Exam 6: Cost-Volume-Profit Analysis

Dallas Inc.sells a product for $60.Variable costs are 60% of sales,and monthly fixed costs are $54,000.Answer the following questions: a.What is the break-even point in units? b.What unit sales would be required to earn a target profit of $120,000? c.Assume they achieve the level of sales required in part b,what is the margin of safety in sales dollars?

Dragon,Inc.has actual sales of $400,000 and a margin of safety of $150,000.What is Dragon's break-even point in sales?

All else being equal,what happens to the unit contribution margin and the contribution margin ratio if the sales price per unit increases?

The manager of Arbor,Inc.is considering raising its current price of $50 per unit by 10%.If she does so,she estimates that demand will decrease by 30,000 units per month.Arbor currently sells 100,000 units per month,each of which costs $35 in variable costs.Fixed costs are $1,200,000. a.What is the current profit? b.What is the current break-even point in units? c.If the manager raises the price,what will profit be? d.If the manager raises the price,what will be the new break-even point in units? e.Assume the manager does not know how much demand will drop if the price increases.By how much would demand have to drop before the manager would not want to implement the price increase?

Pecan,Inc. ,has a contribution margin of 50% and fixed costs of $220,000.What sales revenue is needed to attain a $60,000 profit?

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?

Which of the following statements is not correct about the methods managers use to model the relationship between revenues,costs,profit,and volume?

Nancy Company has sales of $100,000,variable costs of $5 per unit,fixed costs of $25,000,and a profit of $15,000.How many units were sold?

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

Knoll,Inc.currently sells 15,000 units a month for $50 each,has variable costs of $20 per unit,and fixed costs of $300,000.Knoll is considering increasing the price of its units to $60 per unit.If the price is changed,how many units will Knoll need to sell for profit to remain the same as before the price change?

Belle Corp.has a selling price of $50 per unit,variable costs of $40 per unit,and fixed costs of $100,000.What sales revenue is needed to break-even?

Profit is indicated on a cost-volume-profit graph by:

Rollag Corp.has a selling price of $30 and variable costs of $20 per unit.When 14,000 units are sold,profits equaled $45,000.What is the margin of safety?

Harmony sells a product for $50 per unit.Variable costs per unit are $30,and monthly fixed costs are $150,000.Answer the following questions: a.What is the break-even point in units? b.What unit sales would be required to earn a target profit of $100,000? c.Assume they achieve the level of sales required in part b,what is the degree of operating leverage? d.If sales increase by 40% from that level,by what percentage will profits increase?

Cantor 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.What unit sales would be required to earn a target profit of $200,000? c.Assume they achieve the level of sales required in part b,what is the degree of operating leverage? d.If sales decrease by 30% from that level,by what percentage will profits decrease?

Break-even units can be found by dividing fixed costs by the unit contribution margin.

Friar Corp.sells two products.Product A sells for $100 per unit,and has unit variable costs of $60.Product B sells for $70 per unit,and has unit variable costs of $50.Currently,Friar sells three units of Product B for every one unit of Product A sold.Friar has fixed costs of $750,000.How many units would Friar have to sell to earn a profit of $250,000?

Friar Corp.sells two products.Product A sells for $100 per unit,and has unit variable costs of $60.Product B sells for $70 per unit,and has unit variable costs of $50.Currently,Friar sells three units of product B for every one unit of product A sold.Friar has fixed costs of $750,000.What is Friar's break-even point in units?

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?

Louise Corp.has a contribution margin ratio of 35%,fixed costs of $60,000,and a profit of $45,000.What are total sales?