If variable costs per unit increased because of an increase in hourly wage rates
ID: 2575421 • Letter: I
Question
If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would:
d. increase or decrease, depending upon the percentage increase in wage rates.
Zeke Company sells 25,000 units at $21 per unit. Variable costs are $10 per unit, and fixed costs are $75,000. The contribution margin ratio and the unit contribution margin are:
d. 47% and $8 per unit.
If sales are $500,000, variable costs are 75% of sales, and operating income is $40,000, what is the operating leverage?
d. 1.25
Which of the following describes the behavior of the fixed cost per unit?
d. Decreases with decreasing production
If variable costs per unit decreased because of a decrease in utility rates, the break-even point would:
d. remain the same.
Costs that vary in total in direct proportion to changes in an activity level are called:
d. sunk costs
Which of the following conditions would cause the break-even point to increase?
d. Unit selling price increases
In cost-volume-profit analysis, all costs are classified into the following two categories:
a. increase. b. remain the same. c. decrease.d. increase or decrease, depending upon the percentage increase in wage rates.
Zeke Company sells 25,000 units at $21 per unit. Variable costs are $10 per unit, and fixed costs are $75,000. The contribution margin ratio and the unit contribution margin are:
a. 53% and $7 per unit. b. 47% and $11 per unit. c. 52% and $11 per unit.d. 47% and $8 per unit.
If sales are $500,000, variable costs are 75% of sales, and operating income is $40,000, what is the operating leverage?
a. 0 b. 1.3 c. 3.1d. 1.25
Which of the following describes the behavior of the fixed cost per unit?
a. Increases with increasing production b. Remains constant with changes in production c. Decreases with increasing productiond. Decreases with decreasing production
If variable costs per unit decreased because of a decrease in utility rates, the break-even point would:
a. increase. b. increase or decrease, depending upon the percentage increase in utility rates. c. decrease.d. remain the same.
Costs that vary in total in direct proportion to changes in an activity level are called:
a. differential costs. b. fixed costs. c. variable costs.d. sunk costs
Which of the following conditions would cause the break-even point to increase?
a. Total fixed costs decrease b. Unit variable cost decreases c. Unit variable cost increasesd. Unit selling price increases
In cost-volume-profit analysis, all costs are classified into the following two categories:
a. discretionary costs and sunk costs b. variable costs and fixed costs c. mixed costs and variable costs d. sunk costs and fixed costsExplanation / Answer
Note:
There are more than 4 parts of this question. So as per rule I am answering first for 4 parts of the question.
(1). If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would:
Answer is option (a). Increase
Explanation;
When variable cost increase due to an increase in hourly wages rate then contribution margin will decrease because formula of contribution margin is as follow;
Contribution = (Sale – Variable cost)
And we know that Break-even point is calculated with the help of following formula;
Fixed cost / Contribution
So when contribution margin decreases then break even point will increase.
(2). Zeke Company sells 25,000 units at $21 per unit. Variable costs are $10 per unit, and fixed costs are $75,000. The contribution margin ratio and the unit contribution margin are:
Answer is option (c) 52% and $11 per unit
Explanation;
Contribution margin ratio = ($21 – $10) / $21 = 52.38% or 52%
Per unit contribution margin ($21 – $10) = $11
(3). If sales are $500,000, variable costs are 75% of sales, and operating income is $40,000, what is the operating leverage?
Answer is option (C) 3.1
Explanation;
Formula of operating leverage = Contribution / Operating income
Thus answer will be calculated as follow;
Contribution margin ($500000 * 25 / 100) = $125000
$125000 / $40000 = 3.1
(4). Which of the following describes the behavior of the fixed cost per unit?
Answer is option (C) Decreases with increasing production
Explanation;
As we know that fixed cost remain constant (fixed) with various level of production. So as production increases then per unit cost will decrease because with an increase in production total fixed cost does not increase.