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Exam 3: Analysis of Cost, volume, and Pricing to Increase Profitability

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Question 71

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Select the correct statement regarding the contribution margin ratio.

A) The contribution margin ratio can be calculated using either total amounts or per unit amounts.
B) The contribution margin ratio equals contribution margin per unit divided by variable cost per unit.
C) Total fixed costs divided by the contribution margin ratio equals the break-even point in units.
D) An increase in variable cost per unit will cause the contribution margin ratio to increase.

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

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Question 72

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Joseph Company has variable costs of $80 per unit,total fixed costs of $200,000,and a break-even point of 5,000 units.If the variable cost per unit decreases by $8,how many units must Joseph Company sell to break even?

A) 2,778 units
B) 2,500 units
C) 6,250 units
D) 4,167 units

E) B) and D)
F) None of the above

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Question 73

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Sensitivity analysis is performed in order to determine optimal sales mix.

Select the incorrect statement regarding cost-volume-profit relationships for multiple products.

Adams Company sells a product whose contribution margin is $10 and selling price is $25.If the company's break-even point is 100 units,its total fixed costs must be $500.

Houston Company produces a product that sells for $175 per unit and has variable costs of $50 per unit.Houston's annual fixed costs are $200,000,and the company wishes to earn a profit of $80,000. Required: Use the equation method to determine the sales volume in units and dollars required to earn the desired profit.

What happens to the break-even point in sales dollars when the contribution margin ratio increases?

Burke Company has a break-even of $600,000 in total sales.Assuming the company sells its product for $50 per unit,what is its margin of safety in units if sales total $850,000?

Select the term from the list provided that best describes each of the following descriptions or definitions.

How does an increase in variable costs affect the break-even point in sales dollars?

Rose Corporation sells backpacks.Variable costs for this product are $30 per unit,and the sales price per unit is $50 per unit.Total fixed costs amount to $100,000.How many backpacks does Rose need to sell to achieve a desired profit of $60,000?

What is the break-even point for a company?

The Travel Pro Company sells two kinds of luggage.The company projected the following cost information for the two products: $\begin{array}{lrr}&\text { Rolling Bag }&\text { Carry-on Bag }\\ \text { Unit selling price } &\$250&\$120\\ \text { Unit variable cost } &\$110&\$80\\ \text { Number of units produced and sold}&4,000&6,000\end{array}$ The company's total fixed costs are expected to be $280,000. Based on this information,what is the combined number of units of the two products that would be required to break even with the projected sales mix? (Round your answer to the nearest whole unit.)

Crown Company produces and sells two products.The following monthly data are provided: $\begin{array}{lrr}&\text { Slicer }&\text {Chopper }\\\text { Unit selling price } & 10 & \$ 15 \\\text { Variable manufacturing costs } & 6 &9 \\\text { Variable selling and administrative costs } & 1 & 1 \\\text { Estimated unit sales per month } & 280 & 420\end{array}$ The break-even point for the current sales mix is 360 units (144 Slicer models and 216 Chopper models) .What would be the impact on profit if 360 units are sold but 145 Slicer models are sold instead of 144?

Company X has variable costs per unit of $20,fixed costs of $300,000,and a break-even point in units of 60,000 units.If the sales price per unit decreases by $2 and the variable cost per unit decreases by $2,what would happen to the break-even point?

Consider the following cost-volume-profit graph: Based on the information in the graph,the break-even point in sales dollars is approximately equal to:

During the current year,Vanguard Company sold 80,000 of its only product at a selling price of $60 per unit.Variable costs were $18 per unit,and Vanguard's margin of safety for the year was 25,000 units. Required: 1)Calculate Vanguard's margin of safety ratio for the current year. 2)What was the amount of Vanguard's fixed costs for the current year?

To attain a target profit,the total gross margin generated from sales must be sufficient to cover total fixed costs plus the target profit.

Camden Company sets the selling price for its product by adding a markup to the product's variable manufacturing costs.This approach to pricing is referred to as:

Company A has break-even sales of 90,000 units and budgeted sales of 99,000 units.What is the margin of safety as expressed as a percentage?