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

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 superior models sold at break-even?

Which statement is not true about cost-volume profit (CVP)analysis?

Degree of operating leverage is calculated as

A profit-volume graph differs from a cost-volume-profits graph in that a profit-volume graph displays only

Most firms would like to earn operating income equal to the break-even point.

Biggers Company expects the following results for the next accounting period: The sales manager believes sales could be increased by 400 units if advertising expenditures were increased by $10,000.If advertising expenditures are increased and sales increase by 400 units,the effect on operating income will be a(n)

If a multi-product company simply wants to know the overall break-even point,it is easiest to use the break-even in sales revenue approach.

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.Using the lowest whole numbers,what is the sales mix of gyms and tree houses?

Sales mix can be expressed in terms of

The break-even point is when

Figure 4-1. Foster Company makes power tools.The budgeted sales are $420,000,budgeted variable costs are $147,000,and budgeted fixed costs are $227,500. Refer to Figure 4-1.What is the contribution margin?

Information about the Harmon Company's two products includes: What is the total monthly sales volume in units required to break even when the sales mix in units is 70 percent Product X and 30 percent Product Y?

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:

The profit-volume graph shows the relationship between profits and units sold.

A "what-if" technique that examines the impact of changes in underlying assumptions on an answer is

The contribution margin income statement provides a good check to determine if the sale of a certain number of units really results in operating income of the given amount.

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 per hour?

______________________ are those fixed costs that can be traced to each segment and would be avoided if the segment did not exist.

Sales mix is the relative combination of

The impact on a firm's income resulting from a change in the number of units sold can be assessed by multiplying the unit contribution margin by the change in units sold assuming that fixed costs remain the same.