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