Exam 8: Cost-Volume-Profit Relationships

Last year, Perry Company reported profits of $4,200. Its variable expenses totalled $66,000 or $6 per unit. The unit contribution margin was $3.00. The break-even point in units for Perry Company is:

Reference: 08-01 The following is Addison Corporation's contribution format income statement for last month: Sales \ 1,000,000 Less variable expenses 700,000 Contribution margin 300,000 Less fixed expenses 180,000 Net income \ 120,000 The company has no beginning or ending inventories. A total of 20,000 units were produced and sold last month. -If sales increase by 100 units, by how much should net income increase

The break-even point in sales dollars for Rice Company is $360,000 and the company's contribution margin ratio is 30%. If Rice Company desires an income of $84,000, sales would have to total?

Reference: 08-11 Hurst Co. manufactures and sells a single product. Price and cost data regarding this product are as follows: Selling price \ 40 per unit Variable manufacturing costs \ 20 per unit Variable selling \& admin. expenses \ 6 per unit Fixed manufacturing overhead \ 208,000 per year Fixed selling \& admin. expenses \ 324,000 per year -How many units need to be sold to earn an annual net income equal to 10% of sales

Reference: 08-02 The following is Allison Corporation's contribution format income statement for last month: Sales \ 800,000 Less variable expenses 300,000 Contribution margin 500,000 Less fixed expenses 400,000 Net income \ 100,000 The company has no beginning or ending inventories. The company produced and sold 10,000 units last month. -What is the company's contribution margin ratio?

Reference: 08-03 McGordon Corporation has provided the following data: Sales \ 800,000 Variable expenses 560,000 Fixed expenses 168,000 -The contribution margin is?

A product sells for $20 per unit, and has a contribution margin ratio of 40%. Fixed expenses total $120,000 annually. How many units must be sold to yield a profit of $30,000?

Lindsay Company reported the following results from sales of 5,000 units for the month o? June: Sales \ 200,000 Variable expenses 120,000 Fixed expenses 60,000 Assume that Lindsay increases the selling price of the product by 10% on July 1. How many units would have to be sold in July in order to generate a profit of $20,000?

In two companies making the same product and with the same total sales and total expenses, the contribution margin ratio will tend to be lower in the company with a higher proportion of fixed expenses in its cost structure.

The following information pertains to Rica Company: Sales (50,000 units) \ 1,000,000 Manufacturing costs: Variable 340,000 Fixed 70,000 Selling and admin expenses: Variable 10,000 Fixed 60,000 How much is Rica's break-even point in number of units?

For a given level of sales, a low contribution margin ratio will produce less net income than a high contribution margin ratio.

The inclusion of fixed manufacturing costs in an absorption costing statement can lead to difficulties is making some decisions based upon product costs.

The difference between total sales in dollars and total variable expenses is called:

Reference: 08-04 The following data relate to a company that produces and sells a travel guide that is updated monthly: Fixed costs: Copy editing \ 6,000 Art work 2,000 Typesetting 72,000 Variable costs: Printing and binding \ 3.20 per copy Bookstore discounts 4.00 per copy Salespersons' commissions 0.50 per copy Author's royalties 2.00 per copy Each book sells for $20.00. The company sold 8,000 books in June and 10,000 books in July. -The break-even point in units is?