Chapter 19(4): Cost Behavior and Cost-Volume-Profit Analysis
165.
Assuming that last year’s fixed costs totaled $675,000. What was Rusty Co.’s breakeven point in units?
a.
16,875 units
b.
30,100 units
c.
30,000 units
d.
11,250 units
166.
Beemer’s sales are $400,000, variable costs are 75% of sales, and operating income is $50,000. The
operating
leverage is
a. 2.5
b. 7.5
c. 2.0
d. 0
167.
When units manufactured exceed units sold:
a.
variable costing income equals absorption costing income
b.
variable costing income is less than absorption costing income
c.
variable costing income is greater than absorption costing income
d.
variable costing income is greater by the number of units produced multiplied by the variable cost ratio.
168.
What would Timmer’s net income be for the year using absorption costing?
a. $114,000
b. $110,000
c. $ 4,000
d. $106,000
169.
What would Timmer’s net income be for the year using variable costing?
a. $114,000
b. $110,000
c. $ 4,000
d. $106,000
170.
What would be the difference in Timmer’s net income for the year if it used variable costing instead of absorption
costing?
a.
no difference
b.
$2,000 greater
c.
$4,000 less
d.
$6,000 less
171.
The manufacturing cost of Mocha Industries for three months of the year are provided below:
Total Cost
Production
April
$ 63,100
1,100 units
May
80,920
1,800
June
100,900
2,600
Using the high-low method, determine the (a) variable cost per unit, and (b) the total fixed costs.
172.
Blane Company has the following data:
Total sales
$800,000
Total variable costs
$300,000
Fixed costs
$200,000
Units sold
50,000 units
What will operating income be if units sold double to 100,000 units?
Total sales
Total variable costs
Contribution margin
Fixed costs
173.
Global Publishers has collected the following data for recent months:
Month
Issues published
Total cost
March
20,500
$20,960
April
21,800
22,464
May
17,750
18,495
June
21,200
21,395
Required:
(a)
Using the high-low method, find variable cost per unit, total fixed costs, and the total cost equation.
(b)
What is the estimated cost for a month in which 19,000 issues are published?
174.
The following is a list of various costs of producing T-shirts. Classify each cost as either a variable, fixed, or
mixed
cost for units produced and sold.
(a)
Ink used for screen printing
(b)
Warehouse rent of $8,000 per month plus $0.50 per square foot of storage used
(c)
Thread
(d)
Electricity costs of $0.038 per kilowatt–hour
(e)
Janitorial costs of $4,000 per month
(f)
Advertising costs of $12,000 per month
(g)
Accounting salaries
(h)
Color dyes for producing different colors of T-shirts
(i)
Salary of the production supervisor
(j)
Straight-line depreciation on sewing machines
(k)
Salaries of internal pattern designers
(l)
Hourly wages of sewing machine operators
(m)
Property taxes on factory, building, and equipment
(n)
Cotton and polyester cloth
(o)
Maintenance costs with sewing machine company (the cost is $2,000 per year plus
$0.001
for each machine hour of use.)
175.
The cost graphs in the illustration below shows various types of cost behaviors.
For each of the following costs, identify the cost graph that best describes its cost behavior as the number of
units
produced and sold increases:
(a)
Sales commissions of $6,000 plus $0.05 for each item sold.
(b)
Rent on warehouse of $12,000 per month.
(c)
Insurance costs of $2,500 per month.
(d)
Per-unit cost of direct labor.
(e)
Total salaries of quality control supervisors. One supervisor must be added for
each
additional work shift.
(f)
Total employer pension costs of $0.35 per direct labor hour.
(g)
Per-unit straight-line depreciation costs.
(h)
Per-unit cost of direct materials.
(i)
Total direct materials cost.
(j)
Electricity costs of $5,000 per month plus $0.0004 per kilowatt-hour.
(k)
Per-unit cost of plant superintendent’s salary.
(l)
Salary of the night-time security guard of $3,800 per month.
(m)
Repairs and maintenance costs of $3,000 for each 2,000 hours of factory machine usage.
(n)
Total direct labor cost.
(o)
Straight-line depreciation on factory equipment.
Chapter 19(4): Cost Behavior and Cost-Volume-Profit Analysis
176.
Given the following information:
Variable cost per unit = $5.00
July fixed cost per unit = $7.00
Units sold and produced in July = 28,000
What is total estimated cost for August if 30,000 units are projected to be produced and sold?
177.
Copper Hill Inc. manufactures laser printers within a relevant range of production of 70,000 to 100,000 printers
per
year. The following partially completed manufacturing cost schedule has been prepared:
Number of Printers Produced
70,000
90,000
100,000
Total costs:
Total variable costs
$350,000
(d)
(j)
Total fixed costs
630,000
(e)
(k)
Total costs
$980,000
(f)
(l)
Cost per unit:
Variable cost per unit
(a)
(g)
(m)
Fixed cost per unit
(b)
(h)
(n)
Total cost per unit
(c)
(i)
(o)
Complete the preceding cost schedule, identifying each cost by the appropriate letter (a) through (o).
$5.00 ($350,000/70,000 printers)
$9.00 ($630,000/70,000 printers)
$14.00 ($980,000/70,000 printers)
$450,000 ($5.00 × 90,000 printers)
$1,080,000 ($450,000 + $630,000)
$7.00 ($630,000/90,000 printers)
$12.00 ($1,080,000/90,000 printers)
$500,000 ($5.00 × 100,000 printers)
$1,130,000 ($500,000 + $630,000)
$6.30 ($630,000/100,000 units)
$11.30 ($1,130,000/100,000 units)
178.
The manufacturing cost of Carrie Industries for the first three months of the year are provided below:
Total Cost
Production
January
$ 93,300
2,300 units
February
115,500
3,100
March
79,500
1,900
Using the high-low method, determine the (a) variable cost per unit, and (b) the total fixed cost.
ACCT.WARD.16.21-01 – 21–01
179.
Bluegill Company sells 45,000 units at $18 per unit. Fixed costs are $62,000 and income from operations is
$298,000. Determine the (a) variable cost per unit, (b) unit contribution margin, and (c) contribution margin ratio.
180. (a) If Swannanoa Company’s budgeted sales are $1,000,000, fixed costs are $350,000, and
variable costs are
$600,000, what is the budgeted contribution margin ratio?
(b)
If the contribution margin ratio is 30%, sales are $900,000, and fixed costs are $200,000,
what is the
operating income?
181.
Penny Company sells 25,000 units at $59 per unit. Variable costs are $29 per unit, and loss from operations is
$(50,000). Determine the (a) unit contribution margin (b) contribution margin ratio, and (c) fixed costs per unit at
production of 25,000 units.
182.
Given the following:
Variable cost as a percentage of sales = 60%
Unit variable cost = $30
Fixed costs = $200,000
What is the break-even point in units?
183.
Gladstorm Enterprises sells a product for $60 per unit. The variable cost is $20 per unit, while fixed costs are
$85,000. Determine the (a) break-even point in sales units, and (b) break-even point in sales units if the selling
price
increased to $80 per unit. Round your answer to the nearest whole number.
184.
Mia Enterprises sells a product for $90 per unit. The variable cost is $40 per unit, while fixed costs are
$75,000.
Determine the (a) break-even point in sales units, and (b) break-even point in sales units if the selling
price
increased to $100 per unit.
185.
The Atlantic Company sells a product with a break-even point of 3,000 sales units. The variable cost is $60 per
unit,
and fixed costs are $270,000.
Determine the (a) unit sales price, and (b) break-even points in sales units if the company desires a target profit of
$36,000.
186.
Douglas Company has a contribution margin ratio of 30%. If Douglas has $336,420 in fixed costs, what amount
of
sales will need to be generated in order for the company to break even?
187.
The Waterfall Company sells a product for $150 per unit. The variable cost is $80 per unit, and fixed costs are
$270,000.
Determine the (a) break-even point in sales units, and (b) break-even points in sales units if the company desires
a
target profit of $36,000. Round your answer to the nearest whole number.
188.
For the current year ending January 31, Harp Company expects fixed costs of $188,500 and a unit variable cost of
$51.50. For the coming year, a new wage contract will increase the unit variable cost to $55.50. The selling price of
$70.00 per unit is expected to remain the same.
(a)
Compute the break-even sales (units) for the current year. Round your answer to the
nearest whole number.
(b)
Compute the anticipated break-even sales (units) for the coming year, assuming the
new
wage contract is signed.
189.
Carrolton, Inc. currently sells widgets for $80 per unit. The variable cost is $30 per unit and total fixed costs equal
$240,000 per year. Sales are currently 20,000 units annually.
The company is considering a 20% drop in selling price that it believes will raise units sold by 20%. Assuming
all
costs stay the same, what is the impact on income if this change is made?
190.
Louis Company sells a single product at a price of $65 per unit. Variable costs per unit are $45 and total fixed
costs are $625,500. Louis is considering the purchase of a new piece of equipment that would increase the
fixed
costs to $800,000, but decrease the variable costs per unit to $42.
Required:
If Louis Company expects to sell 44,000 units next year, should they purchase this new equipment?
191.
For the current year ending April 30, Hal Company expects fixed costs of $60,000, a unit variable cost of $70,
and
anticipated break-even of 1,715 sales units.
(a)
Compute the unit sales price.
(b)
Compute the sales (units) required to realize an operating profit of
$8,000.
Round your answer to the nearest whole number.
192.
Currently, the unit selling price is $50, the variable cost, $34, and the total fixed costs, $108,000. A proposal is
being
evaluated to increase the selling price to $54.
(a)
Compute the current break-even sales (units).
(b)
Compute the anticipated break-even sales (units), assuming that the unit selling price
is
increased and all costs remain constant.
193.
Perfect Stampers makes and sells aftermarket hub caps. The variable cost for each hub cap is $4.75 and the hub
cap sells for $9.95. Perfect Stampers has fixed costs per month of $3,120. Compute the contribution margin per
unit
and break-even sales in units and in dollars for the month.