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Exam 3: Costvolumeprofit Analysis and Pricing Decisions

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Question 91

Multiple Choice

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Breakeven point can be expressed in terms of

A) units.
B) unit sales price.
C) unit contribution margin.
D) unit fixed costs.

E) A) and B)
F) B) and C)

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Question 92

Multiple Choice

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At the breakeven point, which of the following is not true?

A) Sales revenue is equal to total costs.
B) Contribution margin is equal to total variable costs.
C) Contribution margin is equal to total fixed costs.
D) Operating income equals zero.

E) All of the above
F) None of the above

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Question 93

Multiple Choice

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Cost-volume-profit analysis helps managers assess the impact of

The formula for calculating the sales dollars required to meet target operating income is

The formula for converting desired net income into operating income is

The selling price of a unit is $20 and the variable product cost per unit is $14.In addition, a sales commission of 5% is paid on each sale.If the variable cost per unit (excluding sales commission) ) increases by 1%, what is the new total cost per unit?

What is meant by the term "sales mix"? What is the profit formula for a company with multiple products?

Patch Work's product, Patch Supreme, sells for $62.00 and its variable cost is $44.60 while the cost of goods sold per unit is $42.80.What is Patch Work's markup percentage on variable cost and what is its gross margin percentage?

What basic information is needed in order to calculate the level of sales to reach a target operating income? Managers often want to know how many units must be sold to reach target net income, but the profit equation calculates operating income.How can a manager convert net income to operating income?

Brandi's Bakery sells strawberry cakes for $15 each.Brandi's variable costs are $5 and her fixed costs total $3,000 per month.If Brandi's tax rate is 25%, how many cakes must Brandi sell each month if she wants to earn $6,000 in net income?

Given that the selling price is $200, the variable unit cost is $120, and there's operating income of $50, what is the company's markup percentage?

Assume total fixed costs of $160,000, variable costs per unit of $6, and contribution margin per unit of $4.What are the sales dollars required to meet a target operating income of $50,000?

Which of the following formulas represents the calculation for markup percentage?

Assume total sales of $800,000, total variable costs of $400,000, and total fixed costs of $300,000.Of these amounts, $200,000 of the variable costs are product costs, and $100,000 of the fixed costs are period costs.What is the degree of operating leverage?

One assumption made when using CVP as a decision tool is that all costs can be easily and accurately separated into fixed and variable categories.

What is the formula for calculating degree of operating leverage? What does operating leverage mean? How can a company manage its degree of operating leverage?

Cindy's Chocolates sells its cream filled donuts for $1.50 each.The variable cost per unit for the donuts is $1.05 and total fixed costs are $9,000. a.What is the contribution margin per unit for the donuts? b.What is the breakeven point in sales dollars?

If sales increase by 10%, then total contribution margin will

The degree of operating leverage is calculated as

Back Yard Leisure sells two types of hammocks: Sundance and Shady Lady.The following table shows the sales price and variable cost for each hammock.Back Yard Leisure incurs $600,000 a year in fixed costs.Assume the store has a sales mix of four Sundance for each Shady Lady hammock sold. Required: a.How many hammocks of each type must be sold for Back Yard Leisure to break even? b.What amount of revenue would be generated by each type of hammock for the company to earn $75,200 in operating income?