Managerial Accounting- Chapter 18

Each of the following are methods used to separate mixed costs into their fixed and variable components except:

low- high method

A _______ cost includes both fixed and variable components.

mixed

The break-even point can be expressed as sales in ______ or _______

- units - dollars

A company sells 800 units at $16 each, has variable costs of $12 per unit, and fixed costs of $1,200. Income is $_____

2,000

Assuming all other factors remain constant, if sales price per unit increases, then the break-even point will:

decrease

True or false: On a scatter diagram, costs are plotted on the horizontal axis.

false

A _____ cost remains unchanged when the volume of activity changes within the relevant range.

fixed

Sales mix is the proportion of _____ for various products.

sales volume

Which of the following is the correct statement about fixed costs?

The fixed cost per unit will decrease when volume increases.

CVP analysis relies on all of the following assumptions except:

mixed costs can be used

Match each cost estimation method to its characteristics.

scatter diagram- Based on visual fit and subject to interpretation high-low method- Uses only two sets of values

A company has a margin of safety of 20%. If expected sales are $50,000, then break-even sales are:

40,000 (50,000* .20)= 10,000 50,000 - 10,000= 40,000

A company has sales of $125,000, variable costs of $45,000 and fixed costs of $30,000. The break-even point in sales dollars is $______

46,875

When preparing a scatter diagram, the estimated line of cost behavior is drawn on a scatter diagram to show the relation between:

cost and unit volume

When using the high-low method, the slope represents:

the variable cost per unit

The high-low method uses ___ points to estimate the cost equation.

two

The break-even point can be expressed as sales in _____ or _____

units dollars

A _______ cost changes in proportion to change in volume of activity

variable

A company has fixed costs of $50,000 while manufacturing a product that has variable costs of $4 per unit and sells for $14 per unit. The break-even point is ______ units

$5,000 ((50,000/(14-4))= 5,000

Managers make assumptions in CVP analysis. These assumptions include: (Check all that apply.)

-costs can be classified as variable or fixed. -costs are linear within the relevant range.

CVP analysis looks at how ____ is affected by sales price per unit, variable costs per unit, volume, and fixed costs.

profit

LMN Company produces a product that sells for $1. The company has production costs of $600,000, half of which are fixed costs. Assuming production and sales of 750,000 units, the contribution margin per unit is $

$0.60 (300,000/ 750,000)= .40 (1-0.40) = .60

RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. RST desires to earn a profit of $20,000. The contribution margin per unit is $_______

$4

RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. RST desires to earn a profit of $20,000. The contribution margin per unit is $_____

$4 (10-6)

A company produces a product with variable costs of $2.50 per unit. The product sells for $5.00 per unit. The company has fixed costs of $3,000 and desires a target income of $10,000. The sales level in dollars to achieve the desired target income is $______

26,000

A company sells two models of a product—Alpha and Omega. If the company sells 10,000 Alpha models and 2,500 Omega models, then the sales mix can be expressed as:

4:1

Match each example below to the correct cost type.

Fixed- depreciation Variable- direct materials Mixed- water & electricity

A statistical method for identifying cost behavior is called __________

least squares

A statistical method of identifying cost behavior that is computed using spreadsheet programs or calculators is:

least- squares regression

Sales mix is the (volume/proportion/mix)______ of the sales volume for each product.

proportion

RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. The break-even point in sales dollars is $

$75,000 (10-6) = 4 (4/10) = 40 (30,000 / 40) =75,000

The break-even point is the sales level at which a company: (Check all that apply.)

- has income of $0. - contribution margin equals fixed costs.

Which of the following is the correct statement about variable costs?

The variable cost per unit does not change when volume changes.

Match each example below to the correct cost type.

fixed- office salaries mixed- sales rep pay which includes salary plus commission variable- direct materials

Assuming all other factors remain constant, if variable cost per unit increases, then the break-even point will:

increase

Jack works on the production line at an assembly plant. Jack receives a base salary plus $1.25 per unit assembled. This is an example of a ______ cost.

mixed

Select all that apply The margin of safety is: (Check all that apply.)

- the amount sales can drop before the company incurs a loss. - the difference between expected sales and break-even sales divided by expected sales.

The three methods used to classify costs into their fixed and variable components includes

- scatter diagrams - high-low method - regression

Assuming all other factors remain constant, if fixed costs increase, then the break-even point will:

increase

Maker's Company produces a product that has a variable cost of $4 per unit. The company's fixed costs are $40,000. The product sells for $12 per unit. The company is considering purchasing a new manufacturing machine which would improve efficiency. The new machine would decrease the variable cost to $3, but increase fixed costs by $5,000. The revised break-even point in dollars is $________

$60,000

A company produces a product with a contribution margin per unit of $36. If the company incurs $62,000 in total fixed costs and expects to sell 2,500 units their income would be $____

28,000 (36 * 2500 = 90,000) (90,000 - 62,000= 28,000)

RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. RST desires to earn a target income of $20,000. The sales level in dollars to achieve the desired target income is $______

125,000 (30,000 + 20,000) / 0.40

A company produces a product with variable costs of $2.50 per unit. The product sells for $5.00 per unit. The company has fixed costs of $3,000 and desires a target income of $10,000. The sales level in dollars to achieve the desired target income is $_____

26000

A company sells two models of a product—basic and premium. If the company sells 5,000 basic models and 2,500 premium models, then the sales mix can be expressed as:

2:1

RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. How many units must be produced to break-even

7,500 (30,000)/ (10-6)

Cost-volume-profit analysis helps managers predict how changes in _____ and ______ levels affect income

cost sales

A statistical method for identifying cost behavior is called

regression