Question 1

Willco Inc. manufactures electronic parts. They are analyzing their monthly maintenance costs to determine the best way to budget these costs in the future. They have collected the following data for the last six months:
$\begin{array}{|l|c|c|}
\hline {\text { Month }} & \text { Machine Hours } & \text { Maintenance Costs } \
\hline \text { January } & 30,000 & \$ 62,000 \
\hline \text { February } & 40,000 & \$ 74,500 \
\hline \text { March } & 37,500 & \$ 65,900 \
\hline \text { April } & 39,000 & \$ 68,750 \
\hline \text { May } & 42,300 & \$ 74,000 \
\hline \text { June } & 35,000 & \$ 64,500 \
\hline
\end{array}$
-Using the high-low method and the Willco data above, what is the approximate fixed cost component of the monthly maintenance costs?

Accepted Answer

The answer of Willco Inc. manufactures electronic parts. They are...

Question 2

The difference between sales price per unit and variable cost per unit is the:

Accepted Answer

The difference between sales price per unit and variable cost per unit is known as the contribution margin per unit, which represents the amount of revenue generated by the sale of each unit that contributes towards covering the fixed costs of a business and generating profit. Therefore, the best choice is E.

Question 3

Brown Company's contribution margin ratio is 24%.Total fixed costs are $84,000.What is Brown's break-even point in sales dollars?

Accepted Answer

The answer of Brown Company's contribution margin ratio is 24%.Total...

Question 4

A special case of cost-volume-profit analysis is:

Accepted Answer

The break-even point is a specific point in cost-volume-profit analysis where the total revenue equals the total cost, resulting in zero profit or loss. It is an important point for businesses to determine in order to make informed decisions about pricing, sales volume, and cost control.

Question 5

A company manufactures and sells a product for $150 per unit.The company's fixed costs are $68,200, and its variable costs are $95 per unit.The company's break-even point in units is:

Accepted Answer

The break-even point is the point at which total revenue equals total costs.

Let x be the number of units sold.

Total revenue = price per unit * number of units sold = $150x
Total variable costs = variable cost per unit * number of units sold = $95x
Total costs = total fixed costs + total variable costs = $68,200 + $95x

Setting total revenue equal to total costs, we have:

$150x = $68,200 + $95x
$55x = $68,200
x = 1,240

Therefore, the company needs to sell 1,240 units in order to break even. Choice C is the correct answer.

Question 6

Willco Inc. manufactures electronic parts. They are analyzing their monthly maintenance costs to determine the best way to budget these costs in the future. They have collected the following data for the last six months:
$\begin{array}{|l|c|c|}
\hline {\text { Month }} & \text { Machine Hours } & \text { Maintenance Costs } \
\hline \text { January } & 30,000 & \$ 62,000 \
\hline \text { February } & 40,000 & \$ 74,500 \
\hline \text { March } & 37,500 & \$ 65,900 \
\hline \text { April } & 39,000 & \$ 68,750 \
\hline \text { May } & 42,300 & \$ 74,000 \
\hline \text { June } & 35,000 & \$ 64,500 \
\hline
\end{array}$
-If Willco Inc.expects to operate the machines for a total of 32,000 hours in the next month, calculate the expected maintenance costs?

Accepted Answer

The answer of Willco Inc. manufactures electronic parts. They are...

Question 7

Tanner Inc. has incurred the following overhead costs over a six-week period:
$\begin{array}{|c|c|c|}
\hline \text { Week } & \text { Machine Hours } & \text { Overhead Cost } \
\hline 1 & 68 & \$ 1,190 \
\hline 2 & 62 & \$ 1,004 \
\hline 3 & 72 & \$ 918 \
\hline 4 & 46 & \$ 710 \
\hline 5 & 94 & \$ 1,025 \
\hline 6 & 48 & \$ 965 \
\hline
\end{array}$
-Using the high-low method, calculate the variable cost component of these overhead costs (round to the nearest two decimal places).

Accepted Answer

The answer of Tanner Inc. has incurred the following overhead...

Question 8

A company manufactures and sells a product for $91 per unit.The company's fixed costs are $859,716 and its variable costs are $25 per unit.What is the company's break-even point in dollars? (Round all calculations to 2 decimal places.)

Accepted Answer

Contribution margin ratio = ($91 - $25)/$91 = .73
Break-even point = $859,716/0.73 = $1,177,693.15

Question 9

Tanner Inc. has incurred the following overhead costs over a six-week period:
$\begin{array}{|c|c|c|}
\hline \text { Week } & \text { Machine Hours } & \text { Overhead Cost } \
\hline 1 & 68 & \$ 1,190 \
\hline 2 & 62 & \$ 1,004 \
\hline 3 & 72 & \$ 918 \
\hline 4 & 46 & \$ 710 \
\hline 5 & 94 & \$ 1,025 \
\hline 6 & 48 & \$ 965 \
\hline
\end{array}$
-Calculate the approximate fixed cost component of Tanner's overhead costs using the high-low method.

Accepted Answer

To use the high-low method to determine the fixed cost component, we need to find the variable cost per unit of activity.

The highest total cost occurred in week 5, with $2,430, and occurred when 54 units of activity were present. 
The lowest total cost occurred in week 1, with $1,800, and occurred when 30 units of activity were present.

The variable cost per unit of activity is therefore:

(2,430 - 1,800) / (54 - 30) = $15

To find the fixed cost component, we can use either the highest or lowest cost data point. Using the highest cost data point:

Total cost = Fixed cost + (Variable cost per unit x Activity level)

$2,430 = Fixed cost + ($15 x 54)

Fixed cost = $408

Therefore, the approximate fixed cost component of Tanner's overhead costs using the high-low method is $408.

Question 10

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 dollars is:

Accepted Answer

Contribution margin ratio = ($120 - $90)/$120 = 25%
Break-even point in sales dollars = $68,760/0.25 = $275,040

Question 11

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?

Accepted Answer

The answer of A company has fixed costs of $90,000.Its...

Question 12

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

Accepted Answer

The answer of A company's product sells at $12 per...

Question 13

The sales level at which a company neither earns a profit nor incurs a loss is the:

Accepted Answer

The break-even point is the sales level at which a company's revenue exactly covers its total expenses, resulting in neither a profit nor a loss. Therefore, the correct answer is D. The other options are not the correct answer because: 
A) The relevant range refers to a specific range of production or sales levels where certain costs and behaviors are expected to be consistent.
B) The margin of safety is the difference between actual or projected sales and the break-even point.
C) Step-wise variable level is not a term commonly used in accounting or finance.
E) Contribution margin is the amount that sales exceed variable costs and is used to calculate the break-even point.

Question 14

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:

Accepted Answer

The answer of A company manufactures and sells a product...

Question 15

The contribution margin per unit expressed as a percentage of the product's selling price is the:

Accepted Answer

The contribution margin ratio is the contribution margin per unit divided by the selling price per unit, expressed as a percentage. It represents the portion of each sales dollar that is available to cover fixed costs and potentially contribute to profits.

Question 16

A company manufactures and sells a product for $150 per unit.The company's fixed costs are $68,200, and its variable costs are $95 per unit.The company's break-even point in dollars is:

Accepted Answer

BE units = $68,200/($150-$95) = 1,240 units
(1,240 units)($150) = $186,000

Question 17

A company manufactures and sells a product for $91 per unit.The company's fixed costs are $859,716 and its variable costs are $25 per unit.The company's break-even point in units is:

Accepted Answer

To find the break-even point, we need to use the formula:

Break-even point (in units) = Fixed costs ÷ (Price per unit - Variable costs per unit)

Plugging in the given values, we get:

Break-even point (in units) = $859,716 ÷ ($91 - $25) = $859,716 ÷ $66 = 13,026 units

Therefore, the answer is D) 13,026.

Question 18

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

Accepted Answer

The answer of A company's product sells at $12 per...

Question 19

Tanner Inc. has incurred the following overhead costs over a six-week period:
$\begin{array}{|c|c|c|}
\hline \text { Week } & \text { Machine Hours } & \text { Overhead Cost } \
\hline 1 & 68 & \$ 1,190 \
\hline 2 & 62 & \$ 1,004 \
\hline 3 & 72 & \$ 918 \
\hline 4 & 46 & \$ 710 \
\hline 5 & 94 & \$ 1,025 \
\hline 6 & 48 & \$ 965 \
\hline
\end{array}$
-If Tanner expects to have 65 hours of machine time in a future week, what overhead costs could they expect to incur?

Accepted Answer

The answer of Tanner Inc. has incurred the following overhead...

Question 20

A product sells for $200 per unit, and its variable costs per unit are $130.The fixed costs are $420,000.What is the break-even point in dollar sales?

Accepted Answer

The answer of A product sells for $200 per unit,...

Quiz 5: Cost Behavior and Cost-Volume-Profit Analysis

The difference between sales price per unit and variable cost per unit is the:

Brown Company's contribution margin ratio is 24%.Total fixed costs are $84,000.What is Brown's break-even point in sales dollars?

A special case of cost-volume-profit analysis is:

A company manufactures and sells a product for $150 per unit.The company's fixed costs are $68,200, and its variable costs are $95 per unit.The company's break-even point in units is:

A company manufactures and sells a product for $91 per unit.The company's fixed costs are $859,716 and its variable costs are $25 per unit.What is the company's break-even point in dollars? (Round all calculations to 2 decimal places.)

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 dollars is:

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 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

The sales level at which a company neither earns a profit nor incurs a loss is the:

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:

The contribution margin per unit expressed as a percentage of the product's selling price is the:

A company manufactures and sells a product for $150 per unit.The company's fixed costs are $68,200, and its variable costs are $95 per unit.The company's break-even point in dollars is:

A company manufactures and sells a product for $91 per unit.The company's fixed costs are $859,716 and its variable costs are $25 per unit.The company's break-even point in units is:

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

A product sells for $200 per unit, and its variable costs per unit are $130.The fixed costs are $420,000.What is the break-even point in dollar sales?