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Exam 22: Cost-Volume-Profit Analysis

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Question 1

True/False

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The proportion of sales volumes for various products is known as the composite mix.

A) True
B) False

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Question 2

Multiple Choice

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At Flint 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.

F) B) and E)
G) B) and D)

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D

Question 3

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Rudy Co. has total fixed costs of $520,000. A unit of product sells for $15 and variable costs per unit are $11. a) Prepare a contribution margin income statement showing predicted net income (loss) if Rudy Co. sells 100,000 units for the year ended December 31. b) At a minimum, how many units must Rudy Co. sell in order not to incur a loss?

What is the high-low method? Briefly describe how it is applied.

A cost that can be separated into fixed and variable components is called a:

Briefly describe a CVP chart, including its major components.

Winthrop Manufacturing produces a product that sells for $50.00. Fixed costs are $260,000 and variable costs are $24.00 per unit. Winthrop can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. Compute the contribution margin per unit if the machine is purchased.

The budgeted income statement presented below is for Griffith Corporation for the coming fiscal year. If Griffith Corporation is able to achieve the budgeted level of sales, its margin of safety in dollars would be:

Cost-volume-profit analysis can be used to predict the effects of reduced selling prices, increased fixed costs, and reduced variable costs on break-even points.

Curvilinear costs always increase:

A company manufactures a product and sells it for $120 per unit. The total fixed costs of manufacturing and selling the product are expected to be $155,250, and the variable costs are expected to be $75 per unit. What is the company's break-even point in (a) units and (b) dollar sales?

A product sells for $200 per unit, and its variable costs per unit are $130. The fixed costs are $420,000. If the firm wants to earn $35,000 pretax income, how many units must be sold?

Define variable cost, fixed cost, and mixed cost.

Macleod Company's product has a contribution margin per unit of $62.50 and a contribution margin ratio of 25%. What is the per unit selling price of the product?

A cost that remains the same in total even when volume of activity varies is a:

Describe how a cost-volume-profit analysis would be performed for a company that sells more than one product. (Assume that the sales mix is known.)

The contribution margin per unit is equal to the sales price per unit minus the variable costs per unit.

A cost that changes with volume, but not at a constant rate, is called a:

Management anticipates fixed costs of $72,500 and variable costs equal to 40% of sales. What will pretax income equal if sales are $325,000?

Cost-volume-profit analysis is based on three basic assumptions. Which of the following is not one of these assumptions?