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# BUS 202

### Exam 2 Study Guide

Question | Answer |
---|---|

A variable cost is a cost that | varies in total in proportion to changes in the level of activity |

A fixed cost is a cost which | Remains constant in total with changes in the level of activity |

Fixed cost normally will not include | Direct Labor |

The increased use of automation and less use of the work force in companies has caused a trend towards an increase in | fixed costs and a decrease in variable costs |

Cost behavior analysis applies to | All entities |

Konerko Co. sells 2 types of computer chips. the sales mix is 30% (qchip) & 70% (qchipplus) Qchip has variable costs p/unit of $30 and a selling price of $50. QchipPlus has VC of $35 and a SP $65. How many units of Qchip would be sold at the break even pt | 6,000 |

The sales mix %'s for Guillen's Chicago and Charlotte Divisions are 70% and 30%. The contribution margin ratios are: Chi (40%) & Charlotte (30%). Fixed costs are $555,000. What is Guillen's Break even point? | First find the BEP in units = FC/(price per unit-variable cost). second- price per unit X BEP units In this problem the answer is $1,500,000 |

If a firm increases its activity level, | some costs will change, others will remain the same |

A Co. can sell all the units it can produce of either A or B but not both. A has a unit contribution margin of $16 and takes 2 machine hours to make. B has a UCM of $30 ant takes 3 Machine hours to make. If there are 1,000 machine hours av. income will be | $2,000 less if Product A is made |

If the activity level increases 10%, total variable cost will | Increase 10% |

In using the high-low method, the fixed cost | may be determined by subtracting the total variable cost from either the total cost at the low or high activity |

the following information is for dasher airlines: month miles total cost Jan 80k 96k Feb 50k 80k March 70k 94k Apr 90k 130k In applying the high-low method, which months are relevant? what is the unit variable cost? | February and April 1.25 |

Hess, Inc. sells a product with a contribution margin of $12 per unit, fixed costs of $74,400, and sales for the current year of $100,000. How much is Hess's break-even point? | 6,200 units |

A company desires to sell a sufficient quantity of products to earn a profit of $180,000. If the unit sales price is $20, unit VC $12 & total fixed cost $360,000, how many units must be sold to earn net income of $180,000 | 67,500 Units |

Contribution margin | equals sales revenue- variable cost |

A company has contribution margin per unit of $45 and a contribution margin ratio of 40%. what is the unit selling price? | .40= 45/X .40X = 45 X= 112.50 |

Sales are $500,000 and variable costs are $350,000. What is the contribution margin? | 30% |

A company has total fixed cost of $120,000 and a contribution margin ratio of 20%. The total sales necessary to break even are | $600,000 |

the break even point is where | contribution margin equals total fixed costs |

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cammccarty