Problem 1: Which of the following actions will cause the breakeven point to increase?
a. Decrease variable costs.
b. Decrease selling price.
c. Decrease fixed costs.
d. Decrease safety margin.
Problem 2: The following monthly data are available for the W.K. Kent Company when it sold 20,000 units of Product A and 5,000 units of
Product B:
Product A Product B TOTAL
Sales $220,000 $80,000 $300,000
Variable expenses 120,000 64,000 154,000
Contribution margin $100,000 16,000 116,000
Fixed expenses 36,540
Net operating income $79,460
Problem 3: The breakeven sales for the month for the company are:
a. $17,125
b. $59,576
c. $94,500
d. $111,650
Problem 4: A "step cost" is a
a. fixed cost that is constant.
b. cost that is fixed within one range, then increases and is fixed at a higher amount in a higher range.
c. cost that is added to the income statement in steps over a number of different consecutive periods.
d. mixed cost.
Problem 5: The y-axis on a scatter plot developed for cost estimation typically shows the
a. fixed cost.
b. cost driver.
c. variable cost.
d. total cost.
Problem 6: The following table presents the correlations among operating costs and three possible cost drivers for Gilbert Company based on monthly data gathered over the last five years:
Operating Costs | Costumer Visits Days Open Average Temperature
Operating Costs 1.00
Customer Visits 0.65 1.00
Days Open 0.21 0.52 1.00
Average Temperature -0.73 -0.46 0.11 1.00
Which of the following statements is true concerning the correlations among these variables?
a. The highest correlation is between customer visits and operating costs.
b. The lowest correlation is between days open and average temperature.
c. Both statements are true: the highest correlation is between customer visits and operating costs and the lowest correlation is between days open and average temperature.
d. None of these answers are true.