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Exam 4: Cost-Volume-Profit Analysis

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Question 141

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When more units are sold than produced,operating income is higher under absorption costing than variable costing.

A) True
B) False

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Question 142

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The highest value of total cost was $800,000 in June for Horchata Beverages,Inc.Its lowest value of total cost was $510,000 in December.The company makes a single product.The production volume in June and December were 13,000 and 8000 units,respectively.What is the fixed cost per month? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)

A) $510,000
B) $290,000
C) $46,000
D) $8000

E) B) and C)
F) A) and D)

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Question 143

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Thrills Amusement Park provides a variety of attractions.Thrills sells tickets at $50 per person as a one-day entrance fee.Variable costs are $28 per person,and fixed costs are $178,800 per month. Assume that Thrills reduces fixed costs from $178,800 per month to $166,500 per month.Compute the new breakeven point in tickets and in sales dollars.

Which of the following statements is TRUE if the variable cost per unit increases while the sales price per unit and total fixed costs remain constant?

Isabellas,Inc.,a local convenience store,sells soft drinks.It sells two large drinks for every small drink.A large drink sells for $3.00 with a variable cost of $0.80.A small drink sells for $1.00 with a variable cost of $0.50.The weighted average contribution margin is ________.(Round any intermediate calculations and your final answer to the nearest cent.)

The Buttercrust Pizza Company sells pizzas in two different sizes-medium and large.The number of medium pizzas sold is twice the number of large pizzas sold.The contribution margin of a medium pizza is $10,and the contribution margin of a large pizza is $22.The weighted average contribution margin is $16.00.

Docherty,Inc.reports the following information for the year ended December 31: $\begin{array} { | l | r | c | } \hline \text { Units sold } & 640 & \text { units } \\\hline \text { Sales price } & \$ 120 & \text { per unit } \\\hline \text { Direct materials } & \$ 28 & \text { per unit } \\\hline \text { Direct labor } & \$ 9 & \text { per unit } \\\hline \text { Variable manufacturing overhead } & \$ 15 & \text { per unit } \\\hline \text { Fixed manufacturing overhead } & \$ 12 & \text { per unit } \\\hline \text { Variable selling and administrative costs } & \$ 4 & \text { per unit } \\\hline \text { Fixed selling and administrative costs } & \$ 12,700 & \text { per year } \\\hline\end{array}$ The operating income calculated using variable costing and absorption costing amounted to $9400 and $11,200,respectively.There were no beginning inventories.Determine the total number of units produced during the year.

If the variable cost per unit decreases,the total number of units required to break even will increase.

Which of the following is NOT a product cost under variable costing?

The asymmetrical change in costs when there is a decrease in the volume of activity is called ________.

Morwenna,Inc.reports the following information for August: $\begin{array} { | l | r | } \hline \text { Sales Revenue } & \$ 800,000 \\\hline \text { Variable Cost of Goods Sold } & 110,000 \\\hline \text { Fixed Cost of Goods Sold } & 65,000 \\\hline \text { Variable Selling and Administrative Costs } & 130,000 \\\hline \text { Fixed Selling and Administrative Costs } & 65,000 \\\hline\end{array}$ Calculate the operating income for August using absorption costing.

A ________ groups cost by behavior; costs are classified as either variable costs or fixed costs.

Boyko,Inc.has fixed costs of $400,000.Total costs,both fixed and variable,are $550,000 when 40,000 units are produced.Calculate the total costs if the volume increases to 64,000 units.(Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)

How is the unit contribution margin calculated?

When units produced are less than units sold,how does operating income differ between variable costing and absorption costing? Explain your answer.

Peeler's Smoothie Company has provided the following information: $\begin{array} { | l | r | } \hline \text { Sales price per unit } & \$ 5.50 \\\hline \text { Variable cost per unit } & \$ 2.50 \\\hline \text { Fixed costs per month } & \$ 1000 \\\hline\end{array}$ Calculate the contribution margin ratio.(Round your answer to two decimal places.)

The fundamental assumption of cost-volume-profit (CVP)analysis is that,in the long run,fixed costs become variable costs.

When production is greater than sales,the operating income will be higher under absorption costing than variable costing.Assume zero beginning and ending inventories.Which of the following gives the correct reason for the above statement?

Target profit is the operating income that results when sales revenue minus variable and fixed costs equals management's profit goal.

When all of the units produced are sold,the operating income is the same under both the absorption and variable costing methods.Assume no beginning and ending inventories.Which of the following gives the correct reason for the above statement?