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Exam 21: Cost-Volume-Profit Analysis

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Question 21

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The sales level at which a company neither earns a profit nor incurs a loss is the:

A) Relevant range.
B) Margin of safety.
C) Step-wise variable level.
D) Break-even point.
E) Contribution margin.

F) A) and D)
G) A) and C)

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Question 22

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Spruce Company is considering the production and sale of a new product with the following sales and cost data: unit sales price,$350; unit variable costs,$180; total fixed costs,$399,500; and projected sales,$910,000.Round your answers to the nearest whole unit or dollar. (a)Calculate break-even in units. (b)Calculate break-even in dollars (use four decimal places when calculating the contribution margin ratio). (c)Calculate number of units that would need to be sold to generate an after-tax profit of $420,000 assuming a 30% tax rate. (d)Calculate dollar sales that would be needed to generate the same profit as above. (e)Calculate the margin of safety stated as a percentage using the $910,000 projected sales level. Be sure to label each calculation and show all calculations.

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(a)$399,500/($350-180)= 2,350 units
(b)$...

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Question 23

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Ivan Company has a goal of earning $70,000 after-tax income.Ivan would need to pay $20,000 of income taxes at the target level of income.The contribution margin ratio is 30%.What amount of dollar sales must be achieved to reach the goal if fixed costs are $36,000?

Torville Company's contribution margin income statement is presented below.Sales for the current period consisted of 5,000 units.Determine the company's break-even point in dollars.

In Davis Corporation's most recent fiscal year,the company reported pretax earnings of $215,000. Fixed costs totaled $325,800,the unit selling price of the firm's only product was $60,and the variable costs per unit were 40% of the selling price.Based on this information,the firm's break-even point in units was:

Dunkin Company manufactures and sells a single product that sells for $480 per unit; variable costs are $300.Annual fixed costs are $990,000.Current sales volume is $4,200,000.Compute the contribution margin per unit.

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?

Define the break-even point of a company.

The contribution margin ratio is the percent by which the margin of safety exceeds the break-even point.

An important assumption in multiproduct analysis is that the sales mix is known and remains constant.

The least-squares regression method is:

Wayward Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500.The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models.If the firm's annual fixed costs total $6,500,000,calculate the firm's break-even point in sales dollars.

Which one of the following statements is not true?

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 _________________.

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 cost that remains constant over a limited range of volume,but increases by a lump sum when volume increases beyond a maximum amount,is a(n) :

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?

Three important assumptions in cost-volume-profit analysis is that (1)_______________ per unit is constant,(2)_____________ per unit is constant,and (3)______________ are constant in total.

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:

Winthrop Manufacturing produces a product that sells for $50.00.Fixed costs are $260,000 and variable costs are $24.00 per unit.Winthrop can buy a new production machine that will increase fixed costs by $11,400 per year,but will decrease variable costs by $3.50 per unit.Compute break-even point in units if the new machine is purchased.