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Exam 21: Cost-Volume-Profit Analysis

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Question 1

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What is a scatter diagram? How is a scatter diagram used to estimate cost behavior?

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A scatter diagram displays past cost dat...

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Question 2

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Watson Company has monthly fixed costs of $83,000 and a 40% contribution margin ratio. If the company has set a target monthly income of $15,000, what dollar amount of sales must be made to produce the target income?

A) $207,500
B) $245,000
C) $37,300
D) $170,000
E) $39,200

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Question 3

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When using the high-low method for estimating cost behavior, the slope, or variable cost per unit, is calculated by ________.

The margin of safety can be expressed in units of product, in dollars, or as a percent of sales.

Which one of the following statements is not true?

The unit contribution margin divided by the selling price per unit is the ________.

The margin of safety is the amount that sales can drop before the company incurs a loss.

Briefly describe a CVP chart, including its major components.

A visual line fit to points in a scatter diagram may be used to identify the approximate relation between past cost and unit data.

Contribution margin per unit is the amount by which a product's unit selling price exceeds its total variable cost per unit.

Henderson Co. has fixed costs of $36,000 and a contribution margin ratio of 24%. If expected sales are $200,000, what is the margin of safety as a percent of sales?

A graphic depiction of the break-even point is known as a cost-volume-profit (CVP) chart.

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:

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:

Ludington Corporation provides the following data from a recent period for its manufacture of shoes: variable manufacturing costs, $24,000; variable selling costs, $12,000; and total fixed costs, $40,000. Sales were $60,000 based on 12,000 units sold during the period. Calculate the contribution margin and the contribution margin ratio.

Variable costs per unit increase proportionately with increases in volume of activity.

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:

Which of the following costs are most likely to be classified as variable?

As the level of volume of activity increases, the variable cost per unit remains constant.

The least-squares regression method is: