Question 1: (2 points)
If a product sells for $6, variable costs are $4 and fixed costs are $100,000 what would total
sales have to be in order to break-even?
$190,000.
$199,999.
$300,000.
$399,999.
Question 2: (2 points)
If unit sales are $14, variable costs are $7 per unit and fixed costs are $42,000, how many units
must be sold to earn $250,000?
34,762
29,796
52,142
41,715
Question 3: (2 points)
Russ Corporation manufactures a single product. The selling price is $80 per unit, and variable
costs amount to $64 per unit. The fixed costs are $16,000 per month.
Refer to the above information. What is the contribution margin ratio of Russ's product?
20%.
80%.
72%.
65%.
Question 4: (2 points)
A company's relevant range of production is:
The production range that covers fixed but not variable costs.
The production range over which CVP assumptions are valid.
The production range from zero to 100% of plant capacity.
The production range beyond the break-even point.
Question 5: (2 points)
Exercise 20.2: High-Low Method of Cost Analysis L.O. 1, 9
The following information is available regarding the total manufacturing overhead of Bursa
Mfg. Co. for a recent four-month period:
Machine-Hours
Jan.
Feb.
Mar.
Apr.
Manufacturing Overhead
5,500
3,200
4,900
2,800
$311,500
224,000
263,800
184,600
a. Use the high-low method to determine:
1. The variable element of manufacturing overhead costs per machine-hour.
2. The fixed element of monthly overhead cost.
b. Bursa expects machine-hours in May to equal 5,300. Use the cost relationships
determined in part a to forecast May's manufacturing overhead costs.
c. Suppose Bursa had used the cost relationships determined in part a to estimate the total
manufacturing overhead expected for the months of February and March. By what
amounts would Bursa have over- or underestimated these costs?
Ex. 20.2 a.
(1)
High point
Low point
Changes
Machine
Hours
5500
2800
Manufacturing
Overhead
$ 311500
184600
2700
$ 126900
Thus, the estimated variable element of Bursa Mfg. Co.’s manufacturing overhead
is $ 126900 per machine hour. [$ 2700 change in cost divided by 47 unit
change in the activity base (machine hours)].
(2) Total manufacturing overhead at
machine-hour
level
Variable element of manufacturing overhead at 5,500
machine-hour level (
machine hour)
machine hours x $
$
per
Fixed element of manufacturing overhead
$
b. Estimated manufacturing overhead at activity level of 5,300 machine hours:
Fixed element [a (2)]
Variable cost element ($
machine hours)
$
per machine hour x 5,300
Total estimated manufacturing overhead
$
c.
February
March
Estimated manufacturing overhead:
[February: $53,000 + ($
3,200 m.h.) March: $53,000 + ($
m.h. x 4,900 m.h.)]
Actual manufacturing overhead
Amount over (under) estimated
87.2%
per m.h. x
per
$
$
224,000
$(
)
263,800
$