ACC650
Module 4 - Cost Estimation and CVP Analysis
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1. DuChien
Corporation recently produced and sold 100,000 units. Fixed costs at this level
of activity amounted to $50,000; variable costs were $100,000. How much cost
would the company anticipate if during the next period it produced and sold
102,000 units?
a. $150,000.
$151,000.
$152,000.
$153,000.
Some other amount not
listed above.
2. The
difference between budgeted sales revenue and break-even sales revenue is the:
a.
contribution margin.
contribution-margin
ratio.
safety margin.
target net profit.
operating leverage.
3. At a volume
of 20,000 units, Dries reported sales revenues of $1,000,000, variable costs of
$300,000, and fixed costs of $260,000. The company's break-even point in units
is:
a. 7,027
(rounded).
8,667 (rounded).
9,286 (rounded).
7,429 (rounded).
an amount other than
those above.
At a volume of 20,000 units, Dries reported sales revenues
of $1,000,000, variable costs of $300,000, and fixed costs of $260,000. The
company's break-even point in units is:
Selling price = 1,000,000/20,000 = 50
VC per unit = 300,000/20,000 = 15
Contribution margin per unit = 50 - 15 = 35
BEP = 260,000/35 = 7428.57 (rounding off 7,429)
4. The
contribution-margin ratio is:
a. the
difference between the selling price and the variable cost per unit.
fixed cost per unit
divided by variable cost per unit.
variable cost per
unit divided by the selling price.
unit contribution
margin divided by the selling price.
unit contribution
margin divided by fixed cost per unit.
5. Which of the
following methods of cost estimation relies on only two data points?
a.
Least-squares regression.
The high-low method.
The visual-fit
method.
Account analysis.
Multiple regression.
6. Within the
relevant range, a curvilinear cost function can sometimes be graphed as a:
a. sloping
straight line.
jagged line.
vertical straight
line.
curved line.
horizontal straight
line.
7. A manager
who wants to determine the percentage impact on income of a given percentage
change in sales would multiply the percentage increase/decrease in sales
revenue by the:
a.
contribution margin.
gross margin.
operating leverage
factor.
safety margin.
contribution-margin
ratio
8. A forecast
of a cost at a particular level of activity is termed:
a. cost
estimation.
cost prediction.
cost behavior.
cost analysis.
cost approximation.
9. Ribco Co.
makes and sells only one product. The unit contribution margin is $6 and the
break-even point in unit sales is 24,000. The company's fixed costs are:
a. $4,000.
$14,400.
$40,000.
$144,000.
an amount other than
those above.
10. Booster, Inc.
recently conducted a least-squares regression analysis to predict selling
expenses. The company has constructed the following regression equation: Y =
329,000 + 7.80X. Which of the following statements is false if the primary cost
driver is number of units sold?
a. The company
anticipates $329,000 of fixed selling expenses.
"Y"
represents total selling expenses.
The company expects
both variable and fixed selling expenses.
For each unit sold,
total selling expenses will increase by $7.80.
"X"
represents the number of hours worked during the period.
11. Swanson and
Associates presently leases a copy machine under an agreement that calls for a
fixed fee each month and a charge for each copy made. Swanson made 7,000 copies
and paid a total of $360 in March; in May, the firm paid $280 for 5,000 copies.
The company uses the high-low method to analyze costs.
How much would Swanson's pay if it made 5,500 copies?
a. $382.50.
$322.
$300.
$292.50
An amount other than
those given above.
7,000 copies and paid a total of $360 in March; in May, the
firm paid $280 for 5,000 copies.
5,000 to 7,000..............2,000
280 to 360...................80
Variable cost per copy = $80/2,000 = $0.04
Fixed cost = 360 - (7,000 x 0.04) = 360 - 280 = 80
For 5,500 copies = 80
+ (5,500 x 0.04) = 80 + 220 = 300
12. Swanson and
Associates presently leases a copy machine under an agreement that calls for a
fixed fee each month and a charge for each copy made. Swanson made 7,000 copies
and paid a total of $360 in March; in May, the firm paid $280 for 5,000 copies.
The company uses the high-low method to analyze costs.
Swanson's variable cost per copy is:
a. $0.040.
$0.051.
$0.053.
$0.056.
an amount other than
those given above.
13. Yellow Dot,
Inc. sells a single product for $10. Variable costs are $4 per unit and fixed
costs total $120,000 at a volume level of 10,000 units. What dollar sales level
would Yellow Dot have to achieve to earn a target profit of $240,000?
a. $400,000.
$500,000.
$600,000.
$750,000.
$900,000.
14. At a volume
of 20,000 units, Dries reported sales revenues of $1,000,000, variable costs of
$300,000, and fixed costs of $260,000. The company's contribution margin per
unit is:
a. $22.
$28.
$35.
$37.
an amount other than
those above.
15. Which of the
following costs changes in direct proportion to a change in the activity level?
a. variable
cost.
fixed cost.
semivariable cost.
step-variable cost.
step-fixed cost.
16. A company
observed a decrease in the cost per unit. All other things being equal, which
of the following is probably true?
a. The company
is studying a variable cost, and total volume has increased.
The company is
studying a variable cost, and total volume has decreased.
The company is
studying a fixed cost, and total volume has increased.
The company is
studying a fixed cost, and total volume has decreased.
The company is
studying a fixed cost, and total volume has remained constant.
17. A company has
fixed costs of $900 and a per-unit contribution margin of $3. Which of the
following statement is (are) true?
a. Total
contribution margin equals the sum of variable cost plus fixed cost.
The situation
described is not possible and there must be an error.
Once the break-even
point is reached, the company will increase income at the rate of $3 per unit.
The firm will
definitely lose money in this situation.
18. Northlake,
Inc., uses the high-low method to analyze cost behavior. The company observed
that at 20,000 machine hours of activity, total maintenance costs averaged
$10.50 per hour. When activity jumped to 24,000 machine hours, which was still
within the relevant range, the average total cost per machine hour was $9.75.
On the basis of this information, the company's fixed maintenance costs were:
a. $24,000.
$90,000.
$210,00.
$234,000.
an amount other than
those listed above.
19. Swanson and
Associates presently leases a copy machine under an agreement that calls for a
fixed fee each month and a charge for each copy made. Swanson made 7,000 copies
and paid a total of $360 in March; in May, the firm paid $280 for 5,000 copies.
The company uses the high-low method to analyze costs.
Swanson's monthly fixed fee is:
a. $80.
$102.
$106.
$112.
an amount other than
those given above.
20. Brooklyn
sells a single product to wholesalers. The company's budget for the upcoming
year revealed anticipated unit sales of 31,600, a selling price of $20,
variable cost per unit of $8, and total fixed costs of $360,000. If Brooklyn's
unit sales are 200 units less than anticipated, its breakeven point will:
a. increase by
$12 per unit sold.
decrease by $12 per
unit sold.
increase by $8 per
unit sold.
decrease by $8 per
unit sold.
not change.
21. A company has
fixed costs of $900 and a per-unit contribution margin of $3. Which of the
following statements is (are) true?
A. Each unit "contributes" $3 toward covering the
fixed costs of $900.
B. The situation described is not possible and there must be
an error.
C. Once the break-even point is reached, the company will
make money at the rate of $3 per unit.
D. The firm will definitely lose money in this situation.
E. Statements "A" and "C" are true.
BEP = 900/3 = 300
After selling the 300 units, they can save the contribution
margin
Once the break-even point is reached, the company will
increase income at the rate of $3
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