Chapter 5 Accounting 212 Smart book stuff

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

$40,000

List the cost estimation methods from the least precise to the most precise, with the least precise on top.

1. Scatter Diagrams 2. High-low method 3. Least-squares regression

Scatter diagrams

Based on visual fit and subject to interpretation

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 $

Blank 1: .60 or 0.60

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 target income of $20,000. The sales level in units to achieve the desired target income is

Blank 1: 12500

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 $

Blank 1: 125000

A statistical method for identifying cost behavior is called

Blank 1: regression, least-squares regression, least squares regression, least square, or least squares

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

False

High-low method

Uses only two sets of values

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

contribution margin per unit

A measure to assess the effect of changes in the level of sales on income is the :

degree of operating leverage

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

fixed; profits

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

increase

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

least-squares regression

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

low-high method

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

scatter diagrams regression high-low method

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.

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 ABC Company had its highest level of production in May when they produced 4,000 units at a total cost of $110,000 and its lowest level of production in November when they produced 2,500 units at a total cost of $87,500. Using the high-low method, the estimated variable cost per unit is $

Blank 1: 15

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

Blank 1: 2000

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

Blank 1: 64

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

The ACC Tutoring Service provides tutoring to accounting students. The volume of tutoring is low at the beginning of the semester and increases before exams. ACC had its highest level of service in May when they provided 4,300 hours of tutoring at a total cost of $125,000 and it lowest level of service in January when they provided 1,500 hours of tutoring at a total cost of $55,000. Using the high-low method, the estimated fixed costs are $

Blank 1: 17500

The ACC Tutoring Service provides tutoring to accounting students. The volume of tutoring is low at the beginning of the semester and increases before exams. ACC had its highest level of service in May when they provided 4,300 hours of tutoring at a total cost of $125,000 and its lowest level of service in January when they provided 1,500 hours of tutoring at a total cost of $55,000. Using the high-low method, the estimated variable cost per hour is $

Blank 1: 25

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 $

Blank 1: 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 $

Blank 1: 28000

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 $

Blank 1: 4 or $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 ratio is

Blank 1: 40

The ABC Company had its highest level of production in May when they produced 4,000 units at a total cost of $110,000 and its lowest level of production in November when they produced 2,500 units at a total cost of $87,500. Using the high-low method, the estimated fixed costs are $

Blank 1: 50000

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

Blank 1: 5200

Cost-volume-profit analysis helps managers predict how changes in blank and levels affect income.

Blank 1: cost or costs Blank 2: sales

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

Blank 1: income or profit

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

decrease

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

increase by 25%