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Exam 5: Cost Behavior Cost-Volume-Profit Analysis

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Question 41

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Zola Co. has a contribution margin ratio of 40% and would like to determine whether an additional advertising expenditure of $4,000 would increase sales by $8,000. Calculate the increase or decrease in net income that would result from this change, and comment on whether Zola should purchase the additional advertising.

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Increase in sales…………………………… $8,000
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Question 42

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The unit contribution margin divided by the selling price per unit is the ________.

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Question 43

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Clockworks Co. reports the following data for the current year: Units Sold 1,200 Unit Sales Price $30 Unit Variable Cost $10 Total Fixed Cost $18,000 Required: (a) Calculate Clockworks' pretax income. (b) Calculate Clockworks' degree of operating leverage.

Isaacson Co. has total fixed costs of $240,000 and a contribution margin ratio of 40%. If rent expense increases by $5,000, how much will total sales revenue have to increase to cover this increase in costs?

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

Total contribution margin in dollars divided by pretax income is the:

To calculate the break-even point in units, one must know unit fixed cost, unit variable cost, and sales price.

Bing Company's contribution margin income statement is presented below. Sales for the current period consisted of 7,500 units. Compute the company's break-even point in (a) units, and (b) dollars. Compute the margin of safety in (c) dollars and (d) percent.

A ________ cost is one that includes both fixed and variable cost components; a ________ cost is one that reflects a step pattern.

A firm produces and sells a product with a contribution margin of $32 per unit. The firm is presently selling 90,000 units and earning $320,000 in pre-tax income. If the firm desires to increase its pre-tax income to $ 400,000, how many more units must it sell?

A cost that includes both fixed and variable cost components is called a:

The Goldfarb Company manufactures and sells toasters. Each toaster sells for $23.75 and the variable cost per unit is $16.25. Goldfarb's total fixed costs are $25,000, and budgeted sales are 8,000 units. What is the contribution margin per unit?

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

The contribution margin per unit expressed as a percentage of the product's selling price is the:

A cost that changes as volume changes, but at a nonconstant rate, is called a:

The difference between the unit sales price and the unit variable cost of an item is defined as the ________.

Total variable costs change in proportion to changes in volume of activity.

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

What are the unit contribution margin and the contribution margin ratio? What do these measures reveal about a company's cost structure?

Wolowitz Company's product has a contribution margin per unit of $62.50 and a contribution margin ratio of 25%. What is the per unit selling price of the product?