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Exam 23: Cost Behavior Analysis

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Question 21

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Any cost can be classified as either a variable cost or a fixed cost.

A) True
B) False

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Question 22

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Contribution margin is selling price minus unit fixed costs.

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B) False

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Question 23

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The graphical approach to cost-volume-profit analysis generally yields more precise results than using a formula.

The typical relationship between variable costs and volume may be described best as follows:

An insurance company pays its employees a commission of 6 percent on each sale. What is the proper classification of the cost of sales commissions?

Breakeven analysis adjusted for a profit factor

Using the high-low method and the information below, compute the monthly total fixed costs for SKP Corporation. $\begin{array}{|l|c|r|}\hline \text { Month } & \begin{array}{c}\text { Telephone } \\\text { Hours Used }\end{array} & \begin{array}{c}\text { Telephone } \\\text { Expenses }\end{array} \\\hline \text { April } & 100 & \$ 4,500 \\\text { May } & 110 & 4,800 \\\text { June } & 150 & 5,400 \\\hline\end{array}$

Which of the following would not require the use of cost behavior analysis?

Plunda Co. is planning production for the coming year. The information to be used is based on a projection of cost information for the current year. Projections of the following costs are as follows: Plunda Co. sells its product for $90.00 per unit. Compute the following, showing your calculations: a. The breakeven point in sales units b. The breakeven point in sales dollars c. The sales level in both sales units and dollars if a profit of $122,400 is projected

The objective of breakeven analysis is to find the level of activity at which sales revenue equals the sum of all variable and fixed costs.

Contribution Margin Income Statement is prepared to present for external users of financial information.

The point at which the total cost line intersects with the total revenue line provides information on the number of units that must be sold to break even.

A retail manager is preparing a budget for the coming year and is considering the various costs of the retail store. What is the best approach for the manager to take when budgeting for the cost of the store's merchandise?

Which of the following is a fixed cost?

Which of the following is not an assumption underlying cost-volume-profit analysis?

Straight-line depreciation on the controller's computer is an example of a variable cost.

Operating income is determined by deducting all fixed costs related to production, selling, and administration from contribution margin.

Total costs that change in direct proportion to changes in productive output, or any other volume measure, are called variable costs.

If a company wants to know how many units of a certain product it must sell to make a desired level of profit, it should add the amount of profit to the numerator in the breakeven analysis.

Contribution margin equals sales minus