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Exam 6: Cost-Volume-Profit Analysis

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Question 41

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Profit is indicated on a cost-volume-profit graph by

A) the profit line.
B) the horizontal difference between the revenue line and the cost line.
C) the vertical difference between the revenue line and the cost line.
D) the horizontal distance from the breakeven point.

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

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Question 42

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Managers can use cost-volume-profit analysis to evaluate changes in price.CVP analysis is useful in evaluating changes in price and cost structure.

A) True
B) False

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Question 43

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Maggie Corp has a selling price of $20 per unit,variable costs of $10 per unit,and fixed costs of $140,000.How many units must be sold to break even?

At a sales level of 20,000 units,Pony Corp has sales of $400,000,a variable cost ratio of 60%,and a profit of $40,000.What is the break-even point in units?

If a firm sells more than one product,the break-even point in units represents

Degree of operating leverage is calculated by dividing sales by profit.Degree of operating leverage is calculated by dividing contribution margin by profit.

Skyline Corp has a selling price of $25 per unit,variable costs of $20 per unit,and fixed costs of $25,000.What sales revenue is needed to break-even?

What component of the profit equation should be set equal to zero to find the breakeven point?

Last month Empire Company had a $30,000 profit on sales of $250,000.Fixed costs are $60,000 a month.How much would sales have to decrease for Empire to break even?

The break-even point is the point at which profit equals zero.The break-even point is where the company breaks even,or has zero profit.

Leather Company sold 20,000 units,had variable costs of $12 per unit,fixed costs of $100,000,and profits of $60,000.What is the selling price per unit?

Frontier Corp has a contribution margin of $450,000 and profit of $150,000.What is its degree of operating leverage?

Ironwood Inc.has a variable cost ratio of 60% and fixed costs of $90,000.What sales revenue is needed to generate a $120,000 profit?

To determine the number of units needed to earn a target profit,divide the target contribution margin by the contribution margin per unit.Divide total fixed costs plus profit by the contribution margin per unit.

The formula for break-even point in terms of units is

Fountain Corp has a selling price of $15 per unit and variable costs of $10 per unit.When 14,000 units are sold,profits equaled $45,000.What is the margin of safety?

Contribution margin is equal to fixed costs at the break-even point.At break-even point,profit,or contribution margin minus fixed costs,is zero,so contribution margin must equal fixed costs.

Martol,Inc.has fixed costs of $200,000 and a contribution margin ratio of 40%.How much sales revenue must be earned for a profit of $80,000?

Keith Corp has sales of $200,000,a contribution margin ratio of 35%,and a profit of $40,000.If 10,000 units were sold,what is the variable cost per unit?

Vesper Company has sales of $200,000,variable costs of $8 per unit,fixed costs of $50,000,and a profit of $30,000.How many units were sold?