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Q:
Contribution margin ratio is calculated as the ________________ divided by _____________.
Q:
__________________ is the amount by which the unit selling price of a product exceeds its per unit variable cost.
Q:
There are at least three different methods to estimate costs. These methods are the _______________, _______________, and _______________methods.
Q:
Solving problems to determine the relationship of cost, volume, and profit often commences with the measurement of the _____________ point. Further analysis emphasizing profitability may be accomplished by measuring the _______________ and _________________.
Q:
A __________ cost is one that includes both fixed and variable cost components; a ______________ cost is one that reflects a step pattern.
Q:
A_______________ cost is one that remains unchanged in amount when volume of activity varies from period to period within a relevant range. A ______________ cost is one that changes in proportion to changes in volume of activity.
Q:
Month
Units Produced
Total Cost January
8,750
$ 40,500 February
750
$ 41,500 March
12,500
$ 45,000 April
17,500
$ 41,500 May
23,750
$ 45,500 June
11,500
$38,500 a. Using the high-low method, calculate the variable cost per unit and the estimated fixed costs.
b. Using the resulting relationship, predict the costs if they produce 18,500 units in a future period.
Q:
Gabel Industries has collected the following data in order to analyze the behavior of their costs:
Q:
Beard Enterprises has collected the following data in order to analyze the behavior of their costs: Month
Units Produced
Total Cost January
17,500
$ 20,500 February
27,500
$ 21,500 March
25,000
$ 25,000 April
35,000
$ 21,500 May
47,500
$ 25,500 June
22,500
$18,500 a. Using the high-low method, calculate the variable cost per unit and the estimated fixed costs.
b. Using the resulting relationship, predict the costs if they produce 28,000 units in a future period.
Q:
Hald Co. produces and sells Ultra, Super, and Mega and has total fixed costs of $52,000. Sales and cost data follow: Ultra
Super
Mega Sales price per unit
$6
$8
$10 Variable costs per unit
4
6
7 Sales mix
3
2
1 Calculate the break-even point in composite units.
Q:
Joseph Co. has three products A, B, and C, and its fixed costs are $69,000. The sales mix for its products are 3 units of A, 4 units of B, and 1 unit of C. Information about the three products follows: A B C Projected sales in dollars
$192,000 $192,000 $64,000 Selling price per unit
$40 $30 $40 Contribution margin ratio
30% 35% 35% a. Calculate the company's break-even point in composite units and sales dollars.
b. Calculate the number of units of each individual product to be sold at the break-even point.
Q:
A firm sells two different products, A and B. For each unit of B, the firm sells two units of A. Total fixed costs for this firm are $1,260,000. Additional selling prices and cost information for both products follow: Selling
Variable Product
Price per Unit
Costs per Unit A
$72
$40 B
48
28 Required:
a. Calculate the contribution margin per composite unit.
b. Calculate the break-even point in units of each individual product.
c. If pretax income before taxes of $294,000 is desired, how many units of A and B must be sold?
Q:
Identify items (a), (b), and (c) in the cost-volume-profit chart shown below.
Q:
The following information describes a product expected to be produced and sold by Hadley Company: Selling price
$80 per unit Variable costs
$32 per unit Total fixed costs
$630,000 Required:
a. Calculate the contribution margin ratio.
b. Calculate the break-even point in dollar sales.
c. What dollar amount of sales would be necessary to achieve a pretax income of $120,000?
Q:
Wilson Co. is preparing next period's forecasts. Total fixed costs are expected to be $300,000 and the contribution margin ratio is expected to be 30%. The applicable income tax rate is 25%.
a. Calculate the company's break-even point in dollar sales.
b. If sales are $1,800,000 above the break-even point, what will income be pretax income and after-tax income?
Q:
A firm provides the following sales data: Expected unit sales
5,000
Unit variable cost
$10 Unit selling price
$16
Total fixed cost
$12,000 Required:
a. Calculate the break-even point in dollar sales.
b. Calculate the margin of safety in dollar sales.
Q:
A product has a contribution margin per unit of $17 and sells at $25 per unit. If the break-even point is 82,000 units, calculate (a) the variable costs per unit and (b) the total fixed costs.
Q:
A company manufactures a product and sells it for $120 per unit. The total fixed costs of manufacturing and selling the product are expected to be $155,250, and the variable costs are expected to be $75 per unit. What is the company's break-even point in (a) units and (b) dollar sales?
Q:
Narrows Co. is considering the production and sale of a new product line with the following sales and cost data: unit sales price $125; unit variable costs $75; and total fixed costs of $140,000. Calculate the break-even point:
a. In units.
b. In dollar sales.
Q:
Macleod Company's product has a contribution margin per unit of $62.50 and a contribution margin ratio of 25%. What is the per unit selling price of the product?
Q:
A company sells a single product that has a contribution margin ratio of 24%. If the company's total fixed costs are $84,000, what is the break-even point in dollar sales?
Q:
A company has total fixed costs of $360,000. Its product sells for $40 per unit and variable costs amount to $25 per unit. What is the break-even point in dollar sales?
Q:
A company manufactures and sells spotlights. Each spotlight sells for $145. The variable cost per unit is $98, and the company's total fixed costs are $235,000. Predicted sales are 15,000 units. What is the contribution margin per unit?
Q:
The following information describes a product expected to be produced and sold by Pepin Corporation: Selling price
$32 per unit Variable costs
$27 per unit Total fixed costs
$850,000per year Required:
a. Calculate the contribution margin per unit.
b. Calculate the break-even point in units.
Q:
Outback Products reports the following information: Total contribution margin
$32,000 Total fixed costs
$28,000 Required:
a. Calculate Outback Products degree of operating leverage (DOL).
b. Outback Products forecasts a 6% increase in sales. What is the expected effect in percent on pretax income?
Q:
Duxbury Co. reports the following data for the current year: Units sold
1,200 Unit sales price
$30 Unit variable cost
$10 Total fixed cost
$18,000 Required:
a. Calculate the break-even point in units.
b. Calculate Duxbury's pretax income.
c. Calculate Duxbury's degree of operating leverage.
d.) Calculate the margin of safety in units.
Q:
A company is looking into two alternative methods of producing its product. The following information about the two alternatives is available: Alternative #1
Alternative #2 Variable costs per unit
$8
$12 Fixed costs
$240,000
$140,000 Selling price per unit
$20
$20 If the company's expected sales volume is 35,000 units, which alternative should be selected?
Q:
A firm produces and sells a product with a contribution margin of $32 per unit. The firm is presently selling 90,000 units and earning $240,000 in after-tax income. Taxes are $80,000 at a 25% tax rate. If the firm desires to increase its after-tax income to $300,000, how many more units must it sell?
Q:
The following data relate to a product sold by Nelson Company: Total variable costs
$90,000 Total fixed costs
27,000 Predicted after-tax income (30% tax)
12,600 Contribution margin per unit
5 (a) Calculate the number of units expected to be sold.
(b) Calculate the expected total dollar sales.
Q:
Thomas Company has total fixed costs of $360,000 and variable costs of $14 per unit. If the unit sales price is reduced from $24 to $20 and advertising is increased by $10,000, sales will increase from 40,000 to 65,000 units. Should Thomas reduce its per unit sales price and pay for the additional advertising? (Support your answer with calculations.)
Q:
Abrams Co. has total fixed costs of $240,000 and a contribution margin ratio of 40%. If rent expense increases by $5,000, how much will sales have to increase to cover this increase in costs?
Q:
Herriot Co. has total fixed costs of $180,000 and a contribution margin ratio of 40%. Assume that an additional advertising expenditure of $4,000 would increase sales by $8,000. Should the company spend this additional amount on advertising? (Support your answer with calculations.)
Q:
Boston Co. is considering the production and sale of a new product with the following sales and cost data: unit sales price, $300; unit variable costs, $180; total fixed costs, $270,000; and projected sales, $900,000. What is the margin of safety:
a. In dollar sales?
b. As a percentage of sales?
Q:
Benny and Frieda are art students who often received compliments on the t-shirts they designed and made themselves. In need of funds for fall semester, they decide to sell these t-shirts at a small stand at the South Haven Beach during the summer. Rent on the beach stand is $1,600 per month. Variable costs per t-shirt are $4.75.
a. Complete the following table which estimates total costs and cost per t-shirt at the indicated levels of activity for this t-shirt stand. Round the costs per t-shirt to two decimal places. Number of t-shirts sold in one month 1,000 1,500 2,000 Total fixed cost Total variable cost Total cost Cost per t-shirt sold b. Benny and Frieda need to each earn $5,000 before the fall term starts. They plan to sell the t-shirts for $15. Will they be able to meet their goal? Support your comments with computations. What other factors might affect this business venture?
Q:
Legacy Company is considering the production and sale of a new product with the following sales and cost data: unit sales price $18; unit variable costs $8.10; and total fixed costs of $8,250. Legacy is subject to a 25% tax rate. Determine the dollar sales needed to generate an after-tax income of $33,000.
Q:
Hess Co. manufactures a product that sells for $12 per unit. Total fixed costs are $96,000 and variable costs are $7 per unit. Hess can buy a newer production machine that will increase total fixed costs by $22,800 but variable costs will be decreased by $0.40 per unit. What effect would the purchase of the new machine have on Hess's break-even point in units?
Q:
Hiller Co. anticipates total fixed costs of $120,000 and variable costs equal to 40% of sales. What is the pretax income if sales are $650,000?
Q:
Davison Company has fixed costs of $315,000 and a contribution margin ratio of 24%. If sales are expected to be $1,500,000, what is the margin of safety in percent?
Q:
A company has a goal of earning $100,000 in after-tax income. The company must pay $28,000 in income tax if it achieves the goal. The contribution margin ratio is 30%. What dollar amount of sales must be achieved to reach the goal if fixed costs are $64,000?
Q:
A company has total fixed costs of $200,000. Its product sells for $25 per unit and variable costs amount to $15 per unit. The company wishes to earn an after-tax income of $35,000. Assume that the company has a 30% tax rate. How many units must be sold to achieve this after-tax income level?
Q:
Leather Head Sports operates on a small production scale using expensive, top-quality materials. How does cost-volume-profit analysis benefit this company?
Q:
Describe how a cost-volume-profit analysis would be performed for a company that sells more than one product. (Assume that the sales mix is known.)
Q:
What is a scatter diagram? How is a scatter diagram used to estimate cost behavior?
Q:
What is operating leverage? How can the degree of operating leverage be used in analyzing changes in sales?
Q:
What do unit contribution margin and contribution margin ratio reveal about a companys cost structure?
Q:
What is an important feature that must be remembered when using cost estimation methods?
Q:
What are the basic assumptions of CVP analysis with regard to variable cost, fixed cost, and selling price per unit. (Assume a single product).
Q:
Shown below are terms or phrases preceded by letters a through j followed by a list of definitions. Match the terms or phrases 1 through 10 with the correct definitions by placing the letter of the term or phrase in the answer space provided at the beginning of each definition.
(a) Contribution margin per unit
(b) Fixed cost
(c) Mixed cost
(d) Curvilinear cost
(e) Variable cost
(f) Step-wise cost
(g) Relevant range of operations
(h) Estimated line of cost behavior
(i) Least-squares regression
(j) Cost-volume-profit analysis
__________(1) The amount that the sale of one unit contributes toward recovering fixed costs and earning profit.
__________(2) A cost that changes in proportion to changes in volume of activity.
__________(3) A cost that includes both fixed and variable costs.
__________(4) A cost that changes with volume but not at a constant rate.
__________(5) A line drawn on a graph to fit the past relation between cost and sales.
__________(6) A statistical method for deriving an estimated line of cost behavior that is more precise than the high-low method and a scatter diagram.
__________(7) A company's normal operating range; excludes extremely high and low volumes that are not likely to be encountered.
__________(8) A cost that remains constant over limited ranges of volumes of activity but changes by a lump sum when volume changes occur outside these limited ranges.
__________(9) Useful in business planning; includes predicting the volume of activity, the costs incurred, sales earned, and profits received.
__________(10) A cost that remains unchanged in total amount even when the volume of activity varies.
Q:
What are the contribution margin and net income under the revised conditions?
A. $650,000 and $280,000 respectively.
B. $400,000 and $40,000 respectively.
C. $280,000 and $40,000 respectively.
D. $390,000 and $20,000 respectively.
E. $400,000 and $20,000 respectively.
Q:
What are the contribution margin and net income under the current conditions?
A. $650,000 and $280,000 respectively.
B. $400,000 and $40,000 respectively.
C. $280,000 and $40,000 respectively.
D. $390,000 and $20,000 respectively.
E. $400,000 and $20,000 respectively.
Q:
Camden Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are: M N O Unit sales price
$7 $4 $6 Unit variable costs
3 2 3 Total fixed costs are $340,000. The break-even point in sales dollars for the current sales mix is:
A. $20,000
B. $289,000
C. $400,000
D. $629,000
E. $740,000
Q:
Baker Company's sales mix is 3 units of A, 2 units of B, and 1 unit of C. Selling prices for each product are $20, $30, and $40, respectively. Variable costs per unit are $12, $18, and $24, respectively. Fixed costs are $320,000. What is the break-even point in units of A, B, and C?
A. A 15,000; B 10,000; C 5,000.
B. A 12,000; B 8,000; C 4,000.
C. A 18,000; B 12,000; C 6,000.
D. A 5,000; B 10,000; C 15,000.
E. A 4,000; B 8,000; C 12,000.
Q:
Baker Company's sales mix is 3 units of A, 2 units of B, and 1 unit of C. Selling prices for each product are $20, $30, and $40, respectively. Variable costs per unit are $12, $18, and $24, respectively. Fixed costs are $320,000. What is the break-even point in composite units?
A. 1,111
B. 1,600
C. 2,666
D. 4,000
E. 5,000
Q:
The ratio of the sales volume for the various products sold by a company is called the:
A. Current product mix.
B. Relevant mix.
C. Sales mix.
D. Inventory cost ratio.
E. Production ratio.
Q:
What is the firm's break-even point in units of A and B?
A. 31,000 of A and 31,000 of B.
B. 31,000 of A and 62,000 of B.
C. 10,333 of A and 20,667 of B.
D. 36,167 of A and 72,333 of B.
E. 62,000 of A and 31,000 of B.
Q:
The weighted-average contribution margin is:
A. $14.67
B. $17.33
C. $16.00
D. $18.00
E. $15.00
Q:
The contribution margin per composite unit is:
A. $12
B. $20
C. $32
D. $44
E. $52
Q:
A cost-volume-profit chart is also known as a(n)
A. Operating profit chart.
B. Operating leverage chart.
C. Break-even chart.
D. Margin of safety chart.
E. Sales chart.
Q:
A CVP graph presents data on:
A. Profit and loss on a unit basis.
B. Profit, loss, and break-even on a total basis.
C. Profit, loss, and break-even on a unit basis.
D. Only profit and loss on a total basis.
E. Profit and loss on a budget and actual basis.
Q:
When graphing cost-volume-profit data on a CVP chart:
A. Units are plotted on the horizontal axis; costs on the vertical axis.
B. Units are plotted on the vertical axis; costs on the horizontal axis.
C. Both units and costs are plotted on the horizontal axis.
D. Both units and cost are plotted on the vertical axis.
E. Data points always represent expected future points.
Q:
Assume Moes Southwest Grill has a break-even point of 24,000 units. At this point, total sales are $1,800,000 and total variable costs are $1,200,000. Compute total fixed costs at the break-even point.
A. $1,800,000
B. $1,200,000
C. $3,000,000
D. $25
E. $ 600,000
Q:
Assume that sales are predicted to be $3,750, the expected contribution margin is $1,500, and a net loss of $250 is anticipated. The break-even point in sales dollars is:
A. $1,750
B. $2,500
C. $4,000
D. $4,250
E. $4,375
Q:
Jet Companys break-even point is 5,000 units. The companys fixed costs are $240,000, and its total variable costs are $85,000. The unit sales price is:
A. $20
B. $40
C. $60
D. $65
E. $100
Q:
At Flint Company's break-even point of 9,000 units, fixed costs are $180,000, and variable costs are $540,000 in total. The unit sales price is:
A. $20
B. $40
C. $60
D. $80
E. $100
Q:
A company has a contribution margin per unit of $8.25 and a contribution margin ratio of 12%. What is the selling price of the product?
A. $68.75
B. $9.24
C. $9.77
D. $60.50
E. $129.25
Q:
Ginger Company's product has a contribution margin per unit of $11.25 and a contribution margin ratio of 22.5%. What is the selling price of the product?
A. $5
B. $20
C. $30
D. $40
E. $50
Q:
The Haskins Company manufactures and sells radios. Each radio sells for $23.75 and the variable cost per unit is $16.25. Haskin's total fixed costs are $25,000, and budgeted sales are 8,000 units. What is the contribution margin per unit?
A. $7.50
B. $16.25
C. $23.75
D. $60,000
E. $1.25
Q:
Lee Company manufactures and sells widgets for $2 per unit. Its variable cost per unit is $1.70. Lee's total fixed costs are $10,500. How many widgets must Lee Company sell to break even?
A. 5,250
B. 6,176
C. 35,000
D. 52,500
E. 61,760
Q:
A company has fixed costs of $90,000. Its contribution margin ratio is 30% and the product sells for $75 per unit. What is the company's break-even point in dollar sales?
A. $ 60,000
B. $128,571
C. $180,000
D. $210,000
E. $300,000
Q:
A company manufactures and sells a product for $91 per unit. The company's fixed costs are $859,716 and its variable costs are $25 per unit. What is the company's break-even point in dollars? (Round all calculations to 2 decimal places.)
A. $627,592.68
B. $1,177,693.15
C. $622,982.60
D. $1,091,839.30
E. $66.00
Q:
A company manufactures and sells a product for $150 per unit. The company's fixed costs are $68,200, and its variable costs are $95 per unit. The company's break-even point in dollars is:
A. $107,700
B. $125,000
C. $136,450
D. $186,000
E. $170,550
Q:
A company manufactures and sells a product for $150 per unit. The company's fixed costs are $68,200, and its variable costs are $95 per unit. The company's break-even point in units is:
A. 718 units
B. 455 units
C. 1,240 units
D. 1,364 units
E. 1,137 units
Q:
A company manufactures and sells a product for $120 per unit. The company's fixed costs are $68,760, and its variable costs are $90 per unit. The company's break-even point in dollars is:
A. $91,680
B. $68,760
C. $2,2921
D. $275,040
E. $206,280
Q:
A company manufactures and sells a product for $91 per unit. The company's fixed costs are $859,716 and its variable costs are $25 per unit. The company's break-even point in units is:
A. 7,412
B. 34,389
C. 9,448
D. 13,026
E. 66
Q:
A company manufactures and sells a product for $120 per unit. The company's fixed costs are $68,760, and its variable costs are $90 per unit. The company's break-even point in units is:
A. 2,292
B. 573
C. 764
D. 327
E. 840
Q:
A special case of cost-volume-profit analysis is:
A. Least-squares point.
B. Step-wise point.
C. Composite margin point.
D. Break-even point.
E. Cost point.
Q:
The contribution margin per unit expressed as a percentage of the product's selling price is the:
A. Volume variance.
B. Margin of safety.
C. Contribution margin ratio.
D. Break-even point.
E. Rate of return on sales.
Q:
The difference between sales price per unit and variable cost per unit is the:
A. Gross profit from sales.
B. Gross margin per unit.
C. Fixed cost per unit.
D. Margin of safety per unit.
E. Contribution margin per unit.
Q:
A product sells for $200 per unit, and its variable costs per unit are $130. The fixed costs are $420,000. What is the break-even point in dollar sales?
A. $2,100
B. $6,000
C. $420,000
D. $646,154
E. $1,200,000
Q:
Brown Company's contribution margin ratio is 24%. Total fixed costs are $84,000. What is Brown's break-even point in sales dollars?
A. $20,160
B. $110,526
C. $350,000
D. $240,000
E. $84,000