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Exam 5: Cost Behavior Analysis

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Question 31

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Given the following cost and activity observations for Leno Enterprises' utilities, use the high-low method to calculate Leno's variable utilities cost per machine hour. $\begin{array}{|l|l|l|}\hline & \text { Cost } & \text { Machine Hours } \\\hline \text { September } & \$ 4,100 & 22,000 \\\hline \text { October } & 3,700 & 18,000 \\\hline \text { November } & 3,900 & 19,000 \\\hline \text { December } & 4,500 & 28,000 \\\hline & & \\\hline\end{array}$

A) $0.08
B) $4.86
C) $0.25
D) $12.50

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Question 32

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Breakeven analysis adjusted for a profit factor

A) is a difficult computation that is not normally employed.
B) will not necessarily increase the number of required units.
C) is often adapted for different sales levels to aid in determining the possible levels of potential profit.
D) is a poor basis for evaluating the profitability of a venture.

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Question 33

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a. Provide two different ways of computing breakeven units: one with the contribution margin in the computation and one without the contribution margin. b. Compare and contrast the two different methods of computing breakeven units. Does the use of the contribution margin alter the resulting number of breakeven units? Why or why not? c. Comment on how the contribution margin affects the computation of breakeven units. Would an increase in the contribution margin increase or decrease the number of breakeven units required?

Lakeside has gathered the following data in order to calculate the weighted-average contribution margin: $\begin{array}{|l|l|l|l|}\hline & \text { Unit SalesPrice } & \text { Unit Variable Costs } & \text { Unit Sales } \\\hline \text { Product A } & \$ 150 & \$ 100 & 8,000 \\\hline \text { Product B } & 100 & 60 & 2,000 \\\hline & & &\end{array}$ Fixed costs are $480,000. - The weighted-average contribution margin is

Trawest, Inc., has prepared the following data: $\begin{array}{|l|l|l|l|}\hline & \text { Unit SalesPrice } & \text { Unit Variable Costs } & \text { Unit Sales } \\\hline \text { Prochuct A } & \$ 34.00 & \$ 20.00 & 35,000 \\\hline \text { Prochuct B } & 26.00 & 14.50 & 7,000 \\\hline \text { Prochuct C } & 18.00 & 10.50 & 14,000 \\\hline & & &\end{array}$ The sales mix for Products A, B, and C is

Field Legal Services is trying to determine the variable and fixed elements of its service overhead. The following data have been collected from recent activity: $\begin{array}{|l|l|l|}\hline & \text { Total Service Overliead } & \text { Cases Worked } \\\hline \text { March } & \$ 22,900 & 112 \\\hline \text { Apri1 } & 20,800 & 98 \\\hline \text { May } & 26,400 & 138 \\\hline & &\end{array}$ The formula for total service overhead costs is

If fixed costs are $180,000, variable costs are $38 per unit, and the product sells for $70, the breakeven point in sales dollars is $393,750.

Christian Company's sales revenue for 20xx was $144,000. Christian's product sells for $5.50 and has a 30 percent contribution margin. Christian has fixed costs of $33,000. -What is Christian Company's breakeven point in units?

How many total dollars of sales must BAC Company sell to break even if the selling price per unit is $8.50, variable costs are $4.00 per unit, and fixed costs are $9,000?

Suppose a company rents a building for $250,000 a year for the purpose of manufacturing between 80,000 and 140,000 units (the relevant range of activity) . The rental cost per unit of production will __________ as production levels increase.

Identify the following activities, for an automobile manufacturer as either :

Martin, Inc., has two products: a pocket metronome (unit sales price, $25; unit variable cost, $15) and a pocket tuner (unit sales price, $14; unit variable cost, $9). The company's sales mix of the pocket metronome to the pocket tuner is 4:1 and fixed costs are $32,850. a. Determine the weighted-average contribution margin. b. Calculate the weighted-average breakeven point. c. Compute the breakeven point for each product.

Lakeside has gathered the following data in order to calculate the weighted-average contribution margin: $\begin{array}{|l|l|l|l|}\hline & \text { Unit SalesPrice } & \text { Unit Variable Costs } & \text { Unit Sales } \\\hline \text { Product A } & \$ 150 & \$ 100 & 8,000 \\\hline \text { Product B } & 100 & 60 & 2,000 \\\hline & & &\end{array}$ Fixed costs are $480,000. - The weighted-average breakeven point is

Theoretical operating capacity is the level at which management expects to operate during a normal business environment.

The contribution margin equals total fixed costs at the breakeven point.

The weighted-average contribution margin is computed by multiplying each product's unit contribution margin by the sales mix percentage of each product.

The contribution margin income statement enables managers to view revenue and cost relationships on a per unit basis or as a percentage of sales.

Contribution margin is selling price minus unit fixed costs.

If targeted sales are 12,000 units, the sales price per unit is $70, fixed costs are $130,000, and variable costs are $40 per unit, then planned profit must be $230,000.

"Breakeven" is the point at which a company will begin to earn a profit.