103) The least-squares regression method is:
A) A graphical method to identify cost behavior.
B) An algebraic method to identify cost behavior.
C) A statistical method to identify cost behavior.
D) The only identify cost estimation method allowed by GAAP.
E) A cost estimation method that only uses the two extreme values.
104) A graph used to analyze past cost behaviors by displaying costs and unit data for each
period as points on a diagram is called a:
A) Least-squares diagram.
B) Step-wise diagram.
C) Scatter diagram.
D) Break-even diagram.
E) Composite diagram.
105) A line on a scatter diagram that is intended to reflect the past relation between cost and unit
volume is the:
A) Margin of safety line.
B) Break-even line.
C) Contribution margin line.
D) Estimated line of cost behavior.
E) Standard cost line.
106) A method that estimates cost behavior by using just the highest and lowest volume levels is
called the:
A) Scatter method.
B) High-low method.
C) Least-squares method.
D) Break-even method.
E) Step-wise method.
107) The following information is available for a company’s utility cost for operating its
machines over the last four months.
Month
Machine hours
Utility cost
January
900
$
5,450
February
1,800
$
6,900
March
2,400
$
8,100
April
600
$
3,600
Using the high-low method, the estimated variable cost per machine hour for utilities is:
A) $3.38.
B) $6.00.
C) $2.50.
D) $4.22.
E) $6.17.
108) The following information is available for a company’s utility cost for operating its
machines over the last four months.
Month
Machine hours
Utility cost
January
900
$
5,450
February
1,800
$
6,900
March
2,400
$
8,100
April
600
$
3,600
Using the high-low method, the estimated total fixed cost for utilities is:
A) $1,500.
B) $3,600.
C) $6,000.
D) $3,300.
E) $2,100.
109) The following information is available for a company’s cost of sales over the last five
months.
Month
Units sold
Cost of sales
January
400
$
February
800
$
March
1,600
$
April
2,400
$
Using the high-low method, the estimated variable cost of sales per unit sold is:
A) $25.42.
B) $77.50.
C) $34.23.
D) $15.00.
E) $30.62.
110) The following information is available for a company’s cost of sales over the last five
months.
Month
Units sold
Cost of sales
January
400
$
February
800
$
March
1,600
$
April
2,400
$
Using the high-low method, the estimated total fixed cost is:
A) $25,000.
B) $30,000.
C) $13,692.
D) $100,000.
E) $50,000.
111) The sales level at which a company neither earns a profit nor incurs a loss is the:
A) Relevant range.
B) Margin of safety.
C) Step-wise variable level.
D) Break-even point.
E) Contribution margin.
112) A company’s product sells at $12 per unit and has a $5 per unit variable cost. The
company’s total fixed costs are $98,000. The contribution margin per unit is:
A) $5.00.
B) $7.00.
C) $8.17.
D) $12.00.
E) $17.00.
113) A company’s product sells at $12 per unit and has a $5 per unit variable cost. The
company’s total fixed costs are $98,000. The break-even point in units is:
A) 5,158.
B) 7,000.
C) 8,167.
D) 14,000.
E) 19,600.
114) Maroon Company’s contribution margin ratio is 24%. Total fixed costs are $84,000. What is
Maroon’s break-even point in sales dollars?
A) $20,160.
B) $110,526.
C) $350,000.
D) $240,000.
E) $84,000.
115) Fuschia Company’s contribution margin per unit is $12. Total fixed costs are $84,000. What
is Fuschia’s break-even point in units?
A) 7,000.
B) 26,520.
C) 57,600.
D) 5,760.
E) 70,000.
116) A product sells for $200 per unit, and its variable costs are 65% of sales. The fixed costs are
$420,000. What is the break-even point in sales dollars?
A) $2,100.
B) $6,000.
C) $420,000.
D) $646,154.
E) $1,200,000.
117) A product sells for $30 per unit and has variable costs of $18 per unit. The fixed costs are
$720,000. If the variable costs per unit were to decrease to $15 per unit, fixed costs increase to
$900,000, and the selling price does not change, break-even point in units would:
A) Increase by 20,000.
B) Equal 6,000.
C) Increase by 6,000.
D) Decrease by 20,000.
E) Not change.
118) Forrester Company is considering buying new equipment that would increase monthly fixed
costs from $120,000 to $150,000 and would decrease the current variable costs of $70 by $10 per
unit. The selling price of $100 is not expected to change. Forrester’s current break-even sales are
$400,000 and current break-even units are 4,000. If Forrester purchases this new equipment, the
revised contribution margin ratio would be:
A) 30%.
B) 60%.
C) 40%.
D) 10%.
E) 70%.
119) Forrester Company is considering buying new equipment that would increase monthly fixed
costs from $120,000 to $150,000 and would decrease the current variable costs of $70 by $10 per
unit. The selling price of $100 is not expected to change. Forrester’s current break-even sales are
$400,000 and current break-even units are 4,000. If Forrester purchases this new equipment, the
revised break-even point in dollars would be:
A) $300,000.
B) $400,000.
C) $325,000.
D) $500,000.
E) $375,000.
120) Forrester Company is considering buying new equipment that would increase monthly fixed
costs from $120,000 to $150,000 and would decrease the current variable costs of $70 by $10 per
unit. The selling price of $100 is not expected to change. Forrester’s current break-even sales are
$400,000 and current break-even units are 4,000. If Forrester purchases this new equipment, the
revised break-even point in units would:
A) Increase by 250.
B) Decrease by 250.
C) Increase by 12,000.
D) Decrease by 8,000.
E) Increase by 8,000.
121) The difference between sales price per unit and variable cost per unit is the:
A) Gross profit from sales.
B) Gross margin per unit.
C) Fixed cost per unit.
D) Margin of safety per unit.
E) Contribution margin per unit.
122) The contribution margin per unit expressed as a percentage of the product’s selling price is
the:
A) Volume variance.
B) Margin of safety.
C) Contribution margin ratio.
D) Break-even point.
E) Rate of return on sales.
123) A company manufactures and sells a product for $120 per unit. The company’s fixed costs
are $68,760, and its variable costs are $90 per unit. The company’s break-even point in units is:
A) 2,292.
B) 573.
C) 764.
D) 327.
E) 840.
124) A company manufactures and sells a product for $120 per unit. The company’s fixed costs
are $68,760, and its variable costs are $90 per unit. The company’s break-even point in sales
dollars is:
A) $91,680.
B) $68,760.
C) $2,292.
D) $275,040.
E) $206,280.
125) A company has fixed costs of $90,000. Its contribution margin ratio is 30% and the product
sells for $75 per unit. What is the company’s break-even point in dollar sales?
A) $60,000.
B) $128,571.
C) $180,000.
D) $210,000.
E) $300,000.
126) Mason Company manufactures and sells shoelaces for $2.00 per pair. Its variable cost per
unit is $1.70. Mason’s total fixed costs are $10,500. How many pairs must Mason sell to break
even?
A) 5,250.
B) 6,176.
C) 35,000.
D) 52,500.
E) 61,760.
127) Goldfarb Company manufactures and sells toasters. Each toaster sells for $23.75 and the
variable cost per unit is $16.25. Goldfarb’s total fixed costs are $25,000, and budgeted sales are
8,000 units. What is the contribution margin per unit?
A) $7.50.
B) $16.25.
C) $23.75.
D) $60,000.
E) $1.25.
128) Leeks Company’s product has a contribution margin per unit of $11.25 and a contribution
margin ratio of 22.5%. What is the selling price of the product?
A) $5.
B) $20.
C) $30.
D) $40.
E) $50.
129) Alvarez Company’s break-even point in units is 1,000. The sales price per unit is $10 and
variable cost per unit is $7. If the company sells 2,500 units, what will net income be?
A) $4,500
B) $7,500
C) $17,000
D) $35,000
E) $3,000
130) Mullis Corp. manufactures DVDs that sell for $5.00. Fixed costs are $28,000 and variable
costs are $3.60 per unit. Mullis can buy a newer production machine that will increase fixed
costs by $8,000 per year, but will decrease variable costs by $0.40 per unit. What effect would
the purchase of the new machine have on Mullis’ break-even point in units?
A) 4,444 unit increase.
B) 9,850 unit decrease.
C) 5,714 unit increase.
D) 4,444 unit decrease.
E) No effect.
131) At Midland Company’s break-even point of 9,000 units, fixed costs are $180,000 and
variable costs are $540,000 in total. The unit sales price is:
A) $20.
B) $40.
C) $60.
D) $80.
E) $100.
132) Assume that sales are predicted to be $3,750, the expected contribution margin is $1,500,
and a net loss of $250 is anticipated. The break-even point in sales dollars is:
A) $1,750.
B) $2,500.
C) $4,000.
D) $4,250.
E) $4,375.
133) During a recent fiscal year, Creek Company reported pretax income of $125,000, a
contribution margin ratio of 25% and total contribution margin of $400,000. Total variable costs
must have been:
A) $1,100,000.
B) $1,200,000.
C) $500,000.
D) $1,600,000.
E) $2,100,000.
134) In Keegan Corporation’s most recent fiscal year, the company reported pretax earnings of
$215,000. Fixed costs totaled $325,800, the unit selling price of the firm’s only product was $60,
and the variable costs per unit were 40% of the selling price. Based on this information, the
firm’s break-even point in units was:
A) 13,575 units.
B) 15,023 units.
C) 13,750 units.
D) 9,050 units.
E) 8,750 units.
135) A cost-volume-profit chart is also known as a(n)
A) Operating profit chart.
B) Operating leverage chart.
C) Break-even chart.
D) Margin of safety chart.
E) Sales chart.
136) When graphing cost-volume-profit data on a CVP chart:
A) Units are plotted on the horizontal axis; costs on the vertical axis.
B) Units are plotted on the vertical axis; costs on the horizontal axis.
C) Both units and costs are plotted on the horizontal axis.
D) Both units and cost are plotted on the vertical axis.
E) Data points always represent expected future points.
137) A CVP graph presents data on:
A) Profit and loss on a per unit basis.
B) Profit, loss, and break-even on a total dollar basis.
C) Profit, loss, and break-even on a per unit basis.
D) Only profit and loss on a total basis.
E) Profit and loss on a budget and actual basis.