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Exam 21: Cost-Volume-Profit Analysis

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Question 101

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A firm provides the following sales data: $\begin{array} { l r r r } \text { Expected unit sales.. } & 5,000 & \text { Unit variable cost..... } & \$ 10 \\\text { Unit selling price... } & \$ 16 & \text { Total fixed cost....... } & \$ 12,000\end{array}$ Required: (a) Calculate the break-even point in dollar sales. (b) Calculate the margin of safety in dollar sales.

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(a) Contribution margin ratio ...

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Question 102

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Total fixed costs change in proportion to changes in volume of activity.

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Question 103

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Cost-volume-profit analysis is a predictive tool for determining the profit consequences of future cost changes, price changes, and volume of activity changes.

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 4:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. - Compute the number of units of Product Z McCoy must sell to break even.

The following data relate to a product sold by Hallstone Company: $\begin{array} { | l | l | } \hline \text { Total Variable costs } & \$ 90,000 \\\hline \text { Total fixed costs } & \$ 27,000 \\\hline \text { Predicted pre-tax income } & \$ 18,000 \\\hline \text { Contribution margin per unit } & \$ 5.00 \\\hline\end{array}$ (a) Calculate the number of units expected to be sold. (b) Calculate the expected total dollar sales.

Proctor Company has fixed costs of $315,000 and a contribution margin ratio of 24%. If sales are expected to be $1,500,000, what is the percentage of the margin of safety?

Select cost information for Seacrest Enterprises is as follows: Based on this information:

During its most recent fiscal year, Dover, Inc. had total sales of $3,200,000. Contribution margin amounted to $1,500,000 and pretax income was $400,000. -What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?

A cost-volume-profit chart is also known as a(n)

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000. - Compute the contribution margin ratio.

Glover Headgear produces specialty logo baseball caps for a variety of customers. Selected cost data for Glover follows: direct materials cost $8,000; sales commissions, $9,000; depreciation on factory equipment, $21,000; factory labor, $16,000; factory lease, $24,000. If Glover sells 6,100 caps at an average price of $12 for each cap, what is the company's contribution margin in total dollars?

Cost-volume-profit analysis is used to predict future costs to be incurred, volumes of activity, sales to be made, and profit to be earned.

To determine the slope of the variable cost from a scatter diagram, divide the change in units by the change in cost.

Dubashi Windows manufactures two standard size windows, J and R, in the ratio of 5:3. J has a selling price of $150 and R has a selling price of $200. The variable cost of J is $75.00 and the variable cost of R is $90.00. Fixed costs are $352,500. Compute the (a) contribution margin per composite unit, (b) break-even point in composite units, (c) number of units of each product that will be sold at the break-even point.

To calculate the break-even point in units, one must know unit fixed cost, unit variable cost, and sales price.

Define the break-even point of a company.

The contribution margin ratio:

The proportion of sales volumes for various products in a multiproduct company is known as the composite mix.

Maroon Company's contribution margin ratio is 24%. Total fixed costs are $84,000. What is Maroon's break-even point in sales dollars?

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000. -Compute the break-even point in units.