COST-VOLUME PROFIT ANALYSIS

1. SUN Company has the following data:

Variable costs are 70% of the unit selling price.

The contribution margin ratio is 30%.

The contribution margin per unit is $500.

The fixed costs are $500,000.

Which of the following does not express the break-even point?

O $500,000 $500 = X

O $500,000 0.30 = X

O $500,000 + 0.70X = X

O $500.000 + 0.30X = X

2) Which of the following is not an underlying assumption of CVP analysis?

O There are no changes in inventory levels

O Cost classifications are reasonably accurate.

O Sales mix is constant.

O Changes in activity are the only factors that affect costs.

3) ABC Company provided the information below from its accounting records for 2009:

Expected production 30 000 labor hours

Actual production 28 000 labor hours

Budgeted overhead $1 500 000

Actual overhead $1 450 000

How much is the overhead application rate if ABC Company bases it on direct labor hours?

O $46.67 per hour

O $48.33 per hour

O $50 per hour

O $51.79 per hour

4. For an activity base to be useful in explaining cost behavior,

O the activity should always be stated in dollars

O there should be a correlation between changes in the level of activity and changes in costs.

O the activity be related to direct labor or machine hours.

O the activity level should be constant over a period of time