4 Conceptual questions for Chapter 5: 1. You have a mixture of fixed and variable costs. What role do these costs play in decision making, in terms of remaining constant in total or on a per unit basis? 2. How does the contribution margin ratio relate to a $1 increase in sales, holding all other variables constant? 3. What does the contribution margin per unit tell you about a increase in sales by 1 unit? a decrease in sales by 1 unit? If you increase your fixed costs, how would this affect your breakeven units, increase, decrease or stay the same? 5. If you increase your sales price by 10% per unit and your variable costs by 10% per unit, what impact would this have on your breakeven units, increase, decrease or stay the same? 6. To consider a special order that priced less than the regular selling price what is the minimum price? 7. You have an increase in sales by 100 because you increased your fixed costs by $1,000. What is the minimum unit contribution margin that you would want as a result? 8. Firm A has a higher DOL than another Firm B. which one is more risky in terms of cost structure? 9. For a sales mix where two products share the same fixed costs and Product 1 has a higher proportion of sales as compared to Product 2. Which product will have a higher breakeven sales dollar amount? 10. Mossfeet Shoe Corporation is a single product firm. The company is predicting that a price increase next year will not cause unit sales to decrease. What effect would this price increase have on the following items for next year? 11. What impact will an increase in selling price by $2 per unit due to an increase in its variable labor cost of $2 per unit have on break-even point in units?: Conceptual questions for Chapter 6: 1. A firm is preparing its variable costing and absorption costing income statements. It makes one product only. It sold more units of this product than it produced. Which NOI will be higher and why? 2. A firm has $25 of FMOH per unit. It produces 20,000 units and sells 17,500. What is the dollar difference between absorption costing and variable costing NOI? 3. What costs are part of the product costs for reporting costs of sales and inventory for absorption costing? For variable costing? 4. A firm has absorption costing NOI of $(45,000) with sales of $800,000 and breakeven occurs when sales are $600,000. Is the firm adding or releasing units from its inventory? How do you know this? 5. Which method is used for income tax purposes, absorption or variable costing? 6. What would you expect the different in NOI to be between absorption and variable costing when a firm uses a just in time inventory system? 6. A firm has two segments and a total contribution margin of $250,000. Segment A has sales of $300,000 and a contribution margin ratio of 60%. Segment B's contribution margin ratio is 25%. What is the amount of sales for segment B? 7. What costs are included in the breakeven calculation for a segment? For the entire company with multiple segments? 4 Conceptual questions for Chapter 5: 1. You have a mixture of fixed and variable costs. What role do these costs play in decision making, in terms of remaining constant in total or on a per unit basis? 2. How does the contribution margin ratio relate to a $1 increase in sales, holding all other variables constant? 3. What does the contribution margin per unit tell you about a increase in sales by 1 unit? a decrease in sales by 1 unit? If you increase your fixed costs, how would this affect your breakeven units, increase, decrease or stay the same? 5. If you increase your sales price by 10% per unit and your variable costs by 10% per unit, what impact would this have on your breakeven units, increase, decrease or stay the same? 6. To consider a special order that priced less than the regular selling price what is the minimum price? 7. You have an increase in sales by 100 because you increased your fixed costs by $1,000. What is the minimum unit contribution margin that you would want as a result? 8. Firm A has a higher DOL than another Firm B. which one is more risky in terms of cost structure? 9. For a sales mix where two products share the same fixed costs and Product 1 has a higher proportion of sales as compared to Product 2. Which product will have a higher breakeven sales dollar amount? 10. Mossfeet Shoe Corporation is a single product firm. The company is predicting that a price increase next year will not cause unit sales to decrease. What effect would this price increase have on the following items for next year? 11. What impact will an increase in selling price by $2 per unit due to an increase in its variable labor cost of $2 per unit have on break-even point in units?: Conceptual questions for Chapter 6: 1. A firm is preparing its variable costing and absorption costing income statements. It makes one product only. It sold more units of this product than it produced. Which NOI will be higher and why? 2. A firm has $25 of FMOH per unit. It produces 20,000 units and sells 17,500. What is the dollar difference between absorption costing and variable costing NOI? 3. What costs are part of the product costs for reporting costs of sales and inventory for absorption costing? For variable costing? 4. A firm has absorption costing NOI of $(45,000) with sales of $800,000 and breakeven occurs when sales are $600,000. Is the firm adding or releasing units from its inventory? How do you know this? 5. Which method is used for income tax purposes, absorption or variable costing? 6. What would you expect the different in NOI to be between absorption and variable costing when a firm uses a just in time inventory system? 6. A firm has two segments and a total contribution margin of $250,000. Segment A has sales of $300,000 and a contribution margin ratio of 60%. Segment B's contribution margin ratio is 25%. What is the amount of sales for segment B? 7. What costs are included in the breakeven calculation for a segment? For the entire company with multiple segments