Question

15. When using the regression method of cost estimation: all actual data points must all fall on the line produced by the regression the line is mathematically fit to the data points and a goodness of fit measure is produced total fixed costs will always be the same as those produced by the high low method no analysis of historical data is necessary 16. Holding all other factors constant, a decrease in the unit variable cost will: a. increase the contribution margin b. decrease the breakeven point in units and dollars C. increase the breakeven point in units and dollars both a. and b. above 17. Last year Dunn Co. had revenue of $100.000 and fixed costs of $180,000, Variable costs were 60% of sales, Breakeven sales for the restaurant was: $300,000 $450,000 $280,000 $160,000 18. Zip Company sells only one product. The unit sales price for the product is $50 and unit variable costs are $20. The firm is currently operating at a level that is 100 units past the breakeven point. At this level, total profit will be: a. $5,000 b. $2,000 C. $1,000 d. $3,000

Answer 1

15. Option B

the line is mathematically fit to the data points and a goodness of fit measure is produced.

16. Option D ( both a and b above)

Holding all other factors constant, a decrease in unit variable cost will

• Increases the contribution margin
• decrease the break even point in units and dollars.

17. Option B ($450,000)

Sales revenue = $100,000

Less:- Variable costs = $60,000 (100,000 * 60%)

Contribution margin = $40,000

Contribution margin percentage = Contribution margin / Sales = $40,000 / $100,000 = 40%

Break even sales = Fixed costs / Contribution margin percentage

= 180,000 / 40% = $450,000

18. Option D ( $3000)

Sales revenue = $5000 ($50 * 100)

Less:- Variable costs = $2000 ($20 * 100)

Profit = $3000