Question 1

A firm operated at 90% of capacity for the past year during which fixed costs were $320,000, variable costs were 60% of sales, and sales were $1,200,000. Operating profit was:

Accepted Answer

The answer of A firm operated at 90% of capacity...

Question 2

If fixed costs are $850,000 and the unit contribution margin is $90, what amount of units must be sold in order to have a zero profit?

Accepted Answer

To achieve zero profit, the total revenue must equal the total costs. The total revenue is equal to the unit contribution margin multiplied by the number of units sold. The total costs are equal to the fixed costs plus the variable costs. The variable costs are equal to the unit variable cost multiplied by the number of units sold. Since the unit variable cost is not given, we can assume it is zero. Therefore, the total costs are equal to the fixed costs. Setting the total revenue equal to the total costs, we get:Unit contribution margin * Number of units sold = Fixed costs$90 * Number of units sold = $850,000Number of units sold = $850,000 / $90Number of units sold = 9,444 unitsTherefore, the correct answer is A) 9,444 units.

Question 3

Wiles Inc.'s unit selling price is $40, the unit variable costs is $30, fixed costs are $135,000, and current sales are 10,000 units. How much would operating income change if sales increase by 5,000 units?

Accepted Answer

The operating income change is calculated by the contribution margin per unit times the change in units sold. The contribution margin per unit is the selling price minus the variable cost ($40 - $30 = $10). With an increase of 5,000 units, the operating income would increase by $10 * 5,000 = $50,000.

Question 4

Snower Corporation sells product G for $150 per unit, the variable cost per unit is $105, and the fixed costs are $720,000. What is the sales (in dollars) required to realize income from operations of $40,000?

Accepted Answer

The answer of Snower Corporation sells product G for $150...

Question 5

If sales are $820,000, variable costs are 68% of sales, and operating income is $260,000, what is the contribution margin ratio?

Accepted Answer

The answer of If sales are $820,000, variable costs are...

Question 6

If fixed costs are $250,000, the unit selling price is $105, and the unit variable cost is $65, what is the break-even sales (in units)?

Accepted Answer

The answer of If fixed costs are $250,000, the unit...

Question 7

If sales are $200,000, variable costs are 56% of sales, and operating income is $30,000, what is the contribution margin ratio?

Accepted Answer

Contribution Margin Ratio = (Sales - Variable Costs) / Sales
Operating Income = Sales - Variable Costs - Fixed Costs

Substituting the given values:
$30,000 = $200,000 - 0.56($200,000) - Fixed Costs
Fixed Costs = $64,000

Contribution Margin Ratio = ($200,000 - 0.56($200,000)) / $200,000
= $88,000 / $200,000
= 0.44 or 44%

Thus, the correct answer is choice C) 44%.

Question 8

Currently, fixed costs are $500,000 and the unit contribution margin is $40. What would be the break-even point in units if fixed costs are reduced by $80,000?

Accepted Answer

The answer of Currently, fixed costs are $500,000 and the...

Question 9

If fixed costs are $600,000 and the unit contribution margin is $12, what amount of units must be sold in order to realize an operating income of $100,000?

Accepted Answer

To find the number of units needed to achieve a specific operating income, use the formula: (Fixed Costs + Desired Operating Income) / Unit Contribution Margin. Here, ($600,000 + $100,000) / $12 = 58,334 units.

Question 10

Currently, fixed costs are $450,000, the unit selling price is $75, and the unit variable cost is $50. What would be the break-even sales (in units), if the unit selling price is increased by $5?

Accepted Answer

The break-even point in units is calculated by dividing the fixed costs by the contribution margin per unit. With the increased selling price of $80 ($75 + $5), the contribution margin per unit is $30 ($80 - $50). Therefore, the break-even sales in units is $450,000 / $30 = 15,000 units.

Question 11

Foggy Co. has the following operating data for its manufacturing operations: $\begin{array}{ll}
\$ 250 & \text { Unit selling price } \
\$ 100 & \text { Unit variable cost } \
\$ 840,000 & \text { Total fixed costs }
\end{array}$ The company has decided to increase the wages of hourly workers, which will increase the unit variable cost by 10%. Increases in the salaries of factory supervisors and property taxes for the factory will increase fixed costs by 4%. If sales prices are held constant, the break-even point for Foggy Co. will:

Accepted Answer

The original unit variable cost is $100, and a 10% increase raises it to $110. The original fixed costs are $840,000, and a 4% increase raises them to $873,600. The contribution margin per unit changes from $150 ($250 - $100) to $140 ($250 - $110). The original break-even point is 5,600 units ($840,000 / $150), and the new break-even point is 6,240 units ($873,600 / $140), an increase of 640 units.

Question 12

Variable costs as a percentage of sales for Leamon Inc. are 75%, current sales are $600,000, and fixed costs are $110,000. How much would operating income change if sales increase by $50,000?

Accepted Answer

Operating income change is calculated by multiplying the increase in sales ($50,000) by the contribution margin ratio (1 - variable cost percentage, which is 25%). So, $50,000 * 25% = $12,500 increase.

Question 13

In cost-volume-profit analysis, all costs are classified into the following two categories:

Accepted Answer

In cost-volume-profit analysis, costs are classified into two categories: variable costs and fixed costs. Variable costs are costs that change in direct proportion to changes in the level of activity or volume, while fixed costs remain fixed in total over the relevant range of activity. Mixed costs (which are a combination of variable and fixed components) and discretionary costs (which are discretionary in nature and can be adjusted or eliminated) are not distinct categories in cost-volume-profit analysis. Sunk Costs, on the other hand, are costs that have already been incurred and cannot be recovered, and as such they are not relevant for cost-volume-profit analysis.

Question 14

Which ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?

Accepted Answer

The contribution margin ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit.

Question 15

If fixed costs are $350,000, the unit selling price is $80, and the unit variable cost is $30, what is the break-even sales (in units)?

Accepted Answer

The answer of If fixed costs are $350,000, the unit...

Question 16

Currently, fixed costs are $810,000, the unit selling price is $60, and the unit variable cost is $48. What would be the break-even sales (in units), if the variable cost is increased by $2?

Accepted Answer

The answer of Currently, fixed costs are $810,000, the unit...

Question 17

Currently, fixed costs are $810,000, the unit selling price is $60, and the unit variable cost is $48. What would be the break-even sales (in units), if fixed costs are reduced by $51,000?

Accepted Answer

The answer of Currently, fixed costs are $810,000, the unit...

Question 18

The contribution margin ratio is:

Accepted Answer

The answer of The contribution margin ratio is:
...

Question 19

If fixed costs are $850,000 and variable costs are 60% of the sales, what is the break-even point (in dollars)?

Accepted Answer

The break-even point can be calculated using the following formula:

Break-even point = Fixed costs / (1 - Variable costs as a percentage of sales)

In this case, fixed costs are $850,000 and variable costs are 60% of sales. This means that variable costs as a percentage of sales can be written as 0.6.

Using the formula, we get:

Break-even point = $850,000 / (1 - 0.6) = $850,000 / 0.4 = $2,125,000

Therefore, the break-even point is $2,125,000. The best choice is C.

Question 20

If fixed costs are $750,000 and variable costs are 60% of sales, what is the break-even point (in dollars)?

Accepted Answer

The answer of If fixed costs are $750,000 and variable...

Quiz 11: Cost Behavior and Cost-Volume-Profit Analysis

A firm operated at 90% of capacity for the past year during which fixed costs were $320,000, variable costs were 60% of sales, and sales were $1,200,000. Operating profit was:

If fixed costs are $850,000 and the unit contribution margin is $90, what amount of units must be sold in order to have a zero profit?

Wiles Inc.'s unit selling price is $40, the unit variable costs is $30, fixed costs are $135,000, and current sales are 10,000 units. How much would operating income change if sales increase by 5,000 units?

Snower Corporation sells product G for $150 per unit, the variable cost per unit is $105, and the fixed costs are $720,000. What is the sales (in dollars) required to realize income from operations of $40,000?

If sales are $820,000, variable costs are 68% of sales, and operating income is $260,000, what is the contribution margin ratio?

If fixed costs are $250,000, the unit selling price is $105, and the unit variable cost is $65, what is the break-even sales (in units) ?

If sales are $200,000, variable costs are 56% of sales, and operating income is $30,000, what is the contribution margin ratio?

Currently, fixed costs are $500,000 and the unit contribution margin is $40. What would be the break-even point in units if fixed costs are reduced by $80,000?

If fixed costs are $600,000 and the unit contribution margin is $12, what amount of units must be sold in order to realize an operating income of $100,000?

Currently, fixed costs are $450,000, the unit selling price is $75, and the unit variable cost is $50. What would be the break-even sales (in units) , if the unit selling price is increased by $5?

Variable costs as a percentage of sales for Leamon Inc. are 75%, current sales are $600,000, and fixed costs are $110,000. How much would operating income change if sales increase by $50,000?

In cost-volume-profit analysis, all costs are classified into the following two categories:

Which ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?

If fixed costs are $350,000, the unit selling price is $80, and the unit variable cost is $30, what is the break-even sales (in units) ?

Currently, fixed costs are $810,000, the unit selling price is $60, and the unit variable cost is $48. What would be the break-even sales (in units) , if the variable cost is increased by $2?

Currently, fixed costs are $810,000, the unit selling price is $60, and the unit variable cost is $48. What would be the break-even sales (in units) , if fixed costs are reduced by $51,000?

The contribution margin ratio is:

If fixed costs are $850,000 and variable costs are 60% of the sales, what is the break-even point (in dollars) ?

If fixed costs are $750,000 and variable costs are 60% of sales, what is the break-even point (in dollars) ?