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

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Question 21

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Total fixed costs remain constant as the level of activity changes within the relevant range.

A) True
B) False

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Question 22

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

A) decrease.
B) increase.
C) remain the same.
D) increase or decrease, depending upon the percentage increase in wage rates.

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

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Question 23

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DeGiaimo Co. has an operating leverage of 5. If next year's sales are expected to increase by 10%, then the company's operating income will increase by 50%.

Break-even analysis is a type of cost-volume-profit analysis.

Rouney Co. has budgeted that factory supervisors' salary will increase by 10%. If selling prices and all other cost relationships are held constant, next year's break-even point would:

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

With the aid of computer software, managers can vary assumptions regarding selling prices, costs, and volume and can immediately see the effects of each change on the break-even point and profit. Such an analysis is called:

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

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%.

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

Winston Co. manufactures office furniture. During the most productive month of the year, 3,500 desks were manufactured at a total cost of $84,400. In its slowest month, the company made 1,100 desks at a cost of $46,000. Using the high-low method of cost estimation, total fixed costs are:

If fixed costs are $250,000, the unit selling price is $105, and the unit variable cost is $65, what is the break-even sales (in units) ?

Which of the following graphs illustrates the nature of a mixed cost?

The fixed cost per unit varies with changes in the level of activity.

For purpose of analysis, mixed costs can generally be separated into their variable and fixed components.

Which of the following is an example of a cost that remains the same in total as the number of units produced changes?

A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.

If a business had sales of $4,000,000 and a margin of safety of 25%, what was the break-even point?

Currently, fixed costs are $561,000 and the unit contribution margin is $10. What would be the break-even point in units if variable cost is decreased by $0.50 per unit?

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