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Exam 21: Cost-Volume-Profit Analysis

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Question 91

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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 dollars.

A) $2,000,000.
B) $2,640,000.
C) $1,304,348.
D) $4,202,899.
E) $1,740,000.

F) C) and D)
G) A) and E)

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Question 92

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The ________ is the sales level at which a company neither earns a profit nor incurs a loss.

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Question 93

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Scatter diagrams plot volume (units) on the vertical axis and cost on the horizontal axis.

Barclay Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. -The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's break-even point in total sales dollars.

The contribution margin ratio is the percent by which the margin of safety exceeds the break-even point.

Wolowitz Company's product has a contribution margin per unit of $62.50 and a contribution margin ratio of 25%. What is the per unit selling price of the product?

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 current margin of safety in dollars for Flannigan Company.

An important assumption in multiproduct CVP analysis is a changing sales mix.

Craft Company and Jarmer Company each have sales of $200,000 and costs of $140,000. Craft Company's costs consist of $40,000 fixed and $100,000 variable, while Jarmer Company's costs consist of $100,000 fixed and $40,000 variable. Which company will suffer the greatest decline in profits if sales volume declines by 15%?Prepare income statements and compute degree of operating leverage to assess.

Morse Company reports total contribution margin of $48,000 and pretax net income of $12,000 for the current month. The degree of operating leverage is:

________ is a statistical method of identifying an estimated line of cost behavior.

Crookshank Manufacturing has total fixed costs of $460,000. A unit of product sells for $20 and variable costs per unit are $11. Prepare a contribution margin income statement showing predicted net income (loss) if Crookshank sells 100,000 units for the year ended December 31.

What is operating leverage? How can the degree of operating leverage be used in analyzing changes in sales?

Leeks Company's product has a contribution margin per unit of $11.25 and a contribution margin ratio of 22.5%. What is the selling price of the product?

Management anticipates fixed costs of $72,500 and variable costs equal to 40% of sales. What will pretax income equal if sales are $325,000?

A company sells a single product that has a contribution margin ratio of 28%. If the company's total fixed costs are $84,000, what is the break-even point in dollar sales?

The following information describes a product expected to be produced and sold by Garrison Company: $\begin{array}{llr} \text { Selling price } & \text { \$ 80 per unit } \\ \text { Variable costs } & \text { \$ 32 per unit } \\ \text { Total fixed costs } &\$ 630,000\end{array}$ Required: (a) Calculate the contribution margin ratio. (b) Calculate the break-even point in dollar sales. (c) What dollar amount of sales would be necessary to achieve a pretax income of $120,000?

Mott Company's sales mix is 3 units of A, 2 units of B, and 1 unit of C. Selling prices for each product are $20, $30, and $40, respectively. Variable costs per unit are $12, $18, and $24, respectively. Fixed costs are $320,000. What is the break-even point in composite units?

A CVP graph presents data on:

Assume that sales are predicted to be $3,750, the expected contribution margin is $1,500, and a net loss of $250 is anticipated. The break-even point in sales dollars is: