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

At a monthly sales volume of $25,000,a company incurs variable costs of $19,000 and fixed costs of $6,000. Required: Determine each of the following values:

Product 1 has a contribution margin of $6.00 per unit,and Product 2 has a contribution margin of $7.50 per unit.Total fixed costs are $300,000.Sales mix and total volume varies from one period to another.Which of the following is true?

The Noble Company manufactures two products.Information about the two products are as follows: The company expects fixed costs to be $189,000.The firm expects 60 percent of its sales (in units)to be Product A (a sales mix of 3:2). Required:

If the contribution margin ratio increases

Melody Company sells a product for $14,variable costs are $10 per unit,and total fixed costs are $5,040.What is the per unit contribution margin?

Figure 4-2. Pauley Company provides home health care.Pauley charges $35/hour for professional care.Variable costs are $21/hour and fixed costs are $78,000.Next year,Pauley expects to charge out 12,000 hours of home health care. Refer to Figure 4-2.What is the budgeted operating income?

In the equation to determine the number of units that must be sold to earn a target income,targeted income is subtracted from fixed expense in the numerator.

Income statements for two different companies in the same industry are as follows: Required:

Assume the following information: How many units must be sold to generate a profit of $45,000?

If fixed costs increase,the break-even point decreases.

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

The income statement for Thomas Manufacturing Company for 2011 is as follows: What is the contribution margin per unit?

A company's mix of fixed costs relative to variable costs is referred to as its _______________.

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?

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 overall sales revenue at break-even?

Which of the following can be considered a measure of risk in cost-volume-profit analysis?

Figure 4-6. Shorter Company had originally expected to earn operating income of $130,000 in the coming year.Shorter's degree of operating leverage is 2.4.Recently,Shorter revised its plans and now expects to increase sales by 20% next year. Refer to Figure 4-6.What is the percent change in operating income expected by Shorter in the coming year?

Figure 4-2. Pauley Company provides home health care.Pauley charges $35/hour for professional care.Variable costs are $21/hour and fixed costs are $78,000.Next year,Pauley expects to charge out 12,000 hours of home health care. Refer to Figure 4-2.What is the contribution margin ratio?

A company provided the following information: Required:

Clean Company sells its product for $80.In addition,it has a variable cost ratio of 60 percent and total fixed costs of $8,000.What is the break-even point in sales dollars for Baker Company?