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Chapter 11
78. The following information is given for the maintenance department of Goldenrod Co. Calculate the variable costs per
unit using the high-low method.
Cost
Production in units
July
$2,100
14,000
August
1,000
9,000
September
1,800
10,000
October
4,000
21,000
a.
$0.17
b.
$0.11
c.
$0.25
d.
$0.08
Chapter 11
79. Tucker Co. manufactures office furniture. During the most productive month of the year, 3,600 desks were
manufactured at a total cost of $192,000. In its slowest month, the company made 1,200 desks at a cost of $72,000. Using
the high-low method of cost estimation, total fixed costs per month are:
a.
$120,000.
b.
$12,000.
c.
$72,000.
d.
$11,600.
80. The systematic examination of the relationships among selling prices, volume of sales and production, costs, expenses,
and profits is termed as:
a.
contribution margin analysis.
b.
cost-volume-profit analysis.
c.
budgetary analysis.
d.
gross profit analysis.
Chapter 11
81. _____ analysis is used while selecting the mix of products to sell.
a.
Cost-volume-profit
b.
Activity-based
c.
Discounted
d.
Receivables
82. The _____ indicates the percentage of each sales dollar available to cover fixed costs and to provide operating income.
a.
fixed cost ratio
b.
volume ratio
c.
operating ratio
d.
contribution margin ratio
Chapter 11
83. _____ is the excess of sales over variable costs.
a.
Fixed cost
b.
Contribution margin
c.
Operating income
d.
Incremental cost
84. Variable costs as a percentage of sales for Protoveo Inc. are 65%, sales are $500,000, and fixed costs are $125,000.
How much would operating income change if sales decrease by $10,000?
a.
$3,500 increase
b.
$3,500 decrease
c.
$3,250 decrease
d.
$3,500 increase
Chapter 11
85. Sales amount to $774,000, variable costs are 59% of sales, and fixed cost is $120,000. What is the contribution margin
ratio?
a.
37%
b.
44%
c.
39%
d.
41%
86. A company operated at 82% of its capacity for the past year. Fixed costs during this time were $152,000, variable
costs were 60% of sales, and sales were $790,000. Calculate the company's operating profit.
a.
$97,000
b.
$185,000
c.
$56,000
d.
$164,000
Chapter 11
87. Calculate the contribution margin ratio of a company with sales of $180,000 and operating income of $37,000.
Variable costs of the company are 52% of sales.
a.
41%
b.
48%
c.
36%
d.
24%
88. Wiles Inc.'s unit selling price is $40, the unit variable costs is $30, fixed costs are $135,000, and current sales are
10,000 units. How much would operating income change if sales increase by 5,000 units?
a.
$50,000 increase
b.
$65,000 decrease
Chapter 11
c.
$100,000 increase
d.
$50,000 decrease
89. Compute the break-even point (in dollars) if fixed costs are $540,000 and variable cost are 70% of sales.
a.
$3,850,000
b.
$1,800,000
c.
$1,650,000
d.
$900,000
Chapter 11
90. Calculate break-even sales (in units) when fixed cost is $216,000, unit selling price is $120, and unit variable cost is
$60.
a.
4,100 units
b.
2,300 units
c.
3,400 units
d.
3,600 units
91. If fixed costs are $750,000 and variable costs are 60% of sales, what is the break-even point (in dollars)?
a.
$1,875,000
b.
$1,250,000
c.
$1,666,667
d.
$1,350,000
Chapter 11
92. Foggy Co. has the following operating data for its manufacturing operations:
Unit selling price
$250
Unit variable cost
$100
Total fixed costs
$840,000
The company has decided to increase the wages of hourly workers, which will increase the unit variable cost by 10%.
Increases in the salaries of factory supervisors and property taxes for the factory will increase fixed costs by 4%. If sales
prices are held constant, the break-even point for Foggy Co. will:
a.
increase by 400 units.
b.
increase by 640 units.
c.
decrease by 640 units.
d.
increase by 800 units.
93. Compute break-even sales (in units) when fixed costs are $420,000, unit selling price is $66, and unit variable cost is
$42.
a.
17,500 units
b.
10,500 units
c.
11,500 units
d.
20,300 units
Chapter 11
94. Currently, fixed costs are $810,000, the unit selling price is $60, and the unit variable cost is $48. What would be the
break-even sales (in units), if the variable cost is increased by $2?
a.
16,200 units
b.
57,875 units
c.
81,000 units
d.
67,500 units
95. Omega Inc. is expecting a reduction of $25,000 in fixed costs of $725,000. What will be the change in break-even
sales (in units), if selling price per unit is $50 and the unit variable cost is $35?
a.
48,333 units
b.
46,667 units
c.
1,667 units
d.
2,500 units
Chapter 11
96. Currently, fixed costs are $540,000, the unit selling price is $95, and the unit variable cost is $60. What would be the
break-even sales (in units), if the unit selling price is increased by $10?
a.
5,294 units
b.
9,000 units
c.
12,857 units
d.
12,000 units
97. Snower Corporation sells product G for $150 per unit, the variable cost per unit is $105, and the fixed costs are
$720,000. What is the sales (in dollars) required to realize operating income of $40,000?
a.
$2,533,333
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b.
$1,773,333
c.
$2,400,000
d.
$1,680,000
98. Compute the number of units that must be sold in order to have zero profit when fixed costs are $810,000 and unit
contribution margin is $90.
a.
8,100 units
b.
9,000 units
c.
6,500 units
d.
6,810 units
Chapter 11
99. Calculate the number of units that must be sold in order to realize an operating income of $139,000 when fixed costs
are $440,000 and unit contribution margin is $20.
a.
28,950 units
b.
29,650 units
c.
30,350 units
d.
31,550 units
100. Currently, fixed costs are $500,000 and the unit contribution margin is $40. What would be the break-even point in
units if fixed costs are reduced by $80,000?
a.
14,500 units
b.
20,000 units
c.
10,500 units
d.
12,500 units
Chapter 11
101. Currently, fixed costs are $561,000 and the unit contribution margin is $10. What would be the break-even point in
units if variable cost is decreased by $0.50 per unit?
a.
59,053 units
b.
56,100 units
c.
53,429 units
d.
60,000 units
102. If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would:
a.
decrease.
b.
increase.
c.
remain the same.
d.
increase or decrease, depending upon the percentage increase in wage rates.
Chapter 11
103. If variable costs per unit decreased because of a decrease in utility rates, the break-even point would:
a.
decrease.
b.
increase.
c.
remain the same.
d.
increase or decrease, depending upon the percentage increase in utility rates.
104. Which of the following conditions would cause the break-even point to decrease?
a.
Increase in total fixed costs
b.
Decrease in unit selling price
c.
Decrease in unit variable cost
d.
Increase in unit variable cost
Chapter 11
105. Which of the following conditions would cause the break-even point to increase?
a.
Decrease in total fixed costs
b.
Increase in unit selling price
c.
Decrease in unit variable cost
d.
Increase in unit variable cost
106. Which of the following conditions would cause the break-even point to increase?
a.
Increase in total fixed costs
b.
Increase in unit selling price
c.
Decrease in unit variable cost
d.
Decrease in total fixed costs
Chapter 11
107. Rouney Co. has budgeted that factory supervisors' salary will increase by 10%. If selling prices and all other cost
relationships are held constant, next year's break-even point would:
a.
decrease by 10%.
b.
increase by 10%.
c.
remain constant.
d.
increase at a rate greater than 10%.
108. Vest Food Co. has the following operating data:
Unit selling price
$ 10.00
Chapter 11
Unit variable cost
6.00
Fixed costs
960,000
The company is contemplating moving to another state where direct labor costs can be reduced, thereby reducing the unit
variable cost by 10%. The state where the company currently operates has offered to reduce property taxes to encourage
Vest to stay. The minimum amount of property tax savings necessary to keep the company, assuming no other changes,
would be:
a.
$152,016.
b.
$240,000.
c.
$208,696.
d.
$125,217.
109. If the contribution margin ratio for Harrison Company is 38%, sales were $425,000, and fixed costs were $100,000,
what was the operating income?
a.
$163,500
b.
$161,500
c.
$54,730
d.
$61,500
Chapter 11
110. The point where the sales line and the total costs line intersect on the cost-volume-profit graph represents:
a.
the maximum possible operating loss.
b.
the maximum possible operating income.
c.
the total fixed costs.
d.
the break-even point.
111. The point where the profit line intersects the left vertical axis on the profit-volume graph represents:
a.
the maximum possible operating loss.
b.
the maximum possible operating income.
c.
the total fixed costs.
d.
the break-even point.
