A cost with a flat cost line within a relevant range that shifts to another level when volume significantly changes is a(n):

Multiple Choice

• Step-wise cost.
• Fixed cost.
• Curvilinear cost.
• Incremental cost.
• Flat line cost.

Forrester Company is considering buying new equipment that would increase monthly fixed costs from $120,000 to $150,000 and would decrease the current variable costs of $70 by $10 per unit. The selling price of $100 is not expected to change. Forrester's current break-even sales are $400,000 and current break-even units are 4,000. If Forrester purchases this new equipment, the revised contribution margin ratio would be:

Multiple Choice

• 30%.
• 60%.
• 40%.
• 10%.
• 70%.

Henderson Co. has fixed costs of $36,000 and a contribution margin ratio of 24%. If expected sales are $200,000, what is the margin of safety as a percent of sales?

Multiple Choice

• 6%.
• 25%.
• 33%.
• 50%.
• 75%.

When graphing cost-volume-profit data on a CVP chart:

Multiple Choice

• Units are plotted on the horizontal axis; costs on the vertical axis.
• Units are plotted on the vertical axis; costs on the horizontal axis.
• Both units and costs are plotted on the horizontal axis.
• Both units and cost are plotted on the vertical axis.
• Data points always represent expected future points.

A product sells for $30 per unit and has variable costs of $18 per unit. The fixed costs are $720,000. If the variable costs per unit were to decrease to $15 per unit, fixed costs increase to $900,000, and the selling price does not change, break-even point in units would:

Multiple Choice

• Increase by 20,000.
• Equal 6,000.
• Increase by 6,000.
• Decrease by 20,000.
• Not change.

During its most recent fiscal year, Raphael Enterprises sold 200,000 electric screwdrivers at a price of $15 each. Fixed costs amounted to $400,000 and pretax income was $600,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?

Multiple Choice

• $2,400,000.
• $1,600,000.
• $3,000,000.
• $2,000,000.
• $1,000,000.

Target income refers to:

Multiple Choice

• Income at the break-even point.
• Income from the most recent period.
• Income planned for a future period.
• Income only in a multiproduct environment.
• Income at the minimum contribution margin.

Kent Co. manufactures a product that sells for $50.00 and has variable costs of $24.00 per unit. Fixed costs are $260,000. Kent can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. Compute the revised break-even point in units if the new machine is purchased.

Multiple Choice

• 10,438 units.
• 8,814 units.
• 10,000 units.
• 9,200 units.
• 9,869 units.

A firm sells two products, Regular and Ultra. For every unit of Regular sold, two units of Ultra are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow. The contribution margin per composite unit is:

Product	Unit Sales Price		Variable Cost Per Unit
Regular	$	20	$	8
Ultra		24		4

Multiple Choice

• $12.
• $20.
• $32.
• $44.
• $52.

A product sells for $200 per unit, and its variable costs per unit are $130. Total fixed costs are $420,000. If the firm wants to earn $35,000 pretax income, how many units must be sold?

Multiple Choice

• 6,500.
• 6,000.
• 500.
• 5,000.
• 5,500.

Use the following information to determine the break-even point in units (rounded to the nearest whole unit):

Unit sales	50,000 Units
Unit selling price	$	14.50
Unit variable cost	$	7.50
Fixed costs	$	186,000

Multiple Choice

• 12,828
• 26,571
• 8,455
• 46,667
• 24,800

Barclay Bikes manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's contribution margin ratio per composite unit (rounded to the nearest whole percentage).

Multiple Choice

• 35%
• 50%
• 53%
• 200%
• 40%

Use the following information to determine the margin of safety in dollars:

Unit sales	50,000 Units
Dollar sales	$	500,000
Fixed costs	$	204,000
Variable costs	$	187,500

Multiple Choice

• $88,500.
• $108,500.
• $173,600.
• $326,400.
• $500,000.

A cost that changes intotal in proportion to changes in volume of activity is a(n):

Multiple Choice

• Differential cost.
• Fixed cost.
• Incremental cost.
• Variable cost.
• Product cost.

The contribution margin ratio:

Multiple Choice

• Is the percent of each sales dollar that remains after deducting the total unit variable cost.
• Is the percent of each sales dollar that remains after deducting the total unit fixed cost.
• Is the percent of each sales dollar that remains to cover the variable and fixed costs.
• Cannot be used in conjunction with other analytical tools.
• Is the same as the unit contribution margin.

Forrester Company is considering buying new equipment that would increase monthly fixed costs from $120,000 to $150,000 and would decrease the current variable costs of $70 by $10 per unit. The selling price of $100 is not expected to change. Forrester's current break-even sales are $400,000 and current break-even units are 4,000. If Forrester purchases this new equipment, the revised break-even point in dollars would be:

Multiple Choice

• $300,000.
• $400,000.
• $325,000.
• $500,000.
• $375,000.

Which of the following costs are most likely to be classified as variable?

Multiple Choice

• Factory rent
• Manager salaries
• Insurance
• Direct materials
• Straight-line depreciation

The difference between sales price per unit and variable cost per unit is the:

Multiple Choice

• Gross profit from sales.
• Gross margin per unit.
• Fixed cost per unit.
• Margin of safety per unit.
• Contribution margin per unit.

Which of the following is the correct interpretation of a degree of operating leverage of 5?

Multiple Choice

• Operating leverage of 5 means that sales can decrease by 5% before the firm's current level of sales will hit the break-even point.
• Operating leverage of 5 means that if sales increase by 5% the firm will hit its break-even point.
• Operating leverage of 5 means that if sales increase by 5%, there will be a 25% increase in the firm's pretax profit.
• Operating leverage of 5 measures the degree of debt employed by the firm's debt structure.
• Operating leverage of 5 means that the company would need to increase sales by 5 times in order to hit its break-even point.

Mason Company manufactures and sells shoelaces for $2.00 per pair. Its variable cost per unit is $1.70. Mason's total fixed costs are $10,500. How many pairs must Mason sell to break even?

Multiple Choice

• 5,250.
• 6,176.
• 35,000.
• 52,500.
• 61,760.

If a firm's forecasted sales are $250,000 and its break-even sales are $190,000, the margin of safety in dollars is:

Multiple Choice

• $60,000.
• $250,000.
• $190,000.
• $440,000.
• $24,000.

A manufacturer reports the following information below for its first three years in operation.

	Year 1			Year 2			Year 3
Income under variable costing	$	76,000		$	109,000		$	115,000
Beginning inventory (units)		0			800			500
Ending inventory (units)		800			500			0
Fixed manufacturing overhead per unit	$	8.00		$	8.00		$	8.00

Income for year 1 using absorption costing is:

Multiple Choice

• $76,000.
• $82,400.
• $88,800.
• $106,600.
• $111,000.

The following information is available for a company's cost of sales over the last five months.

Month	Units sold		Cost of sales
January	400		$	31,000
February	800		$	37,000
March	1,600		$	49,000
April	2,400		$	61,000

Using the high-low method, the estimated total fixed cost is:

Multiple Choice

• $25,000.
• $30,000.
• $13,692.
• $100,000.
• $50,000.

A cost-volume-profit chart is also known as a(n)

Multiple Choice

• Operating profit chart.
• Operating leverage chart.
• Break-even chart.
• Margin of safety chart.
• Sales chart.

Barclay Bikes manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's break-even point in total sales dollars.

Multiple Choice

• $13,250,000.
• $13,000,000.
• $12,750,000.
• $12,900,050.