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Exam 5: Cost Volume Profit Analysis

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Question 71

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If the volume of sales is $7,000,000 and sales at the break-even point amount to $4,800,000, the margin of safety is 45.8%.

A) True
B) False

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Question 72

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The Waterfall Company sells a product for $150 per unit. The variable cost is $80 per unit, and fixed costs are $270,000. Determine the (a) break-even point in sales units, and (b) break-even points in sales units if the company desires a target profit of $36,000. Round your answer to the nearest whole number.

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a.  $150 - $80 = $70...

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Question 73

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If fixed costs are $300,000, the unit selling price is $31, and the unit variable costs are $22, what is the break-even sales (units) if fixed costs are reduced by $30,000?

The Atlantic Company sells a product with a break-even point of 3,000 sales units. The variable cost is $60 per unit, and fixed costs are $270,000. Determine: (a) unit sales price (b) break-even points in sales units if the company desires a target profit of $36,000.

Understanding how costs behave is useful to management for all the following reasons except

The ratio that indicates the percentage of each sales dollar available to cover the fixed costs and to provide operating income is termed the contribution margin ratio.

If Kaden Company's fixed costs are $46,800, the unit selling price is $42, and the unit variable costs are $24. What is the break-even sales (units) ?

A company with a break-even point at $900,000 in sales revenue had fixed costs of $225,000. When actual sales were $1,000,000, variable costs were $750,000. Determine: (a) the margin of safety expressed in dollars (b) the margin of safety expressed as a percentage of sales (c) the contribution margin ratio (d) the operating income.

Which of the following conditions would cause the break-even point to decrease?

  Figure 21-1 Which of the graphs in Figure 21-1 illustrates the behavior of a total variable cost?

Which of the following costs is an example of a cost that remains the same in total as the number of units produced changes?

Because variable costs are assumed to change in direct proportion to changes in the activity level, the graph of the variable costs when plotted against the activity level appears as a circle.

Currently, the unit selling price is $50, the variable cost, $34, and the total fixed costs, $108,000. A proposal is being evaluated to increase the selling price to $54. (a) Compute the current break-even sales (units). (b) Compute the anticipated break-even sales (units), assuming that the unit selling price is increased and all costs remain constant.

The point where the profit line intersects the horizontal axis on the profit-volume chart represents

The difference between the current sales revenue and the sales at the break-even point is called the

Cost-volume-profit analysis cannot be used if which of the following occurs?

If fixed costs are $850,000 and variable costs are 60% of sales, what is the break-even point (dollars) ?

Johnson's Plumbing's fixed costs are $700,000 and the unit contribution margin is $17. What amount of units must be sold in order to realize an operating income of $100,000?

Zipee Inc.'s unit selling price is $90, the unit variable costs are $40.50, fixed costs are $170,000, and current sales are 12,000 units. How much will operating income change if sales increase by 5,000 units?

Blane Company has the following data: What will operating income be if units sold double to 100,000 units?