Managerial accounting Ch 6

Total direct materials costs are $126,000, fixed costs are $79,500, and units produced are 15,000. What is the direct materials cost per unit? a. $3.10 b. $8.40 c. $13.70 d. $5.30

($126,000/15,000 units) b. $8.40

If sales are $420,000, variable costs are 63% of sales, and operating income is $66,000, what is the contribution margin ratio? a. 63% b. 84% c. 16% d. 37%

Contribution margin ratio = (Sales - Variable cost) / Sales ($420,000 - ($420,000*63%)) / $420,000 = 37% d. 37%

If fixed costs are $444,000, the unit selling price is $40, and the unit variable costs are $25, what is the break-even sales (in units)? a. 29,600 units b. 11,100 units c. 17,760 units d. 26,640 units

a. 29,600 units $444,000 / ($40-$25)

When direct materials costs per unit are plotted on the vertical axis of a graph and units produced are plotted on the horizontal axis, a unit variable cost appears as a _____________. a. horizontal straight line. b. diagonal straight line. c. curved line. d. vertical straight line.

a. horizontal straight line.

Contribution margin is a. sales revenue minus variable costs. b. profit minus fixed costs. c. the same as sales revenue. d. sales revenue minus fixed costs.

a. sales revenue minus variable costs.

If sales are $396,000, variable costs are 80% of sales, and operating income is $36,000, what is the operating leverage? a. 1.95 b. 2.20 c. 0.78 d. 1.33

b. 2.20 (Sales - VC) / Operating Income ($369,000 - ($369,000 * .8)) / $36,000

Which of the following is an example of a cost that varies in total as the number of units produced changes? a. Production supervisor's salary b. Electricity per KWH to operate factory equipment c. Depreciation on factory equipment d. Rent on a factory building

b. Electricity per KWH to operate factory equipment

Costs that vary in total in direct proportion to changes in an activity level are called __________ costs. a. fixed b. variable c. differential d. sunk

b. Variable

The equation for the break-even point in sales units is a. variable costs divided by unit contribution margin. b. fixed costs divided by unit contribution margin. c. fixed costs multiplied by unit contribution margin. d. fixed costs divided by contribution margin ratio.

b. fixed costs divided by unit contribution margin. Break Even sales units = FC / CM

In a service company, the unit of analysis can influence whether costs are defined as a. short-term or long-term. b. fixed or variable. c. product or period. d. selling or administrative.

b. fixed or variable.

Companies with high fixed costs will normally have a. low operating leverage. b. high operating leverage. c. a high contribution margin. d. a high contribution margin ratio.

b. high operating leverage.

Break-even analysis for a service company involves identifying the correct a. units of product manufactured. b. profit margin. c. unit of analysis. d. units of product sold.

b. profit margin.

Contribution margin is the excess of sales over a. fixed costs. b. variable costs. c. operating income. d. cost of goods sold.

b. variable costs.

Given the following costs and activities for Falcon Company electrical costs, use the high-low method to calculate Falcon's variable electrical costs per machine hour. Costs Machine Hours April $2,800 15,000 May $2,500 10,000 June $3,300 20,000 a. $8.00 per unit b. $0.61 per unit c. $0.08 per unit d. $0.80 per unit

c. $0.08 per unit ( ($3,300-$2,500) / (20,000-10,000) ) = $0.08

Which of the following conditions would cause the break-even point to increase? a. Unit selling price increases b. Unit variable cost decreases c. Unit variable cost increases d. Total fixed costs decrease

c. Unit variable cost increases

__________ is a measure of the relative mix of a business's variable costs and fixed costs, computed as contribution margin divided by operating income. a. Break-even point b. Margin of safety c. Sales mix d. Operating leverage

d. Operating leverage

An example of a type of company with high fixed costs is a(n) a. public accounting firm. b. retail shop. c. fast-food restaurant. d. airline manufacturer.

d. airline manufacturer.