Exam 6: Cost-Volume-Profit Analysis

Boise Corp had a margin of safety of $375,000 last month, with sales revenue of $1,000,000 and fixed costs of $250,000. a. What are break-even sales? b. What is the contribution margin ratio? c. How much profit did Boise earn last month? d. How much would sales have to increase for Boise to earn profit of 600,000?

A firm with a higher degree of operating leverage would be considered less risky than a comparable firm with a lower degree of operating leverage

Skyline Corp. has a selling price of $25 per unit, variable costs of $20 per unit, and fixed costs of $25,000. What sales revenue is needed to break-even?

On a CVP graph, the break-even point is the point at which the contribution margin line crosses the total cost line

Last month Carlos Company had a $60,000 profit on sales of $300,000. Fixed costs are $120,000 a month. What sales revenue is needed for Carlos to break even?

Munoz Inc. has a contribution margin ratio of 30% and fixed costs of $90,000. What sales revenue is needed to generate a $60,000 profit?

A company is debating whether to change its cost structure so that fixed costs increase from $300,000 to $400,000, but variable costs decrease from $5 per unit to $4 per unit. If it were to implement the change at its current production level of 100,000 units, profit would not change. What would happen to the company's profit if the change were implemented and production increased to 125,000 units?

Plymouth Corp. sells units for $100 each. Variable costs are $75 per unit, and fixed costs are $200,000. If Plymouth leases a new machine, fixed costs will increase by $60,000 a year, but production will be more efficient, saving $5 per unit. At what level of production will Plymouth be indifferent between leasing and not leasing the new machine?

Paint Corp. has sales of $600,000, a contribution margin ratio of 30%, and a profit of $40,000. If 20,000 units were sold, what is the variable cost per unit?

Contribution margin is equal to fixed costs at the break-even point

Cost-volume-profit analysis assumes that total costs behave in a ________ fashion.

Allen, Inc., has a contribution margin of 40% and fixed costs of $250,000. What is the break-even point in sales dollars?

In multiproduct cost-volume-profit analysis, an assumption made in addition to those used in single-product CVP analysis is that:

Halifax Products sells a product for $75. Variable costs per unit are $50, and monthly fixed costs are $75,000. Answer the following questions: a. What is the break-even point in units? b. How many units would need to be sold to earn a target profit of $200,000? c. Assume they achieve the level of sales required in part b, what is the margin of safety in sales dollars?

Which of the following is not a key assumption of cost-volume-profit?

Merlot, Inc. has fixed costs of $200,000, sales price of $50, and variable cost of $30 per unit. How many units must be sold to earn profit of $80,000?

In multiproduct cost-volume-profit analysis, a break-even point must be calculated separately for each product

The profit equation is:

Elk Corp. has sales of $300,000, a contribution margin ratio of 40%, and a target profit of $30,000. If 20,000 units were sold, what is the variable cost per unit?

Fern, Inc. has fixed costs of $400,000 and a contribution margin ratio of 30%. How much sales revenue must be earned for a profit of $80,000?