21. As production increases, what should you expect to happen to the fixed costs per unit?
A) Increase
**B) Decrease**
C) Remain the same
D) Either increase or decrease, depending on the variable cost
22. Given the following cost and activity observations for Leno Enterprises' utilities, use the high-low method to calculate Leno's variable utilities cost per machine hour.
Cost Machine Hours
September $4,100 22,000
October 3,700 18,000
November 3,900 19,000
December 4,500 28,000
**A) $0.08
**
B) $4.86
C) $0.25
D) $12.50
23. You have calculated, using the high-low method, a variable cost per machine hour of $0.80 for your production power costs. Power costs at 6,000 machine hours are $5,400; at 9,000 machine hours, they are $7,800. What are the total fixed costs that you would use to estimate production power costs for your company at any level within your relevant range?
**A) $600
**
B) $6,400
C) $2,400
D) $4,800
24. Given the following cost and activity observations for Notwen Company's maintenance costs, use the high-low method to calculate Notwen's monthly fixed costs for maintenance.
Cost Units Produced
January $130,000 25,000
February 180,500 35,000
March 151,100 28,000
A) $11,250
B) $4,550
**C) $3,750
**
D) $2,650
25. Dapper Hat Makers is in the business of designing and producing specialty hats. The material used for derbies costs $4.50 per unit, and Dapper pays each of its two full-time employees $250 per week. If the employees make 50 derbies in one week, what is the fixed cost per derby? (Round to two decimal places where necessary.)
A) $4.50
**B) $5.00
**
C) $10.00
D) $14.50
26. Which of the following is a fixed cost?
A) Direct materials
**B) Personnel manager's salary
**
C) Operating supplies
D) Telephone expense
E) Direct labor
27. Retleb Manufacturing Company noticed that, during its busiest month of 20xx, maintenance costs totaled $15,400, resulting from the production of 32,000 units. During its slowest month, $12,600 in maintenance costs were incurred, resulting from the production of 24,000 units. Using the high-low method, what maintenance cost would the company expect to incur at a volume of 20,000 units?
A) $7,000
**B) $11,200
**
C) $8,400
D) $2,800
28. During this past year, a small publishing company sold 60,000 copies of Super Travel paperbacks (its only product) at $5 per book; total fixed costs were $21,000; and total variable costs were $3 per book. What is this company's breakeven point in units?
A) 14,700 units
**B) 10,500 units
**
C) 42,000 units
D) 21,000 units
29. How many total dollars of sales must BAC Company sell to break even if the selling price per unit is $8.50, variable costs are $4.00 per unit, and fixed costs are $9,000?
A) $4,000
B) $8,500
C) $9,000
**D) $17,000
**
E) $20,000
30. How many units must BAC Company sell to break even if the selling price per unit is $8.50, variable costs are $4.00 per unit, and fixed costs are $9,000?
A) 1,000
B) 1,059
**C) 2,000
**
D) 2,250
31. Field Legal Services is trying to determine the variable and fixed elements of its service overhead. The following data have been collected from recent activity:
Total Service Overhead Cases Worked
March $22,900 112
April 20,800 98
May 26,400 138
The formula for total service overhead costs is
A) $5,600 + $140 per case.
B) $5,600 + $40 per case.
C) $7,823 + $134.62 per case.
**D) $7,080 + $140 per case.
**
32. Dilly LLC, wants to make a profit of $30,000. It has variable costs of $85 per unit and fixed costs of $20,000. How much must it charge per unit if 5,000 units are sold?
A) $70
B) $55
C) $85
**D) $95
**
E) $100
33. Walton's Warehouse reported sales of $640,000, a contribution margin of $8 per unit, fixed costs of $314,000, and a profit of $70,000. How many units did Walton's Warehouse sell?
A) 8,750 units
B) 28,375 units
**C) 48,000 units
**
D) 67,625 units
34. For every unit that a company produces and sells above the breakeven point, its profitability is improved (ignoring taxes) by the unit's
A) gross margin.
B) selling price minus fixed cost.
C) variable cost.
**D) contribution margin.
**
35. Excerpts from a cost-volume-profit analysis indicate fixed costs of $50,000, a contribution margin per unit of $35, a selling price of $90, and a sales level of 4,000 units. What must be the targeted level of profit?
A) $80,000
B) $105,000
C) $140,000
**D) $90,000
**
36. Dick Sports, Inc.'s, income statement data for last year is as follows:
Sales revenue $200,000
Variable costs 140,000
Fixed costs 30,000
Operating income 18,000
What is Dick's breakeven point in dollars?
**A) $100,000
**
B) $18,000
C) $142,000
D) $48,000
Use the following to answer questions 37-38:
SHARE is trying to determine how many clients must be serviced in order to cover its monthly service overhead. Using the high-low method, it has determined that the variable cost per client is $800 and that the monthly fixed overhead is $28,000.
37. Assuming an average fee of $1,200 per client, the breakeven point per month is
A) 35 clients.
B) 80 clients.
**C) 70 clients.
**
D) 55 clients.
38. Assuming an average fee of $1,400 per client and a targeted profit of $26,000, the number of clients to be serviced is
A) 80 clients.
B) 120 clients.
C) 47 clients.
**D) 90 clients.
**
39. Excerpts from a cost-volume-profit analysis indicate fixed costs of $30,000, a variable cost per unit of $36, a selling price of $60, and a sales level of $125,000. The targeted level of profit must be
**A) $20,000.
**
B) $50,000.
C) $95,000.
D) $75,000.
40. If fixed costs are $80,000, the contribution margin is $25 per unit, and the targeted profit is $30,000, then the required unit sales are
**A) 4,400 units.
**
B) 2,000 units.
C) 4,500 units.
D) 2,500 units |