A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.
Total fixed costs change as the level of activity changes.
Variable costs are costs that remain constant on a per-unit basis as the level of activity changes.
Direct materials and direct labor costs are examples of variable costs of production.
For purposes of analysis, mixed costs can generally be separated into their variable and fixed components.
If fixed costs are $850,000 and the unit contribution margin is $50, profit is zero when 15,000 units are sold.
If direct materials cost per unit increases, the break-even point will increase.
If a business sells two products, it is not possible to estimate the break-even point.
Cost behavior refers to the manner in which:
a cost changes as the related activity changes
a cost is allocated to products
a cost is used in setting selling prices
a cost is estimated
Which of the following is NOT an example of a cost that varies in total as the number of units produced changes?
Electricity per KWH to operate factory equipment
Direct materials cost
Insurance premiums on factory building
Wages of assembly worker
A cost that has characteristics of both a variable cost and a fixed cost is called a:
Given the following cost and activity observations for Wondrous Company’s utilities, use the high-low method to calculate Wondrous’ variable utilities costs per machine hour.
As production increases, what would you expect to happen to fixed cost per unit?
Remain the same
Either increase or decrease, depending on the variable costs
Contribution margin is:
the excess of sales revenue over variable cost
another term for volume in the "cost-volume-profit" analysis
the same as sales revenue
If sales are $820,000, variable costs are 62% of sales, and operating income is $260,000, what is the contribution margin ratio?
Variable costs as a percentage of sales for Leamon Inc. are 75%, current sales are $600,000, and fixed costs are $110,000. How much will operating income change if sales increase by $40,000?
If sales are $820,000, variable costs are $524,800, and operating income is $260,000, what is the contribution margin ratio?
If fixed costs are $39,600, the unit selling price is $42, and the variable costs are $24, what is the break-even sales (units)?
Shipley Co. sells two products, Orks and Zins. Last year Shipley sold 14,000 units of Orks and 21,000 units of Zins. Related data are:
What was Shipley’s Co.’s overall unit contribution margin?
If sales are $400,000, variable costs are 75% of sales, and operating income is $50,000, what is the operating leverage?