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2007FL ACCT 2302 EXAM III Review w ans

2007FL ACCT 2302 EXAM III Review w ans - ACCT 2302 2007FL...

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ACCT 2302 2007FL EXAM III REVIEW SHEET CHAPTER 5: I. Graphly Company has prepared the following cost-volume-profit graph: Instructions For the items listed below, enter to the left of the item, the letter in the graph which best corresponds to the item. ____ 1. Profit ____ 6. Break-even point ____ 2. Revenues ____ 7. Dollars ____ 3. Total costs ____ 8. Fixed costs ____ 4. Variable costs ____ 9. Loss ____ 5. Activity base Solution 1. B Profit 6. A Break-even point 2. I Revenues 7. E Dollars 3. H Total costs 8. C Fixed costs 4. F Variable costs 9. G Loss 5. D Activity base II. Jagswear, Inc. earned net income of $100,000 during 2006. The company wants to earn net income of $140,000 during 2007. The company's fixed costs are expected to be $56,000, and variable costs are expected to be 30% of sales. Instructions A. Determine the required sales to meet the target net income during 2007. B. Fill in the dollar amounts for the summary income statement for 2007 below based on your answer to part A. Sales revenue $ Variable costs Contribution margin Fixed costs Net income $ Solution A. 70% x − 56,000 = 140,000 Required sales = $280,000 B. Sales revenue $280,000 Variable costs 84,000 Contribution margin 196,000 Fixed costs 56,000 Net income $140,000 I B H D G E A F C
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III. COMPLETION STATEMENTS 1.Knowledge of cost behavior is important in ______________________ analysis. 2.A _________________ cost remains constant per unit at every level of activity. 3.Unit fixed costs __________________ with the changes in the level of activity. 4.Total fixed costs are _____________ over various levels of activities, whereas total variable cost __________________ directly and ________________ with changes in the activity level. 5.An assumption of CVP analysis is that variable and fixed costs have a______________ relationship with an activity base. 6.The range over which a company expects to operate is the ____________ range. 7.A cost that has both variable and fixed cost elements is a ______________ cost. 8.The amount of revenue remaining after deducting total variable costs is called the __________________. 9.The _______________ point is when total revenues equals total costs. 10.________ divided by the contribution margin ratio will give the amount of ___________ to break even. 11.The difference between actual or expected sales and break-even sales is called the _________________. 12. A _______________ income statement classifies costs and expenses as variable or fixed and reports contribution margin. Answers to Completion Statements 1. cost-volume-profit (CVP) 2. variable 3. vary inversely 4. constant, vary, proportionately 5. linear 6. relevant 7. mixed 8. contribution margin 9. break-even 10. Fixed costs, sales in dollars 11. margin of safety 12. CVP IV. Tractor Power, Inc. estimates that variable costs will be 55% of sales and fixed costs will total $297,000. The selling price of each gear is $120, and 5,600 units will be sold.
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