Exam 8: Cost-Volume-Profit Analysis

Which of the following statements is TRUE about relevant range?

Which of the following assumptions does NOT pertain to cost-profit-volume analysis?

Refer to Figure 8-8. Suppose Urban could reduce setup costs by £300 per setup and could reduce the number of engineering hours needed to 1,400 hours. How many units must be sold to break even in this case?

The following information is provided: Sales price per unit £70 Variable cost per unit £45 Fixed costs £50,000 Expected sales 5,000 units The margin of safety is

The following data pertain to the three products produced by Alberts Ltd.: A B C Selling price per unit £5.00 £7.00 £6.00 Variable costs per unit 4.00 5.00 3.00 Contrihution margin ner unit £.100 £200 £300 Fixed costs are £90,000 per month. Sixty per cent of all units sold are Product A, 30 per cent are Product B, and 10 per cent are Product C. What is the monthly break-even point for total units?

Figure 8-6 The following diagram is a cost-volume-profit graph for a manufacturing company: -Refer to Figure 8-6. The difference between line AB and line AC (area BAC) is the

Assuming all other things are equal, fixed costs must have ____ if there was a decrease in the break-even point.

At a price of £32, the estimated monthly sales of a product are 12,000 units. Variable costs include manufacturing costs of £18 and distribution costs of £6. Fixed costs are £40,000 per month. Required: Determine each of the following values: a.Unit contribution margin b.Monthly break-even unit sales volume c.Before-tax monthly profit d.Monthly margin of safety in units

Figure 8-1 The Kringel Company provides the following information: Sales (200,000 units) £500,000 Manufacturing costs: Variable 170,000 Fixed 30,000 Selling and administrative costs: Variable 80,000 Fixed 20,000 -Refer to Figure 8-1. What is the break-even point in units for Kringel?

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

A profit-volume graph

Figure 8-3 Sarah Smith, a sole proprietor, has the following projected figures for next year: Selling price per unit £150.00 Contributi on margin per unit £45.00 Total fixed costs £630,000 -Refer to Figure 8-3. What is the break-even point in monetary terms?

In a cost-volume-profit graph, the slope of the total revenue line represents

Anthony Industries developed the following income statement using a contribution margin approach: ANTHONY INDUSTRIES PROJECTED INCOME STATEMENT FOR THE CURRENT YEAR ENDING DECEMBER 31 Sales £750,000 Less variable costs: Variable manufacturing costs £280,000 Variable selling costs \_120,000 Total variable costs Contribution margin £350,000 Less fixed costs: Fixed manufacturing costs £130,000 Fixed selling and administrative costs Total fixed costs \_210,000 Operating income £140,000 The projected income statement was based on sales of 100,000 units. Anthony has the capacity to produce 120,000 units during the year. a.Determine the break-even point in units. b.The sales manager believes the company could increase sales by 8,000 units if advertising expenditures were increased by £22,000. Determine the effect on income if the company increases advertising expenditures. c.What is the maximum amount the company could pay for advertising if the advertising would increase sales by 8,000 units?

For each of the following situations, draw a graph that best describes the cost behaviour pattern. The vertical axis represents costs, and the horizontal axis represents volume. a.Direct materials per unit b.Depreciation expense on a building per unit c.An employee paid £50 per hour with a guaranteed salary of £1,000 per week d.A consultant paid £100 per hour with a maximum fee of £2,000 e.Salaries of teachers where each teacher can handle a maximum of 15 students

The range of operations within which a linear cost function is valid is called:

Figure 8-4 Dirth Company sells only one product at a regular price of £7.50 per unit. Variable expenses are 60 per cent 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. -Refer to Figure 8-4. What is the new break-even point in units for Dirth Company when the selling price is £6.00?

Zachary Plumbing Company has the following information for 20011: Selling price per unit £10 Variable costs per unit £7 Fixed costs £1,500 a.Profit line b.Intersection of profit line and vertical axis c.Break-even point d.Profit area e.Loss area

Figure 8-7 The income statement for Thomas Manufacturing Company for 2011 is as follows: Sales (10,000 units) £120,000 Variable expenses 72,000 Contribution margin £48,000 Fixed expenses 36,000 Operating income £12,000 -Refer to Figure 8-7. What is the contribution margin per unit?

Figure 8-3 Sarah Smith, a sole proprietor, has the following projected figures for next year: Selling price per unit £150.00 Contributi on margin per unit £45.00 Total fixed costs £630,000 -Refer to Figure 8-3. How many units must be sold to obtain a target before-tax profit of £270,000?