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BUS 202

Exam 2 Study Guide

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
Created by: cammccarty
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