Exam 16: Cost-Volume-Profit Analysis

In the Cost-Volume-Profit analysis, what are two ways management can deal with risk and uncertainty?

The Mildmanner Corporation has the following data for the current year: Selling price per unit \1 5 Variable cost per unit \ 9 Fixed costs \ 45,000 Units sold 10,000 units If sales decrease to 7,500 units in the current year, Mildmanner's operating leverage will be

The term net income is used to mean operating income before income taxes.

Sales revenue to earn target profits equals total fixed costs plus target profit divided by the contribution margin.

In a CVP graph, the intersection of the total costs line and the total sales revenue line is the break-even point in units.

The Mildmanner Corporation has the following data for the current year: Selling price per unit \ 15 Variable cost per unit \ 9 Fixed costs \ 45,000 Units sold 10,000 units The margin of safety expressed in sales revenue will be

Jamie Quinn, a sole proprietor, has the following projected figures for next year: Selling price per unit \1 50.00 Contribution margin per unit \4 5.00 Total fixed costs \6 30,000 How many units must be sold to obtain a target before-tax profit of $270,000?

Nonesuch Company sells only one product at a regular price of $7.50 per unit. Variable expenses are 60 percent of sales and fixed expenses are $30,000. Management has decided to decrease the selling price to $6.00 in hopes of increasing its volume of sales. What is the new break-even point in units for Nonesuch Company when the selling price is $6.00?

Cain Company and Abel Corporation have the following income statements for the current year: Cain Company Abel Corporation Sales \ 50,000 \ 50,000 Variable expenses 10,000 25,000 Contribution margin \ 40,000 \ 25,000 Fixed expenses 25,000 10,000 Operating income \ 15,000 \ 15,000 What is the degree of operating leverage for Cain Company for the current year?

The Cumberland Company provides the following information: Sales (250,000 units) \6 25,000 Manufacturing costs: Variable 212,500 Fixed 37,500 Selling and administrative costs: Variable 100,000 Fixed 25,000 What is the variable cost per unit for Cumberland?

Assume the following cost behavior data for Graphic Arts Company: Sales price \ 18.00 per unit Variable costs \ 13.50 per unit Fixed costs \ 22,500 Tax rate 40\% What volume of sales dollars is required to earn an after-tax income of $40,500?

In multiple-product analysis, the break-even units for each product will change as the sales mix changes.

The margin of safety is

Assuming all other things are the same, if there was an increase in the break-even point, contribution margin per unit must have:

Hologram Printing Company projected the following information for next year: Selling price per unit \7 5.00 Contribution margin per unit \3 0.00 Total fixed costs \1 20,000 Tax rate 40\% How many units must be sold to obtain an after-tax profit of $67,500?

Nonesuch Company sells only one product at a regular price of $7.50 per unit. Variable expenses are 60 percent of sales and fixed expenses are $30,000. Management has decided to decrease the selling price to $6.00 in hopes of increasing its volume of sales. What is the contribution margin ratio when the selling price is reduced to $6 per unit?

The variable cost ratio

On a profit-volume graph, the __________ line intersects the horizontal axis at the break-even point.

The Solemn Company has an operating leverage of 2. Sales for the current year are $100,000 with a contribution margin of $50,000. Sales are expected to be $150,000 in next year. Operating income for the current year can be expected to increase by what amount over the previous year?

Which of the following assumptions is NOT necessary for cost-volume-profit analysis?