Question 1

An accountant may have difficulty classifying costs as fixed or variable because:

Accepted Answer

All of these factors can contribute to the difficulty in classifying costs as fixed or variable. Costs can be fixed in the short term due to specific decision situations, influenced by multiple cost drivers, or exhibit nonlinear behavior.

Question 2

The following information is for Center Corporation: $$\begin{array} { l l } 
\text { Total fixed costs } & \$ 313,500 \
\text { Variable costs per unit } & \$ 99 \
\text { Selling price p er unit } & \$ 154
\end{array}$$ If management has a targeted net income of $59,400 (ignore income taxes), then sales revenue should be:

Accepted Answer

Sales revenue = (Fixed costs + Target net income) / (Selling price per unit - Variable cost per unit)= (313,500 + 59,400) / (154 - 99)= 372,900 / 55= $678,182

Question 3

Ankeny Company wishes to earn after- tax net income of $18,000. Total fixed costs are $84,000, and the contribution margin per unit is $6.00. Ankeny's tax rate is 40%. The number of units that must be sold to earn the targeted net income is:

Accepted Answer

The answer of Ankeny Company wishes to earn after- tax...

Question 4

Given a break- even point of 88,000 units and a contribution margin per unit of $9.60, the total number of units that must be sold to reach a net pre- tax profit of $18,096 is:

Accepted Answer

To find the total number of units needed to reach a net pre-tax profit of $18,096, you add the break-even units to the additional units needed to cover the desired profit. The additional units are calculated by dividing the desired profit by the contribution margin per unit: $18,096 / $9.60 = 1,885 units. Adding these to the break-even point: 88,000 + 1,885 = 89,885 units.

Question 5

As sales exceed the break- even point, a high contribution- margin percentage:

Accepted Answer

A high contribution-margin percentage means that a larger portion of each sales dollar contributes to covering fixed costs and generating profit, thus increasing profits faster as sales exceed the break-even point.

Question 6

Number of engineering hours is a likely cost driver for which value chain function?

Accepted Answer

The answer of Number of engineering hours is a likely...

Question 7

will decrease a company's break- even point.

Accepted Answer

Reducing total fixed costs will decrease a company's break-even point because it will lower the total amount of sales needed to cover fixed costs.

Question 8

An increase in fixed costs usually indicates:

Accepted Answer

An increase in fixed costs usually indicates that the relevant range is increasing, as fixed costs are often associated with capacity or scale, which can expand the range of activity levels over which the fixed costs remain constant.

Question 9

Cuyahoga County Hospital has overall variable costs of 75% of total revenues and fixed costs of $40 million per year. There are 40,000 patient- days estimated for next year. The average daily revenue per patient necessary to breakeven is:

Accepted Answer

The answer of Cuyahoga County Hospital has overall variable costs...

Question 10

Which of the following statements about highly leveraged companies is true?

Accepted Answer

Highly leveraged companies have high fixed costs and low variable costs, which means that large changes in sales volume will result in larger changes in net income. This also means that there is a higher possibility of net income or net loss, and therefore more risk, than a highly leveraged firm.

Question 11

If targeted after- tax net income is $67,500 with a 40% tax rate, contribution margin per unit is $2.00, and total fixed costs are $370,000, then the number of units which must be sold is:

Accepted Answer

The correct answer is A.The number of units which must be sold is:$67,500 / ($2.00 * (1 - 0.40)) - $370,000 / $2.00 = 241,250 units

Question 12

Output measures of both resources and activities are:

Accepted Answer

Cost drivers are factors that cause changes in the cost of an activity or resource, thus they measure the output of both resources and activities.

Question 13

Suppose the In & Out Motel has annual fixed costs applicable to its rooms of $1.2 million for its 300- room motel, average daily room rents of $50, and average variable costs of $10 for each room rented. It operates 365 days per year. The percent of occupancy for the year needed to breakeven is:

Accepted Answer

To find the breakeven occupancy rate, calculate the breakeven point in terms of rooms rented per year: Fixed Costs / (Room Rent - Variable Cost) = $1,200,000 / ($50 - $10) = 30,000 room nights. The total available room nights per year is 300 rooms * 365 days = 109,500 room nights. The breakeven occupancy rate is 30,000 / 109,500 = 27.4%.

Question 14

is all variable costs divided by sales.

Accepted Answer

The variable-cost ratio is calculated by dividing all variable costs by sales.

Question 15

Burning Company, a producer of salsa, has the following information: $\begin{array}{ll}
\text { Income tax rate } & 30 \% \
\text { Selling price per unit } & \$ 5.00 \
\text { Variable cost per unit } & \$ 3.00 \
\text { Tot al fixed costs } & \$ 90,000.00
\end{array}$ The break- even point in dollars is:

Accepted Answer

The answer of Burning Company, a producer of salsa, has...

Question 16

If the sales price per unit is $20, the unit contribution margin is $8, and total fixed costs are $24,000, the break- even point in units is:

Accepted Answer

The answer of If the sales price per unit is...

Question 17

Rampart Hospital has total variable costs of 90% of total revenues and fixed costs of $50 million per year. There are 50,000 patient- days estimated for next year. What is the average daily revenue per patient necessary to breakeven?

Accepted Answer

The answer of Rampart Hospital has total variable costs of...

Question 18

If the sales price per unit is $100, the unit variable cost is $75, and total fixed costs are $150,000, then the break- even volume in dollar sales rounded to the nearest whole dollar is:

Accepted Answer

The break-even volume in dollar sales is calculated by dividing the total fixed costs by the contribution margin ratio. The contribution margin per unit is $100 - $75 = $25. The contribution margin ratio is $25 / $100 = 0.25. The break-even point in units is $150,000 / $25 = 6,000 units. In dollar sales, it is 6,000 units * $100 = $600,000.

Question 19

Four Alarm Company, a producer of salsa, has the following information: $$\begin{array} { l l } 
\text { Income tax rate } & 30 \% \
\text { Selling pric e per unit } & \$ 5.00 \
\text { Variable cost p er unit } & \$ 3.00 \
\text { Total fixed costs } & \$ 90,000.00
\end{array}$$ The contribution- margin ratio is:

Accepted Answer

The contribution margin per unit is the selling price per unit minus the variable cost per unit, which is $5.00 - $3.00 = $2.00. The contribution margin ratio is the contribution margin per unit divided by the selling price per unit, which is $2.00 / $5.00 = 0.40 or 40%.

Question 20

Assume the following cost information for Donald Company: $\begin{array}{ll}
\text { Selling price per unit } & \$ 144 \
\text { Variable costs per unit } & \$ 95 \
\text { Total fixed costs } & \$ 80,000 \
\text { Tax rate } & 40 \%
\end{array}$ The break- even point in units is

Accepted Answer

The answer of Assume the following cost information for Donald...

Quiz 2: Introduction to Cost Behavior and Cost Volume Relationships