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

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Question 121

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A firm expects to sell 25,000 units of its product at $11 per unit and to incur variable costs per unit of $6. Total fixed costs are $70,000. The total contribution margin is:

A) $55,000.
B) $90,000.
C) $125,000.
D) $150,000.
E) $380,000.

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

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Question 122

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Kent Co. manufactures a product that sells for $50.00. Fixed costs are $260,000 and variable costs are $24.00 per unit. Kent can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. What effect would the purchase of the new machine have on Kent's break-even point in units?

A) 800 unit increase.
B) 800 unit decrease.
C) 5,714 unit increase.
D) 4,444 unit decrease.
E) No effect on the break-even point in units.

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

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Question 123

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Alvarez Company's break-even point in units is 1,000. The sales price per unit is $10 and variable cost per unit is $7. If the company sells 2,500 units, what will net income be?

Use the following information to determine the margin of safety in dollars:

Dubashi Windows manufactures two standard size windows, J and R, in the ratio of 5:3. J has a selling price of $150 per unit and R has a selling price of $200 per unit. The variable cost of J is $75.00 and the variable cost of R is $90.00. Fixed costs are $352,500. Compute the (a) contribution margin per composite unit, (b) break-even point in composite units, (c) number of units of each product that will be sold at the break-even point.

The unit contribution margin divided by the selling price per unit is the ________.

A company has fixed costs of $90,000. Its contribution margin ratio is 30% and the product sells for $75 per unit. What is the company's break-even point in dollar sales?

Wang Co. manufactures and sells a single product that sells for $450 per unit; variable costs are $270 per unit. Annual fixed costs are $800,000. Current sales volume is $4,200,000. Compute the contribution margin ratio.

The following information is available for a company's utility cost for operating its machines over the last four months. Using the high-low method, the estimated total fixed cost for utilities is:

Leeks Company's product has a contribution margin per unit of $11.25 and a contribution margin ratio of 22.5%. What is the selling price of the product?

During March, a firm expects its total sales to be $160,000, its total variable costs to be $95,000, and its total fixed costs to be $25,000. The contribution margin for March is:

During its most recent fiscal year, Dover, Inc. had total sales of $3,200,000. Contribution margin amounted to $1,500,000 and pretax income was $400,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year?

Briefly describe a CVP chart, including its major components.

Degree of operating leverage (DOL) is defined as total contribution margin in dollars divided by pretax income.

One aid in measuring cost behavior involves creating a display of the data about past costs in graphical form. Such a visual display is called a ________.

Kent Co. manufactures a product that sells for $50.00 and has variable costs of $24.00 per unit. Fixed costs are $260,000. Kent can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. Compute the revised break-even point in units if the new machine is purchased.

A product has a contribution margin per unit of $17 and sells at $25 per unit. If the break-even point is 82,000 units, calculate (a) the variable costs per unit and (b) the total fixed costs.

The contribution margin ratio is the percent of each sales dollar that remains after deducting the unit variable cost.

The margin of safety is the amount that sales can drop before the company incurs a loss.

A cost-volume-profit chart is also known as a(n)