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Cunningham Walters

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1. A company sells a product which has a unit sales price of $5, unit variable cost of $3 and total fixed costs of $180,000. The number of units the company must sell to break even is

360,000 units.
90,000 units.
60,000 units.
36,000 units.

2. Cunningham, Inc. sells MP3 players for $60 each. Variable costs are $40 per unit, and fixed costs total $90,000. What sales are needed by Cunningham to break even?

$270,000.
$120,000.
$360,000.
$225,000.

3. Cost behavior analysis is a study of how a firm's costs

respond to changes in the level of business activity.
respond to changes in the gross national product.
relate to general price level changes.
relate to competitors' costs.

4. Sales are $500,000 and variable costs are $350,000. What is the contribution margin ratio?

43%
30%
70%
Cannot be determined because amounts are not expressed per unit

5. If graphed, fixed costs that behave in a curvilinear fashion resemble a(n)

S-curve.
inverted S-curve.
straight line.
stair-step pattern.

6. Which of the following is not a plausible explanation of why variable costs often behave in a curvilinear fashion?

Availability of quantity discounts
Labor specialization
Overtime wages
Total variable costs are constant within the relevant range

7. If a company had a contribution margin of $750,000 and a contribution margin ratio of 40%, total variable costs must have been

$300,000.
$1,875,000.
$450,000.
$1,125,000.

8. The relevant range of activity refers to the

levels of activity over which the company expects to operate.
activity level where all costs are curvilinear.
geographical areas where the company plans to operate.
level of activity where all costs are constant.

9. Walters Corporation sells radios for $50 per unit. The fixed costs are $420,000 and the variable costs are 60% of the selling price. As a result of new automated equipment, it is anticipated that fixed costs will increase by $100,000 and variable costs will be 50% of the selling price. The new break-even point in units is:

16,800
20,800
20,600
21,000

10. Reliable Manufacturing wants to sell a sufficient quantity of products to earn a profit of $80,000. If the unit sales price is $10, unit variable cost is $8, and total fixed costs are $160,000, how many units must be sold to earn income of $80,000?

1,200,000 units
30,000 units
120,000 units
80,000 units

11. Hayduke Corporation reported the following results from the sale of 6,000 units in May: sales $300,000, variable costs $180,000, fixed costs $90,000, and net income $30,000. Assume that Hayduke increases the selling price by 10% on June 1. How many units will have to be sold in June to maintain the same level of net income?

5,160.
4,800.
5,400.
6,000.

12. How much sales are required to earn a target income of $160,000 if total fixed costs are $200,000 and the contribution margin ratio is 40%?

$600,000
$400,000
$900,000
$660,000

13. A mixed cost contains

both operating and nonoperating costs.
both retailing and manufacturing costs.
a variable element and a fixed element.
both selling and administrative costs.

14. Kaplan, Inc. produces flash drives for computers, which it sells for $20 each. The variable cost to make each flash drive is $13. During April, 700 drives were sold. Fixed costs for April were $2 per unit for a total of $1,400 for the month. How much is the monthly break-even level of sales in dollars for Kaplan?

$4,000
$200
$14,000
$8,400

15. A cost structure which relies more heavily on fixed costs makes the company
less sensitive to changes in sales revenue.
have a lower break-even point.
either more or less sensitive to changes in sales revenue, depending on other factors.
more sensitive to changes in sales revenue.


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