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Exam 22: Cost-Volume-Profit

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Question 71

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Hughes Company manufactures a single product. Annual production costs incurred in the manufacturing process are shown below for the production of 2,000 units. The Utilities and Maintenance are mixed costs. The fixed portions of these costs are $200 and $400, respectively. Instructions Calculate the expected costs to be incurred when production is 4,000 units. Use your knowledge of cost behavior to determine which of the other costs are fixed or variable.

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a. Variable $4,000 ÷ 2,000 = $2.00 per ...

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Question 72

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A target net income is calculated by taking actual sales minus the margin of safety.

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Question 73

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An activity index might be referred to as a cost

For CVP analysis, both variable and fixed costs are assumed to have a linear relationship within the relevant range of activity.

Newton, Inc. earned net income of $100,000 during 2010. The company wants to earn net income of $40,000 more during 2011. The company's fixed costs are expected to be $84,000, and variable costs are expected to be 30% of sales. Instructions (a) Determine the required sales to meet the target net income during 2011. (b) Fill in the dollar amounts for the summary income statement for 2011 below, based on your answer to part (a).

How much sales are required to earn a target income of $80,000 if total fixed costs are $100,000 and the contribution margin ratio is 40%?

Contribution margin is the amount of revenues remaining after deducting cost of goods sold.

Cost-volume-profit analysis includes all of the following assumptions except

The relevant range of activity is the activity level where the firm will earn income.

A company has contribution margin per unit of $45 and a contribution margin ratio of 40%. What is the unit selling price?

Required sales in dollars to meet a target net income is computed by dividing

Kohler Corporation sells its product for $40. The variable costs are $18 per unit. Fixed costs are $16,000. The company is considering the purchase of an automated machine that will result in a $2 reduction in unit variable costs and an increase of $5,000 in fixed costs. Which of the following is true about the break-even point in units?

Sutton Company produces flash drives for computers, which it sells for $20 each. The variable cost to make each flash drive is $6. During April, 700 drives were sold. Fixed costs for April were $2 per unit for a total of $1,400 for the month. How much is the monthly break-even level of sales in dollars for Sutton Company?

A variable cost remains constant per unit at various levels of activity.

The _______________ point is when total revenues equal total costs.

Starr Company has the following data: Variable costs are 60% of the unit selling price. The contribution margin ratio is 40%. The contribution margin per unit is $500. The fixed costs are $400,000. Which of the following does not express the break-even point?

In evaluating the margin of safety, the

Sales are $500,000 and variable costs are $350,000. What is the contribution margin ratio?

The CVP income statement

The difference between the costs at the high and low levels of activity represents the fixed cost element of a mixed cost.