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Exam 6: Cost-Volume-Profit Analysis

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Question 61

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Frontier Corp.has a contribution margin of $450,000 and profit of $150,000.If sales increase 20%,by how much will profits increase?

A) 20%
B) 30%
C) 60%
D) 90%

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

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Question 62

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Cost structure refers to:

A) a company's break-even point.
B) whether fixed costs are covered by the contribution margin.
C) how a company uses variable versus fixed costs to perform operations.
D) where funds are stored.

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

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Question 63

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Juniper had revenues of $450,000 in March.Fixed costs in March were $240,000 and profit was $30,000.Answer the following questions: a.What was the contribution margin percentage? b.What monthly sales volume (in dollars)would be needed to break-even? c.What was the margin of safety for March?

Jasper Corp.has a selling price of $30,and variable costs of $20 per unit.When 12,000 units are sold,profits equaled $70,000.How many units must be sold to break-even?

The formula for target sales is:

Allen,Inc. ,has a contribution margin of 40% and fixed costs of $250,000.What is the break-even point in sales dollars?

Managers can use cost-volume-profit analysis to evaluate changes in cost structure.

Halifax Products sells a product for $75.Variable costs per unit are $50,and monthly fixed costs are $75,000.Answer the following questions: a.What is the break-even point in units? b.How many units would need to be sold to earn a target profit of $200,000? c.Assuming they achieve the level of sales required in part b,what is the margin of safety in sales dollars?

The profit equation is:

A company is debating whether to change its cost structure so that variable costs increase from $4 per unit to $5 per unit but fixed costs decrease from $400,000 to $300,000.If it were to implement the change at its current production level of 100,000,profit would not change.What would happen to the company's profit if the change were implemented and production increased?

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

Cost-volume-profit analysis can only be performed for companies that sell only one product.

Which of the following is not a key assumption of cost-volume-profit?

Malibu,Inc. ,which has fixed costs of $2,150,000,sells three products whose sales price,variable cost per unit,and percentage of sales units are presented in the table below. a.What is the weighted average unit contribution margin? b.At the break-even point,how many units of Product A must be sold? c.To make a profit of $1,075,000,how many units of Product B must be sold?

Drake,Inc. ,which has fixed costs of $1,400,000,sells three products whose sales price,variable cost per unit,and percentage of sales units are presented in the table below. a.What is the weighted average unit contribution margin? b.At the break-even point,how many units of Product A must be sold? c.To make a profit of $910,000,how many units of Product B must be sold?

Plymouth Corp.sells units for $100 each.Variable costs are $75 per unit,and fixed costs are $200,000.If Plymouth leases a new machine,fixed costs will increase by $60,000 a year,but production will be more efficient,saving $5 per unit.At what level of production will Plymouth be indifferent between leasing and not leasing the new machine?

Plymouth Corp.sells units for $100 each.Variable costs are $75 per unit,and fixed costs are $200,000.If Plymouth leases a new machine,production will be more efficient,saving $5 per unit.If Plymouth plans to sell 12,000 units,at what lease cost will Plymouth be indifferent between leasing and not leasing the new machine?

Last month Carlos Company had a $60,000 profit on sales of $300,000.Fixed costs are $120,000 a month.What sales revenue is needed for Carlos to break even?

Raven Inc.sells a single product for $45.Variable costs include $26 for each unit plus a $10 selling expense per unit.Fixed costs are $200,000 per month. a.What is the contribution margin percentage? b.What is the breakeven sales revenue? c.What sales revenue is needed to achieve a $175,000 per month profit?

Last month Angus Company had a $30,000 loss on sales of $250,000.Fixed costs are $60,000 a month.What sales revenue is needed for Angus to break even?