chapter 21

The break-even point is the sales level at which a company: (

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

Contribution margin per unit contributes to covering ______ costs and then generating _____ on a per unit basis.

fixed; profits

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

income

A manufacturing company incurs rent costs of $12,500 per month. The company manufactured 250,000 units in May and 300,000 units in June. The cost per unit in May and June, respectively, is:

$0.05 and $0.04

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

5000

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 $

60000

A company has sales of $125,000, variable costs of $45,000 and fixed costs of $30,000. The contribution margin ratio is

64

Because of its usefulness in CVP analysis, managers generally use an income statement in which format?

Contribution margin income statement

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

The fixed cost per unit will decrease when volume increases.

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

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

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

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

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

increase

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

low-high method

CVP analysis relies on all of the following assumptions except:

mix cost is

A cost which reflects a stair-step pattern in costs is called a---- cost

step-wise

On a CVP chart, the line which crosses the vertical axis at $0 and slopes upwards represents: Multiple choice question.

total sale

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

unit ,dollars

A______cost changes in proportion to changes in volume of activity.

variable

A company has a degree of operating leverage of 2.5. If sales increase by 10%, then profits will:

25%

RST Company produces a product that has expected sales of $75,000 and break-even sales of $50,000. The margin of safety is

25000

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 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

28000

he percent by which a product's unit selling price exceeds its total unit variable cost is the:

contribution margin ratio.

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

decrease

The contribution margin ratio is interpreted as the percent of:

each sales dollar that remains after deducting unit variable cost

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

fixed

-----Unavailable cost includes both fixed and variable components.

mixed

The formula used in a contribution margin income statement is:

sales - variable costs = contribution margin - fixed costs = income

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

$40,000

RST Company produces a product that has a selling price of $10 per unit and variable cost of $6 per unit. The company's fixed costs are $30,000. If the company sells 15,000 units, the degree of operating leverage is

2

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

2000

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

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

regression scatter diagrams high-low method

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 units to achieve the desired target income is---unit

5200

A company has break-even sales of $200,000. If the company expects sales of $500,000, the margin of safety is

60

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

A manufacturing company incurs depreciation costs of $6,000 per month on manufacturing machinery. The depreciation cost per unit is $------- , Correct Unavailable when the company manufactures 2,000 units.

3

Acme Manufacturing recently added another shift, which required the company to hire another production supervisor. The supervisor's salary would be considered a:

step-wise cost

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 $

.60

A manufacturing company incurs direct materials costs of $6 per unit. The total direct materials cost is $12000Blank ---- , Correct Unavailable when the company manufactures 2,000 units

12000

A company incurs $12,000 in direct labor costs when they produce 480 units and $12,500 in direct labor costs when they produce 500 units. The direct labor cost per unit is $

25

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 ratio is

40%