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Exam 4: Cost-Volume-Profit Analysis: a Managerial Planning Tool

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Question 51

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MATCHING Given the following numbers from Webster Company, match the correct value with its appropriate term. Webster Company sells a product for $20. Unit cost information is as follows: Webster normally produces 50,000 units and the fixed overhead rate is based on this amount. Fixed selling and administrative expense is $37,000. a.$6 b.30% c.$14 d.70% e.$290,000 f.14,500 -break-even point (in units)

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Question 52

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Patricia Company produces two products, X and Y, which account for 60% and 40%, respectively, of total sales dollars. Contribution margin ratios are 50% for X and 25% for Y. Total fixed costs are $120,000. What is Patricia's break-even point in sales dollars?

A) $300,000
B) $328,767
C) $342,856
D) $375,000

E) A) and B)
F) All of the above

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Question 53

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__________ is the relative combination of products being sold by a firm.

The contribution margin ratio can be calculated by subtracting the variable cost ratio from one.

The Young Manufacturing Company produces the following three products: Fixed costs are $76,000 per year. 50% of all sales in units are hammers, 30% are screwdrivers, and 20% are saws. Required: Calculate the following values:

Stepford Company makes dolls. The price is $10 and the variable expense per unit is $6. What is the contribution margin ratio?

A ________________________ visually portrays the relationship between profits and units sold.

Travel On Inc. sells luggage. They sell a duffle bag, a carry-on suitcase and a deluxe suitcase. The price and variable cost for each type of luggage is listed below. The total fixed costs for Travel On Inc. equals $60,000. For every 8 duffle bags Travel On Inc sells it sells 3 carry-on suitcases and 1 deluxe suitcase. Required: A.) Calculate the package contribution margin. B.) Calculate the break-even point in units for duffle bags, carry-on suitcases and deluxe suitcases. C.) If Travel On Inc. has a target income for the coming year of $300,000, how many packages will company have to sell? D.) Based on your answer in Part C, prepare a contribution margin income statement for the coming year. E.) What is the company's margin of safety in packages?

The quantity at which two systems produce the same operating income is referred to as the ___________________.

Thomas Corporation developed the following income statement using a contribution margin approach: The projected income statement was based on sales of 100,000 units. Thomas has the capacity to produce 120,000 units during the year. Required:

Figure 4-5. Standlar Company makes wireless speakers. The standard model price is $360 and variable expenses are $210. The deluxe model price is $500 and variable expenses are $300. The superior model price is $1,600 and variable expense per unit is $600. Total fixed expenses are $300,000. Generally, Standlar sells 8 standard models and 4 deluxe models for every superior model sold. -Refer to Figure 4-5. What is the number of deluxe models sold at break-even?

Assuming that fixed costs remain unchanged, the _____________________ can be used to find the profit impact of a change in sales revenue.

If variable costs per unit decrease, sales volume at the break-even point will

Melody Company sells a product for $14, variable costs are $10 per unit, and total fixed costs are $5,040. If Melody wants to earn an operating profit of $880, how many units must it sell?

Figure 4-4. Yerke Company makes jungle gyms and tree houses for children. For jungle gyms, the price is $120 and variable expenses are $90 per unit. For tree houses, the price is $200 and variable expenses are $100. Total fixed expenses are $253,750. Last year, Yerke sold 12,000 gyms and 4,000 tree houses. -Refer to Figure 4-4. Now suppose that Yerke expects tree house demand to increase from 4,000 to 8,000 units. What is the sales revenue at break-even?

Direct fixed expenses are the fixed costs that are not traceable to the segments and would remain even if one of the segments was eliminated.

MATCHING Given the following numbers from Webster Company, match the correct value with its appropriate term. Webster Company sells a product for $20. Unit cost information is as follows: Webster normally produces 50,000 units and the fixed overhead rate is based on this amount. Fixed selling and administrative expense is $37,000. a.$6 b.30% c.$14 d.70% e.$290,000 f.14,500 -Variable cost per unit

Sales mix is the relative combination of

Match each item with the correct statement below. a.break-even point b.Common fixed expenses c.Contribution margin d.Direct fixed expenses e.Margin of safety f.Operating leverage g.Degree of operating leverage h.Sales mix -Fixed costs that are directly traceable to a given segment and, consequently, disappear if the segment is eliminated.

The profit-volume graph