Cost Accounting Chapter 3: Concept Questions

A company currently spends $52,500 per month on fixed costs and produces a product with a contribution margin per unit of $750. The production process involves an engraving machine that can only finish 50 units per month. For each additional 50 units, another machine must be rented at a cost of $7,500 per month. The break-even point per month for this product is

80

A company has a unit contribution margin of $50, fixed costs of $15,000 and a target profit of $20,000 after-tax. If the tax rate is 20% the company must sell ________ units in order to earn the target profit.

800

Cost-volume-profit analysis includes all of the following except ______.

Assets

Excel's Goal Seek may be used to perform ______ analysis.

CVP

True or false: At the break-even point, profit = total expenses.

False because at break even point, profit equals zero

Which of the following correctly express the Profit Equation?

Operating profit = Total revenues - Total costs Total costs = Total revenues - Operating profit

margin of safety=

Sales volume - Break-even sales volume

On a CVP graph, ______.

TR = TC at breakeven profit = TR - TC

True or False: Does total revenue=total expenses

True

CVP analysis relies on certain ________ that might limit the applicability of results for decision making.

assumptions

The volume level at which profits equal zero is called the _______ - ______ point.

break-even

When compared to the Cost-Volume-Profit graph, the ______ lines are collapsed on the Profit-Volume graph.

cost and revenue

An organization's _______ _______ is the proportion of fixed and variable costs to total costs.

cost structure

An organization's _________ _______ is the proportion of fixed and variable costs to total costs

cost structure

A company that is capital intensive has a cost structure with a high proportion of __________ costs.

fixed

On a CVP graph, the intercept of the total cost line is the _________ cost for the period.

fixed

The intercept of the profit-volume line equals the loss at zero volume, which equals _______ ______.

fixed costs

CVP analysis can be performed using Excel's _____ _____.

goal seek

The excess of the projected (or actual) sales over the break-even sales level is called the _______ ______ ______.

margin of safety

(Price - Variable costs) x Units of output - Fixed costs =

profit

The slope of the profit-volume line represents ______.

unit contribution margin

Assumptions that may be considered important limitations of CVP analysis include constant ______.

unit variable costs and selling price

A company that is labor intensive has a cost structure with a high proportion of _______ costs.

variable

The process where managers understand the relationships between revenues, costs, volume and profit is called cost ________ - ________ ________

volume profit analysis

When a company is doing multi-product break-even analysis and assumes a constant product mix, the contribution margin is the __________ - _________ the contribution margin of all of its products.

weighted-average