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Exam 22: Cost-Volume-Profit Analysis

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Question 71

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Plymouth Industries incurs the following costs during the current year: Sales for the year were $80,000 and Plymouth Industries determined that only the direct production costs (prime costs) and sales commissions are to be classified as variable costs; all other costs are classified as fixed costs. Plymouth sold 400 units. (a) Calculate the unit contribution margin and the contribution margin ratio for Plymouth Industries. (b) Plymouth Industries is considering plans that would increase the contribution margin ratio for next year. Should it pursue these plans? Explain.

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(a)
Variable costs per unit = $20,000/40...

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Question 72

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Legacy Company is considering the production and sale of a new product with the following sales and cost data: unit sales price $18; unit variable costs $8.10; and total fixed costs of $8,250. Legacy is subject to a 25% tax rate. Determine the dollar sales needed to generate an after-tax income of $33,000.

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Target pretax income = $33,000/(1 - .25)...

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Question 73

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The budgeted income statement presented below is for Griffith Corporation for the coming fiscal year. If Griffith Corporation's income tax rate is 40%, compute the number of units that must be sold in order to achieve a target pretax income of $130,000.

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

During its most recent fiscal year, Simon Enterprises sold 200,000 electric screwdrivers at a price of $15 each. Fixed costs amounted to $400,000 and pretax income was $600,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?

Examining strategies that impact several estimates in the CVP analysis is known as ______________________.

One aid in measuring cost behavior involves creating a display of the data about past costs in graphical form. Such a visual display is called a _____________________.

The least-squares regression method is:

Abington Corporation provides the following data from a recent period for its manufacture of shoes: variable manufacturing costs, $24,000; variable selling costs, $12,000; and total fixed costs, $40,000. Sales were $60,000 based on 12,000 units sold during the period. Calculate the contribution margin and the contribution margin ratio.

A step-wise variable cost can be separated into a fixed component and a variable component.

A firm expects to sell 25,000 units of its product at $11 per unit. Pretax income is predicted to be $60,000. If the variable costs per unit are $5, total fixed costs must be:

The following data relate to a product sold by Nelson Company: (a) Calculate the number of units expected to be sold. (b) Calculate the expected total dollar sales.

Baines 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 A Baines must sell to break even.

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

When using the high-low method for estimating cost behavior, the slope, or variable cost per sales dollar, is calculated by __________________________________.

Dunkin Company manufactures and sells a single product that sells for $480 per unit; variable costs are $300. Annual fixed costs are $990,000. Current sales volume is $4,200,000. Dunkin company management targets an annual after-tax income of $843,750. The company is subject to a 25% income tax rate. Compute the dollar sales to earn the target after-tax net income.

A visual line fit to points in a scatter diagram may be used to identify the approximate relation between past cost and volume.

Wayward 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 sales dollars.

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

Curvilinear costs are also known as nonlinear costs.