales when a business has sales of $824,000 and a margin of safety of 21%.

If fixed costs are $300,000 and variable costs are 70% of break-even sales, profit is zero when sales revenue is $1,000,000.

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: ?? $\begin{array}{rrrr}& \text { Unit } & \text { Unit } & \text { Unit } \\& \text { Selling} & \text { Variable } & \text { Contribution } \\\text { Product } & \text { Price } & \text { Cost } & \text { Margin } \\\hline\text { Arks } & \$ 80 & \$ 20 & \$ 60 \\\text { Bins } & 120 & 40 & 80\end{array}$ ? What was Kennedy's sales mix last year?

If the volume of sales is $4,000,000 and sales at the break-even point amount to $3,200,000, the margin of safety will be 20%.

_____ analysis is used while selecting the mix of products to sell.

Even if a business sells six products, it is possible to estimate the break-even point.

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

A change in fixed costs as a result of increase in the property tax rates will increase the break-even point.

Monthly rent on a factory building is an example of a fixed cost.

If the contribution margin ratio for Harrison Company is 38%, sales were $425,000, and fixed costs were $100,000, what was the operating income?

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

Which of the following is an example of a mixed cost?

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

What is the margin of safety (in sales) when a business has sales of $485,000, sales of $225,000 at break-even point, and unit selling price of $55?

If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would:

If sales total $2,000,000, fixed costs total $600,000, and variable costs are 60% of the sales, the contribution margin ratio is 40%.