chapter 21 quiz

If fixed costs are $500,000, the unit selling price is $55, and the unit variable costs are $30, what is the break-even point in sales units if fixed costs are increased by $80,000?

23,200 =$500,000/$55-$30 = $500,000/25 = 20,000 units revised break-even = $500,000+$80,000/$55-$30 =$580,000/25 = 23,200 units

If sales are $425,000, variable costs are 62% of sales, and income from operations is $50,000, what is the contribution margin ratio?

38%

Strait Co. manufactures office furniture. During the most productive month of the year, 3,100 desks were manufactured at a total cost of $82,600. In the month of lowest production, the company made 1,270 desks at a cost of $57,000. Using the high-low method of cost estimation, total fixed costs are

39,231

What ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?

contribution margin ratio

Bryce Co. sales are $914,000, variable costs are $498,130, and income from operations is $196,000. What is the contribution margin ratio?

45.5%

Lee Industry's sales are $525,000, variable costs are 53% of sales, and income from operations is $19,000. What is the contribution margin ratio?

47%

Which of the graphs in Figure 21-1 illustrates the behavior of a total variable cost?

graph 3

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

increase

As production increases, variable costs per unit

stay the same

The contribution margin ratio is the

the same as the profit-volume ratio

If fixed costs are $850,000 and variable costs are 60% of sales, what is the break-even point in sales dollars?

2,125,000 Contribution margin ratio = 100% - Variable cost ratio = 100% - 60% = 40% Break-even point in dollar sales = Fixed costs / Contribution margin ratio = $850,000 / 40%

Jacob Inc. has fixed costs of $240,000, a unit selling price of $32, and unit variable costs of $20. What are the old and new break-even points in sales units if the unit selling price increases by $4?

20,000 units and 15,000 units, respectively

When a business sells more than one product at varying selling prices, the business's break-even point can be determined as long as the number of products does not exceed

there is no limit

Thompson Company manufactures and sells cookware. Because of current trends, it expects to increase sales by 15% next year. If this expected level of production and sales occurs and plant expansion is not needed, how should this increase affect next year's total amounts for the following costs?

variable cost increase fixed cost no change

If fixed costs are $244,000, the unit selling price is $119, and the unit variable costs are $80, what is the break-even point in sales units (rounded to a whole number)?

1,226 units

If fixed costs are $1,481,000, the unit selling price is $228, and the unit variable costs are $104, what is the break-even point in sales units if fixed costs are increased by $40,000?

12,266 units

O'Boyle Co.'s fixed costs are $256,000, the unit selling price is $36, and the unit variable costs are $20. What is the break-even point in sales units?

16,000 units

What was Carter Co.'s unit selling price of E, with E representing one overall "enterprise" product?

88$ total sales (14,000*120)+(56,000*80)=6,160,000 total units sold 14,000+56,000=70,000 weighted average selling price= 6,160,000/70,000= 88

Which of the following statements regarding fixed and variable costs is true?

Fixed costs are constant in total, and variable costs are constant per unit.

Most operating decisions of management focus on a narrow range of activity called the

relevant range of production

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

rental costs of $10,000 per month plus $0.30 per machine hour of use

The relative distribution of sales among the various products sold by a business is the

sales mix

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

unit variable cost increases

Manley Co. manufactures office furniture. During the most productive month of the year, 4,500 desks were manufactured at a total cost of $86,625. In its slowest month, the company made 1,800 desks at a cost of $49,500. Using the high-low method of cost estimation, total fixed costs

are $24,750