SmartBooks Cost Accounting Chapter 5

Bluin Corporation pays its salesperson a flat salary of $5,750 per month and is considering paying $30 per unit instead. Current unit sales are 250 per month, but Bluin believes the compensation change will increase unit sales by 50%. Bluin's current contribution margin is $100 per unit. If Bluin switches the compensation and sales grow as expected, net operating income will Blank______ per month.

increase 7000

The equation that should be used in setting a target selling price for a special order bulk sale that does not affect a company's normal sales is: selling price per unit =

variable cost per unit + desired profit per unit

Daisy's Dolls sold 30,000 dolls this year. Each doll sold for $40 and had a variable cost of $19. Fixed expenses were $250,000. Net operating income for the year is Blank______.

$380,000

The break-even point calculation is affected by

sales mix selling price per unit costs per unit

CVP analysis focuses on how profits are affected by

sales volume total fixed costs selling price mix of products sold unit variable cost

Target profit analysis

estimates sales needed to earn a given profit is similar to break-even analysis

Estimating the sales volume required to earn a given amount of net income is known as

target profit

In a CVP graph, the horizontal axis represents

unit sales

Variable expenses ÷ Sales is the calculation for the

variable cost

When using the high-low method, the slope of the line equals the

variable cost per unit

To calculate the break-even point (in unit sales and dollar sales), managers can use the equation method or the

formula method

The rise-over-run formula for the slope of a straight line is the basis of Blank

high low method

The relative proportions in which a company's products are sold is referred to as

sales mix

A change in profits that occurs due to a change in sales and fixed expenses may be calculated as

cm ratio × change in sales - change in fixed expenses

A company has an opportunity to make a bulk sale that would not impact regular sales or total fixed expenses. The variable cost per unit is $11 and the company desires a total profit of $4,500. The quoted selling price per unit for 500 units should be $

20

ABC Inc. sells a product for $10 per unit. Variable costs are $4 per unit and total fixed costs equal $40,000. If sales increase from 10,000 units to 14,000 what will be the increase in overall profit?

24000

A company's current profit is $25,000 for a product that sells for $100 and has a unit contribution margin of $65. Fixed costs are $40,000. If the company increases sales by 50 units, total profit will increase by $

3250

A company sells 500 sleds per month for $80. Variable costs are $41 per unit and fixed expenses are $3,500 per month. The company thinks that using a new material would increase sales by 70 units per month. If the new material increases variable costs by $4 per unit, the impact on contribution margin would be a Blank______.

450 increase

Vivian's Violins has sales of $326,000, contribution margin of $184,000 and fixed costs total $85,000. Vivian's Violins net operating income is Blank______.

99000

Company A produces and sells 10,000 units of its product for $10 per unit. Variable costs are $4 per unit and fixed costs total $30,000. A move to a larger facility would increase rent expense by $8,000, and allow the company to meet its demand for an additional 1,000 units. If the move is made, profits will

Decrease by 2000

Account analysis involves a detailed analysis of what cost behavior should be, based on an industrial engineer's evaluation.

False

Which of the following statements are true?

Plotting data on a scattergraph is an important diagnostic step. Scattergraphs are a way to diagnose cost behavior.

Cost behavior is considered linear whenever

a straight line approximates the relationship between cost and activity

Margin of safety in dollars is Blank

budgeted (or actual) sales minus break-even sales

Tasty Tangerine is currently selling 50,000 boxes for $25 per box. Variable cost per box is $17 and fixed costs total $260,000. A plan is being considered to spend $60,000 on advertising and reduce the selling price by $2 per box. Management believes this plan will increase sales volume by 24,000 boxes. If management's predictions are correct, making these changes will cause net income for the year to Blank______.

decrease 16000

Sweet Dreams sells pillows for $25 each. Variable costs are $15 per pillow. The company is considering improving the quality of materials which will increase variable costs to $19. The company expects the improved materials will increase sales from 1,200 to 1,500 pillows per month. The impact of this change on total contribution margin would be a(n)

decrease 3000

When a company produces and sells multiple products

each product most likely has a unique contribution margin a change in the sales mix will most likely change the break-even point each product most likely has different costs

Estimating the fixed and variable components of a mixed cost using the approach involves a detailed analysis of what cost behavior should be.

engineering approach

Goldin Corporation currently pays its salesperson a flat salary of $5,000 per month and is considering paying $20 per unit instead. Sales are currently 200 units per month. Goldin believes the compensation change will increase unit sales by 25%. The current contribution margin is $80 per unit. If the change is implemented, net operating income will Blank

increase by 4000

The best fitting line minimizes the sum of the squared errors when using

least-square regression

A method that uses all the available data points to divide a mixed cost into its fixed and variable components is called Blank

least-squares regression

A measure of how sensitive net operating income is to a given percentage change in unit sales is known as operating

leverage

A measure of how sensitive net operating income is to a given percentage change in unit sales is known as operating _

leverage

CVP analysis allows companies to easily identify the change in profit due to changes in _____.

product mix volume selling price

Operating leverage is a measure of how sensitive Blank______ is to a given percentage change in unit sales.

sales

The variable expense ratio equals variable expenses divided by Blank______.

sales