Question 1

Shown below are terms or phrases preceded by letters a through j followed by a list of definitions. Match the terms or phrases 1 through 10 with the correct definitions by placing the letter of the term or phrase in the answer space provided at the beginning of each definition.
(a) Mixed cost
(b) Fixed cost
(c) Contribution margin per unit
(d) Curvilinear cost
(e) Variable cost
(f) Step-wise cost
(g) Relevant range of operations
(h) Estimated line of cost behavior
(i) Least-squares regression
(j) Cost-volume-profit analysis
________ (1) The amount that the sale of one unit contributes toward covering fixed costs and generating profit.
________ (2) A cost that changes in total in proportion to changes in volume of activity.
________ (3) A cost that includes both fixed and variable cost components.
________ (4) A cost that changes as volume changes, but at a nonconstant rate.
________ (5) A line drawn on a graph to fit the relation between cost and unit volume.
________ (6) A statistical method for identifying cost behavior that is more precise than the high-low method and a scatter diagram.
________ (7) A company's normal operating range of production volume; excludes extremely high and low operating levels that are unlikely to recur.
________ (8) A cost that remains constant over limited ranges of volumes of activity but shifts to another level when volume changes significantly.
________ (9) A business planning tool that helps managers predict how changes in costs and sales levels affect profit.
________ (10) A cost that remains unchanged in total amount despite variations in the volume of activity within a relevant range.

Accepted Answer

The answer of Shown below are terms or phrases preceded...

Question 2

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000. 
-Flannigan Company management targets an annual pre-tax income of $1,125,000. Compute the unit sales to earn the target pre-tax net income.

Accepted Answer

The correct answer is A.Explanation:Target pre-tax income = $1,125,000Contribution margin per unit = $450 - $270 = $180Unit sales to earn target pre-tax net income = (Target pre-tax income + Fixed costs) / Contribution margin per unit= ($1,125,000 + $800,000) / $180= $10,694

Question 3

Carver Packing Company reports total contribution margin of $72,000 and pretax net income of $24,000 for the current month. In the next month, the company expects sales volume to increase by 8%. The degree of operating leverage and the expected percent change in income, respectively, are:

Accepted Answer

The degree of operating leverage (DOL) can be calculated using the formula:

DOL = contribution margin / pretax net income

Plugging in the given numbers, we get:

DOL = $72,000 / $24,000 
DOL = 3

The expected percent change in income can be calculated using the formula:

% change in income = DOL x % change in sales

Plugging in the given numbers, we get:

% change in income = 3 x 8% 
% change in income = 24%

Therefore, the answer is C, with a DOL of 3 and an expected percent change in income of 24%.

Question 4

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000.
- Compute the break-even point in dollars.

Accepted Answer

Break-even point = Fixed costs / (Selling price per unit - Variable cost per unit)= 800,000 / (450 - 270)= 800,000 / 180= $2,000,000

Question 5

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000. 
-Compute the break-even point in units.

Accepted Answer

The answer of Flannigan Company manufactures and sells a single...

Question 6

Describe what happens to the net income of a company under each of the following assumptions:
(a) Units sold are less than break-even units. (b) Units sold are greater than break-even units. (c) Units sold are equal to the break-even units.

Accepted Answer

The answer of Describe what happens to the net income...

Question 7

A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials, $10 per unit, Direct labor, $6 per unit, Variable overhead, $70,000, and Fixed overhead, $120,000.
- The total product cost per unit under variable costing is:

Accepted Answer

The answer of A manufacturer reports the following costs to...

Question 8

A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials, $10 per unit, Direct labor, $6 per unit, Variable overhead, $70,000, and Fixed overhead, $120,000.
- Of the 10,000 units produced, 9,200 were sold, and 800 remain in inventory at year-end. Under variable costing, the value of the inventory is:

Accepted Answer

The answer of A manufacturer reports the following costs to...

Question 9

A manufacturer reports the following information below for its first three years in operation. $\begin{array} { l r r r } 
& & & \
& \text { Year 1 } & \text { Year 2 } & \text { Year 3 } \
\text { Income under variable costing } & \$ 76,000 & \$ 109,000 & \$ 115,000 \
\text { Beginning inventory (units) } & 0 & 800 & 500 \
\text { Ending inventory (units) } & 800 & 500 & 0 \
\text { Fixed manufacturing overhead per unit } & \$ 8.00 & \$ 8.00 & \$ 8.00 \
\hline
\end{array}$
-
Income for year 1 using absorption costing is:

Accepted Answer

The answer of A manufacturer reports the following information below...

Question 10

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000. 
-Compute the current margin of safety in dollars for Flannigan Company.

Accepted Answer

Margin of safety = (Current sales - Break-even sales)Break-even sales = Fixed costs / (Selling price per unit - Variable cost per unit)Break-even sales = $800,000 / ($450 - $270) = $2,285,714.29Margin of safety = $4,200,000 - $2,285,714.29 = $1,914,285.71

Question 11

Discuss how CVP analysis can be useful in planning.

Accepted Answer

The answer of Discuss how CVP analysis can be useful...

Question 12

A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials, $10 per unit, Direct labor, $6 per unit, Variable overhead, $70,000, and Fixed overhead, $120,000.
- Of the 10,000 units produced, 9,200 were sold, and 800 remain in inventory at year-end. Under absorption costing, the value of the inventory is:

Accepted Answer

Under absorption costing, the value of the inventory is equal to the total manufacturing costs incurred to produce the units in inventory. In this case, the total manufacturing costs are $10 per unit for direct materials, $6 per unit for direct labor, $7 per unit for variable overhead, and $12 per unit for fixed overhead. Therefore, the total manufacturing cost per unit is $35. The value of the inventory is equal to the total manufacturing cost per unit multiplied by the number of units in inventory, which is $35 x 800 = $28,000.

Question 13

What are the basic assumptions of CVP analysis with regard to variable cost, fixed cost, and selling price per unit? (Assume a single product).

Accepted Answer

The answer of What are the basic assumptions of CVP...

Question 14

Morse Company reports total contribution margin of $48,000 and pretax net income of $12,000 for the current month. The degree of operating leverage is:

Accepted Answer

The degree of operating leverage is calculated as the contribution margin divided by the pretax net income. Here, it is $48,000 / $12,000 = 4.0.

Question 15

A manufacturer reports the following information below for its first three years in operation. $\begin{array} { l r r r } 
& & & \
& \text { Year 1 } & \text { Year 2 } & \text { Year 3 } \
\text { Income under variable costing } & \$ 76,000 & \$ 109,000 & \$ 115,000 \
\text { Beginning inventory (units) } & 0 & 800 & 500 \
\text { Ending inventory (units) } & 800 & 500 & 0 \
\text { Fixed manufacturing overhead per unit } & \$ 8.00 & \$ 8.00 & \$ 8.00 \
\hline
\end{array}$
- 
Income for year 3 using absorption costing is:

Accepted Answer

Under absorption costing, fixed manufacturing overhead is included in the cost of inventory. In Year 3, there is no ending inventory, so all fixed overhead costs are expensed. The income under absorption costing is the same as variable costing for Year 3, which is $115,000. However, since there is no ending inventory, the fixed overhead cost of the beginning inventory (500 units * $8) is expensed, reducing the income by $4,000, resulting in $111,000.

Question 16

A manufacturer reports the following information below for its first three years in operation. $\begin{array} { l r r r } 
& & & \
& \text { Year 1 } & \text { Year 2 } & \text { Year 3 } \
\text { Income under variable costing } & \$ 76,000 & \$ 109,000 & \$ 115,000 \
\text { Beginning inventory (units) } & 0 & 800 & 500 \
\text { Ending inventory (units) } & 800 & 500 & 0 \
\text { Fixed manufacturing overhead per unit } & \$ 8.00 & \$ 8.00 & \$ 8.00 \
\hline
\end{array}$
- 
Income for year 3-year period using absorption costing is:

Accepted Answer

The answer of A manufacturer reports the following information below...

Question 17

A manufacturer reports the following information below for its first three years in operation. $\begin{array} { l r r r } 
& & & \
& \text { Year 1 } & \text { Year 2 } & \text { Year 3 } \
\text { Income under variable costing } & \$ 76,000 & \$ 109,000 & \$ 115,000 \
\text { Beginning inventory (units) } & 0 & 800 & 500 \
\text { Ending inventory (units) } & 800 & 500 & 0 \
\text { Fixed manufacturing overhead per unit } & \$ 8.00 & \$ 8.00 & \$ 8.00 \
\hline
\end{array}$
-  
Income for year 2 using absorption costing is:

Accepted Answer

The answer of A manufacturer reports the following information below...

Question 18

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000. 
-Flannigan Company management targets an annual pre-tax income of $1,125,000. Compute the dollar sales to earn the target pre-tax net income.

Accepted Answer

The answer of Flannigan Company manufactures and sells a single...

Question 19

A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials, $10 per unit, Direct labor, $6 per unit, Variable overhead, $70,000, and Fixed overhead, $120,000.
- The total product cost per unit under absorption costing is:

Accepted Answer

Under absorption costing, all direct costs and both fixed and variable overhead costs are included in product cost. The total cost per unit in this scenario would be:
Direct materials = $10 per unit
Direct labor = $6 per unit
Variable overhead = $70,000/10,000 units = $7 per unit
Total fixed overhead = $120,000
Total units produced = 10,000
Total cost per unit = (direct materials + direct labor + variable overhead + (total fixed overhead/total units produced))
Total cost per unit = ($10 + $6 + $7 + ($120,000/10,000)) = $35 per unit.

Question 20

Define variable cost, fixed cost, and mixed cost.

Accepted Answer

The answer of Define variable cost, fixed cost, and mixed...

Quiz 21: Cost-Volume-Profit Analysis

Carver Packing Company reports total contribution margin of $72,000 and pretax net income of $24,000 for the current month. In the next month, the company expects sales volume to increase by 8%. The degree of operating leverage and the expected percent change in income, respectively, are:

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000. - Compute the break-even point in dollars.

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000. -Compute the break-even point in units.

Describe what happens to the net income of a company under each of the following assumptions: (a) Units sold are less than break-even units. (b) Units sold are greater than break-even units. (c) Units sold are equal to the break-even units.

A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials, $10 per unit, Direct labor, $6 per unit, Variable overhead, $70,000, and Fixed overhead, $120,000. - The total product cost per unit under variable costing is:

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000. -Compute the current margin of safety in dollars for Flannigan Company.

Discuss how CVP analysis can be useful in planning.

What are the basic assumptions of CVP analysis with regard to variable cost, fixed cost, and selling price per unit? (Assume a single product).

Morse Company reports total contribution margin of $48,000 and pretax net income of $12,000 for the current month. The degree of operating leverage is:

A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials, $10 per unit, Direct labor, $6 per unit, Variable overhead, $70,000, and Fixed overhead, $120,000. - The total product cost per unit under absorption costing is:

Define variable cost, fixed cost, and mixed cost.