Chapter 21—Cost Behavior and Decisions Using C-V-P Analysis
Key
1. Which of the following items is NOT a key factor involved in cost-volume-profit (C-V-P) analysis?
2. C-V-P analysis is useful to managers in:
3. C-V-P analysis, while useful for several purposes, is primarily useful in:
4. All the following are common cost behavior patterns EXCEPT:
5. Which of the following types of costs always change in total in proportion to changes in the level of activity
of a firm?
6. Which of the following is most likely to be a variable cost?
7. Within the relevant range, variable costs are considered to be:
8. The relevant range refers to the activity range over which:
9. Which of the following is NOT a cost behavior pattern?
10. The type of cost that remains constant (in total) over the relevant range is a:
11. Which of the following types of costs remain constant per unit within a certain relevant range?
12. The two components of a mixed cost are:
13. Relevant ranges must be considered for:
14. Fixed costs per unit:
15. An example of a stepped fixed cost is:
16. Within the relevant range some fixed costs may actually be:
17. Within the relevant range, per-unit variable cost:
18. Within the relevant range, the fixed cost per unit:
19. Costs that contain both fixed and variable components are:
20. Which of the following costs would LEAST likely be a fixed cost?
21. Which of the following costs would LEAST likely be a variable cost?
22. Costs that would NOT be graphed as a straight line are:
23. Zodiac Company’s total costs are increasing in direct proportion to the increases in activity levels. The
company’s cost structure must have all:
24. Mosely Company’s per-unit cost is the same at all levels of activity. The company’s cost structure must have
all:
25. Refer to the figure below. A charge for electricity that is based on a flat rate plus a variable cost after a
certain number of kilowatt-hours are used follows which of the following cost behavior patterns?
26. Refer to the figure below. Which would be the diagram of a mixed cost?
27. Assume that Upward Company has total variable costs of $90,000 when 30,000 units are sold. If 40,000
units were sold, total variable costs would be:
28. Another name for the scattergraph method of analyzing mixed costs is the:
29. The scattergraph method is a useful tool for:
30. In the scattergraph method fixed costs are:
31. The slope of the line in a scattergraph represents the:
32. Which of the following is a common method of analyzing mixed costs?
33. The scattergraph method is used to analyze:
34. When using the scattergraph method to analyze mixed costs, the regression line should be visually fit to:
35. Which of the following is the formula used to calculate the slope of the regression line on a scattergraph?
36. Which of the following is the formula for the high-low method of analyzing mixed costs?
37. Exhibit 21-1
Wimmer Company makes swimming suits and wants to analyze its mixed costs. The diagram below shows a
scattergraph representing Wimmer’s mixed costs for the previous five months.
Refer to Exhibit 21-1. Using the graph above, determine Wimmer’s variable cost rate.
38. Exhibit 21-1
Wimmer Company makes swimming suits and wants to analyze its mixed costs. The diagram below shows a
scattergraph representing Wimmer’s mixed costs for the previous five months.
Refer to Exhibit 21-1. Using the graph above, determine the amount of Wimmer’s fixed costs.
39. Exhibit 21-2
The following cost data are available for Malta Marketing:
Total Manufacturing
Direct
Month
Overhead Cost
Labor Hours
July
$64,000
8,400
August
57,000
6,800
September
48,000
4,000
October
77,000
12,000
November
90,000
18,000
December
82,000
15,000
Refer to Exhibit 21-2. Given the data above and using the high-low method of analysis, total fixed costs are approximately:
40. Exhibit 21-2
The following cost data are available for Malta Marketing:
Total Manufacturing
Direct
Month
Overhead Cost
Labor Hours
July
$64,000
8,400
August
57,000
6,800
September
48,000
4,000
October
77,000
12,000
November
90,000
18,000
December
82,000
15,000
Refer to Exhibit 21-2. Given the data above and using the high-low method of analysis, total variable costs are approximately:
41. If total costs are $27,000 and $36,000 for activity levels of 5,000 and 8,000, respectively, how much are
fixed costs?
42. What are the total costs for a company with per-unit variable costs of $12 and total fixed costs of $51,000 if
it sells 8,000 units of product?
43. XYZ Company generally produces between 200 and 350 units of product. Its fixed costs, within this
relevant range, are $50,000. Its variable costs at 250 units of production are $10 per unit. What are the fixed
costs per unit at 250 and 300 units of production, respectively? (Round to the nearest dollar.)
44. If fixed costs are $40,000 and total costs are $200,000 at an activity level of 8,000 units, variable costs are
approximately:
45. The contribution margin minus total fixed costs is equal to:
46. The excess of sales over variable costs is equal to:
47. Contribution margin will provide a profit if:
48. The per-unit contribution margin is equal to:
49. Contribution margin is equal to:
50. When the variable cost ratio decreases, the:
51. If the fixed costs relative to a specific product increase while the variable costs and sales price remain
constant, the contribution margin will:
52. If a company has a positive contribution margin, the maximum amount of loss that it can have is equal to
its:
53. If sales revenue is equal for a manufacturing firm and a service firm, which of these two firms will probably
need a higher contribution margin to break even?
54. Exhibit 21-3
The following partial income statement is available for Lauria Company:
Sales revenue (4,500
units at $75 each)
$337,500
Variable expenses:
$62,000
35,000
38,000
Total variable expenses
135,000
$202,500
90,000
$112,500
Refer to Exhibit 21-3. Given the data above, the contribution margin per unit is:
55. Exhibit 21-3
The following partial income statement is available for Lauria Company:
Sales revenue (4,500
units at $75 each)
$337,500
Variable expenses:
$62,000
35,000
38,000
Total variable expenses
135,000
$202,500
90,000
$112,500
Refer to Exhibit 21-3. Given the data above, at an activity level of 5,000 units, net income would increase by:
56. Challis Company had sales of $450,000 and a profit of $54,000 during the period. Assume the fixed costs
for the period were $184,500. The contribution margin ratio for the period was:
57. If total sales are $460,000, total variable costs are $138,000, and total fixed costs are $184,000, the
contribution margin is:
58. If total sales are $460,000, total variable costs are $138,000, and total fixed costs are $184,000, the
contribution margin ratio is:
59. Black Company had the following income statement:
Sales revenue (700 units)
$70,000
Variable costs
38,500
Contribution margin
$31,500
Fixed costs
30,500
Net income
$ 1,000
Given this data, Black Company has a per-unit contribution margin of:
60. Heyburn Company had the following income statement:
$900,000
440,000
$460,000
352,000
Net income
$108,000
Given this data, Heyburn Company’s per-unit contribution margin is:
61. Exhibit 21-4
Cash2U Company had the following income statement:
Sales revenue (1,000 units)
$400,000
Variable costs
220,000
Contribution margin
$180,000
Fixed costs
126,000
Net income
$ 54,000
Refer to Exhibit 21-4. Given the data above, Cash2U Company’s contribution margin percentage is:
62. Exhibit 21-4
Cash2U Company had the following income statement:
Sales revenue (1,000 units)
$400,000
Variable costs
220,000
Contribution margin
$180,000
Fixed costs
126,000
Net income
$ 54,000
Refer to Exhibit 21-4. Given the data above, Cash2U Company’s break-even point in units is:
63. The limiting assumptions of C-V-P analysis include all of the following, EXCEPT:
64. The behavior of a cost is usually defined in terms of how that cost varies with respect to:
66. Which of the following is true of a firm having a high level of fixed costs?
67. A firm will break even when:
68. The equation for computing the break-even point is:
69. is the formula for:
70. Assume that StoneWorks has total fixed costs of $31,540 for the period. Each unit sells for $20. The
variable cost per unit is $12.40. How many units must be sold to break even?
71. Star of the Sea School has annual fixed costs of $150,000 and variable costs of $550 per student. Star of the
Sea expects 345 students for the upcoming year. If the school wishes to earn a profit of $10,000, what should
tuition per student be?
72. If variable costs are $46 per unit, revenues are $76 per unit, and fixed costs are $7,500, the break-even point
is:
73. To reach a target income of $20,000, a firm with fixed costs of $10,000 and a per-unit contribution margin
of $5 must sell:
74. A company that has a per-unit contribution margin of $140 and fixed costs of $126,000 will break even
when it sells:
75. Given the equation $500X = $300X + $200,000, variable costs are:
76. Given the equation $500X = $300X + $200,000, per-unit contribution margin is:
77. Given the equation $500X = $300X + $200,000, the break-even point in units is:
78. A company with a cost-volume-profit structure of $50X = $30X + $20,000 will earn a 20% return on
revenues when it sells:
79. Everclean Company cleans draperies. It charges $75 to clean a full-size drape, and its variable and fixed
costs are $45 per drape and $8,000 per year, respectively. Given this data, approximately how many drapes
must the company clean to break even?
80. Everclean Company cleans draperies. It charges $75 to clean a full-size drape, and its variable and fixed
costs are $40 per drape and $8,000 per year, respectively. Given this data, how many drapes must the company
clean to make $50,000 profit?
81. Inner Corporation sells space heaters. The contribution margin is $5.40 per heater. If fixed costs are
$540,000, what would be the total number of heaters sold at the break-even point?
82. Duke Corporation sells fans for $20 per unit. In 2011, fixed costs are expected to be $450,000, and the
variable cost ratio is 60%. How many fans must Duke sell to generate operating income of $60,000?
83. Anderson Corporation sells picture calendars for $10 each. The fixed costs of production are $300,000, and
the variable costs are 60% of the selling price. The company desires to make a profit of $120,000. How many
calendars must it sell?
84. Stone Company plans to sell 200,000 calculators. The fixed costs are $600,000, and the variable costs are
60% of the selling price. If the company wants to realize a profit of $120,000, the selling price of each
calculator must be:
85. Beta Corp. has a 45% contribution margin ratio on all units they sell. The company would like to make a
profit of $20,000. Fixed costs are $70,000. What must Beta earn in sales revenue?
86. Newport Corporation is planning to sell 50,000 lawn mowers for $100 each. The fixed costs are $2,000,000.
If the company realizes a profit of $400,000, what would the variable costs be?
87. Stites Corporation will make $100,000 if it sells 8,000 bathtubs for $200 per unit. If the contribution margin
is 30%, what will the fixed costs be?
88. Grate Company’s product has a selling price of $15 and a per-unit variable cost of $8. Its fixed costs are
$14,000. How many units must the company sell to earn a profit of $35,000?
89. A firm’s per-unit contribution margin is $30, its fixed costs are $67,500, and its daily production output is 18
units. How many days will it take to break even after it is in operation?