At a break-even point of 400 units sold, variable expenses were $4,000 and fixed expenses were $2,000. What will the 401st unit sold contribute to profit?

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A. $0.

D. $1

B. $5.

C. $10.

If selling price is increased from $10 to $12, variable cost is $6 and fixed cost is $20,000, what is the break-even sales in dollars?

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D) $35,000

B) $30,000

C) $25,000

A) $33,333

While using Variable Costing format of income statement, which of the following would not be included in product costs?

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D. Fixed manufacturing overhead.

B. Direct labour.

A. Direct materials.

C. Variable manufacturing overhead.

The linear equation Y = a + bX is often used to express cost formulas. In this equation:

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A. the "b" term represents fixed cost per unit of activity.

B. the "a" term represents variable cost in total.

C. the "X" term represents total fixed cost.

D. the "Y" term represents total cost.

If selling price is $10, variable cost is $6 and fixed cost is $20,000, what is the break-even sales in dollars?

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D) $50,000.

A) $18,000

B) $26,000

C) $54,000

Within the relevant range of activity, variable cost per unit will:

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C. vary inversely with the level of activity.

B. remain constant.

A. increase in proportion with the level of activity.

D. change in some other way.

Which of the following is an advantage of the high-low method?

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C. It eliminates most of the data points.

B. It is quick and easy to apply.

D. All data points are used in the analysis.

A. It enables the analysis to determine whether the data points are linear.

A product sells for $20 per unit and has a contribution margin ratio of 40%. Fixed expenses total $240,000 annually. How many units of the product must be sold to yield a profit of $60,000?

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B. 37,500 units.

D. 65,000 units

C. 40,000 units.

A. 30,000 units.

If Bathurst Company has fixed costs of $200,000, sales price of $50, and variable cost of $30 per unit. How many units must be sold to earn profit of $50,000?

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A) 2,500

C) 12,500

D) 15,200

B) 10,000

An activity base for a variable cost is also referred to as a "cost driver"

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False

True

The average selling price of a cup of coffee is $3.50 and the average variable expense per cup is $1.70. The average fixed expense per month is $2,295. What is the break-even sales in dollars?

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D) $7,000.

B) $4,500

C) $4,200

A) $8,000

The linear equation Y = a + bX is often used to express cost formulas. In this equation:

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B. the "a" term represents fixed cost in total.

A. the "b" term represents fixed cost per unit of activity.

D. the "Y" term represents total fixed cost.

C. the "X" term represents total cost.

An example of a discretionary fixed cost is:

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C. management development programs.

B. taxes on real estate.

A. insurance.

D. depreciation of buildings and equipment.

Kern Company prepared the following tentative budget for next year:

Sales $500,000

Selling price $5 per unit

Variable expenses $300,000

Fixed expenses $150,000

The sales manager argues that the unit selling price could be increased by 20%, with an expected volume decrease of only 10%. If Kern incorporates these changes in its budget, what should be the budgeted net income?

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B. $90,000.

C. $120,000.

A. $66,000.

D. $145,000.

A company has provided the following data:

Sales 3,000 units

Sales price $70 per unit

Variable cost $50 per unit

Fixed cost $25,000

If the sales volume decreases by 25%, the variable cost per unit increases by 15%, and all other factors remain the same, net income will:

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D. decrease by $3,125.

B. decrease by $15,000.

A. decrease by $31,875.

C. increase by $20,625.

Lindsay Company reported the following results from sales of 5,000 units for the month of June:

Sales $200,000

Variable expenses 120,000

Fixed expenses 60,000

Assume that Lindsay increases the selling price of the product by 10% on July 1.

How many units would have to be sold in July in order to generate a profit of $20,000?

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A. 4,000 units.

B. 4,300 units.

C. 4,500 units.

D. 5,000 units

The linear equation Y = a + bX is often used to express cost formulas. In this equation:

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C. the "X" term represents total cost.

B. the "a" term represents variable cost in total.

D. the "Y" term represents total fixed cost.

A. the "b" term represents variable cost per unit of activity.

CVP Analysis is an important decision making tool for which reason?

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Option 5

A) Determining product mix

B) Setting selling price

D) All of the above

C) Maximizing use of facilities

The contribution margin approach to the income statement:

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D. can be used only by manufacturing companies

B. is useful to managers in planning and decision making.

A. organizes costs on a functional basis.

C. shows a contribution margin rather than a net income figure at the bottom of the statement.

Indirect costs, such as manufacturing overhead, are always fixed costs.

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False

True

For a cost to be variable it must vary with either units produced, or units sold.

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Choose

McGordon Corporation has provided the following data:

Sales $800,000

Variable expenses 560,000

Fixed expenses 168,000

The break-even point in sales dollars is:

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C. $560,000.

A. $240,000.

B. $408,000.

D. $728,000.

At a break-even point of 800 units sold, White Company's variable expenses are $8,000 and its fixed expenses are $4,000. What will the Company's net income be at a volume of 801 units?

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B) $10

A) $5.

D) $20

C) $15

Expense A is a fixed cost; expense B is a variable cost. During the current year the activity level has increased but is still within the relevant range. In terms of cost per unit of activity, we would expect that:

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D. expense B has increased.

C. expense A has decreased.

B. expense B has decreased.

A. expense A has remained unchanged.

Gasson Company is a merchandising firm. Next month the company expects to sell 800 units. The following data describe the company's revenue and cost structure:

Selling price per unit $40

Sales commission 5%

Purchase price (cost) per unit $18

Advertising expense $4,000 per month

Administrative expense $4,500 per month plus 15% of sales

Assume that all activity mentioned in this problem is within the relevant range.

The expected net income next month is?

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A. $2,700.

D. $11,200.

B. $5,100.

C. $7,500.