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

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Question 61

Multiple Choice

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Which of the following graphs illustrates the behavior of a total variable cost?

A) Graph 2
B) Graph 3
C) Graph 4
D) Graph 1

E) B) and C)
F) A) and B)

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Question 62

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

A) True
B) False

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Question 63

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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?

If direct materials cost per unit decreases,the amount of sales necessary to earn a desired amount of profit will decrease.

Which of the following costs is a mixed cost?

Which of the following activity bases would be the most appropriate for food costs of a hospital?

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?

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

For the current year ending January 31,Ringo Company expects fixed costs of $178,500 and a unit variable cost of $41.50.For the coming year,a new wage contract will increase the unit variable cost to $45.The selling price of $50 per unit is expected to remain the same. (a) Compute the break-even sales (in units) for the current year. (b) Compute the anticipated break-even sales (in units) for the coming year, assuming the new wage contract is signed.

Rental charges of $60,000 per year plus $2 for each machine hour over 15,000 hours is an example of a fixed cost.

In cost-volume-profit analysis,all costs are classified into the following two categories:

Cost-volume-profit analysis cannot be used if which of the following occurs?

Currently,fixed costs are $500,000 and the unit contribution margin is $40.What would be the break-even point in units if fixed costs are reduced by $80,000?

Costs that vary in total in direct proportion to changes in an activity level are called:

Refer to the information provided for Kennedy Co.What was Kennedy's overall product's unit variable cost?

Variable costs are costs that vary in total in direct proportion to changes in the activity level.

Refer to the information provided for Kennedy Co.What was Kennedy's sales mix last year?

Refer to the information provided for Kennedy Co.What was Kennedy's overall product's unit selling price?

As production increases,what should happen to the variable costs per unit?

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