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Exam 5: Cost Volume Profit Analysis

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Question 1

True/False

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The contribution margin ratio is the same as the profit-volume ratio.

A) True
B) False

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Question 2

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If sales are $400,000, variable costs are 80% of sales, and operating income is $40,000, what is the operating leverage?

A) 0.0
B) 7.5
C) 2.0
D) 1.3

E) C) and D)
F) All of the above

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Question 3

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When Isaiah Company has fixed costs of $120,000 and the contribution margin is $30, the break-even point is

Only a single line, which represents the difference between total sales revenues and total costs, is plotted on the cost-volume-profit chart.

Given the following information: Variable cost per unit = $5.00 July fixed cost per unit = $7.00 Units sold and produced in July = 28,000 What is total estimated cost for August if 30,000 units are projected to be produced and sold?

This question has been removed by Cengage as inapplicable.

Total variable costs change as the level of activity changes.

Given the following: Variable cost as a percentage of sales = 60% Unit variable cost = $30 Fixed costs = $200,000 What is the break-even point in units?

Unit variable cost does not change as the number of units of activity changes.

Variable costs as a percentage of sales for Lemon Inc. are 80%, current sales are $600,000, and fixed costs are $130,000. How much will operating income change if sales increase by $40,000?

The Grant Company has sales of $300,000, and the break-even point in sales dollars if $225,000. Determine the company's margin of safety percentage.

If a business sells four products, it is not possible to estimate the break-even point.

(a) If Swannanoa Company's budgeted sales are $1,000,000, fixed costs are $350,000, and variable costs are $600,000, what is the budgeted contribution margin ratio? (b) If the contribution margin ratio is 30%, sales are $900,000, and fixed costs are $200,000, what is the operating income?

If sales total $2,000,000, fixed costs total $800,000, and variable costs are 60% of sales, the contribution margin ratio is 40%.

If the unit selling price is $40, the volume of sales is $3,000,000, sales at the break-even point amount to $2,500,000, and the maximum possible sales are $3,300,000, the margin of safety is 14,500 units.

The Dean Company has sales of $500,000, and the break-even point in sales dollars of $300,000. Determine the company's margin of safety percentage.

Silver River Company sells Products S and T and has made the following estimates for the coming year: Fixed costs are estimated at $202,400. Determine: (a) the estimated sales in units of the overall product necessary to reach the break-even point for the coming year (b) the estimated number of units of each product necessary to be sold to reach the break-even point for the coming year (c) the estimated sales in units of the overall product necessary to realize an operating income of $119,600 for the coming year.

If a business had a capacity of $10,000,000 of sales, actual sales of $6,000,000, break-even sales of $4,200,000, fixed costs of $1,800,000, and variable costs of 60% of sales, what is the margin of safety expressed as a percentage of sales?

The relevant range is useful for analyzing cost behavior for management decision-making purposes.

Costs that vary in total in direct proportion to changes in an activity level are called