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Exam 18: Cost-Volume-Profit Analysis

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Question 31

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The break-even point is the sales level at which a company neither earns a profit nor incurs a loss.

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B) False

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Question 32

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A product is sold for $45 and has variable costs of $33 per unit.The total fixed costs for the firm are $180,600.If the firm desires to earn a pretax income of $77,400,how many units must be sold?

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Unit sales = (Fixed costs + Ta...

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Question 33

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

The ratio of the sales volume for the various products sold by a company is called the:

Reference: 18_03 A company's product sells at $12 per unit and has a $5 per unit variable cost. The company's total fixed costs are $98,000. -The contribution margin per unit is:

Reference: 18_01 Willco Inc. manufactures electronic parts. They are analyzing their monthly maintenance costs to determine the best way to budget these costs in the future. They have collected the following data for the last six months: $\begin{array} { | l | c | c | } \hline { \text { Month } } & \text { Machine Hours } & \text { Maintenance Costs } \\\hline \text { January } & 30,000 & \$ 62,000 \\\hline \text { February } & 40,000 & \$ 74,500 \\\hline \text { March } & 37,500 & \$ 65,900 \\\hline \text { April } & 39,000 & \$ 68,750 \\\hline \text { May } & 42,300 & \$ 74,000 \\\hline \text { June } & 35,000 & \$ 64,500 \\\hline\end{array}$ -If Willco Inc.expects to operate the machines for a total of 32,000 hours in the next month,calculate the expected maintenance costs?

A cost that remains the same in total even when volume of activity varies is a:

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:

Herriot Co.has total fixed costs of $180,000 and a contribution margin ratio of 40%.Assume that an additional advertising expenditure of $4,000 would increase sales by $8,000.Should the company spend this additional amount on advertising? (Support your answer with calculations.)

A company has fixed costs of $90,000.Its contribution margin ratio is 30% and the product sells for $75 per unit.What is the company's break-even point in dollar sales?

A cost-volume-profit (CVP)chart is a graph that plots volume on the horizontal axis and costs and sales on the vertical axis.

Lee Company manufactures and sells widgets for $2 per unit.Its variable cost per unit is $1.70.Lee's total fixed costs are $10,500.How many widgets must Lee Company sell to break even?

The dollar amount of sales needed to achieve a targeted after-tax income is computed by dividing the sum of fixed costs plus the desired after-tax income plus income taxes by the contribution margin ratio.

Outback Products reports the following information: $\begin{array} { l l } \text { Total contribution margin} & \$ 32,000 \\\text { Total fixed costs } & \$ 28,000\end{array}$ Required: a.Calculate Outback Products' degree of operating leverage (DOL). b.Outback Products forecasts a 6% increase in sales.What is the expected effect in percent on pretax income?

A company manufactures a product and sells it for $120 per unit.The total fixed costs of manufacturing and selling the product are expected to be $155,250,and the variable costs are expected to be $75 per unit.What is the company's break-even point in (a)units and (b)dollar sales?

A term describing a firm's normal range of operating activities is:

The excess of expected sales over the sales level at the break-even point is known as the:

As the level of output activity increases,the variable cost per unit remains constant.

The least-squares regression method is:

What is a scatter diagram? How is a scatter diagram used to estimate cost behavior?