Exam 8: Cost-Volume-Profit Analysis

Which of the following statements is true concerning the use of linear analysis at high activity levels (above the range for which the company's facility was designed)?

The Millennium Company produces two types of products: Quality and Superior. The company expects to sell 1,200 units of Quality and 800 units of Superior. A projected income statement for the firm as a whole follows: Sales £400,000 Less: Variable costs 100,000 Contribution margin £300,000 Less: Fixed costs Operating income £25,000 a.Determine the break-even point in terms of sales revenue. b.Determine the sales revenue necessary to generate a before-tax profit of £300,000. c.Determine the sales revenue necessary to generate an after-tax profit of £270,000 if the tax rate is 40 per cent.

Camp Gordon has annual fixed operating costs of £150,000 and variable cost of £550 per camper. Total fees charged to campers amount to £500 each. The camp expects 350 campers next summer. Projected government grants are £95,000. How much must Camp Gordon raise from other sources to break even?

When a company sells more units than the break-even point,

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

The contribution margin at the break-even point

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. If sales increase by £60,000, what will happen to profit?

Product 1 has a contribution margin of £6.00 per unit, and Product 2 has a contribution margin of £7.50 per unit. Total fixed costs are £300,000. Sales mix and total volume varies from one period to another. Which of the following is TRUE?

Information about two products is as follows: Froduct C Product D Selling price per unit £20 £25 Variable costs per unit Contribution margin per unit The firm expects 60 per cent of its sales (in units) to be Product C (a sales mix of 6:4). Fixed costs are expected to be £82,000. Break-even in units would be Product C Product D A) 1,200 units 800 units B) 2,460 units 1,312 units C) 18,000 units 14,000 units D) 6,000 units 4,000 units

Total contribution margin is calculated by subtracting

Which of the following items would NOT be considered in cost-volume-profit analysis?

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 monetary sales level required to break even at the old price of £7.50?

Figure 8-2 Lewis Production Company had the following projected information for 2011: Selling price per unit £150 Variable cost per unit £90 Total fixed costs £300,000 -Refer to Figure 8-2. What is the contribution margin ratio?

Figure 8-5 Information about the Harmon Company's two products includes: Product X Product Y Unit selling price £9.00 £9.00 Unit variable costs: Manufacturing £5.25 £6.75 Selling .75 .75 Total £6.00 £7.50 Monthly fixed costs are as follows: Manufacturing £82,500 Selling and administrative Total £127,500 -Refer to Figure 8-5. If the sales mix in units is 50 per cent Product X and 50 per cent Product Y, the monthly break-even total monetary sales is

On a profit-volume graph, the intersection of the profit line with the vertical axis provides a

Which of the following statements is TRUE?

Assuming all other things are the same, selling price per unit must have ____ if there was a decrease in the break-even point.

Cost-volume-profit models assume that

Figure 8-5 Information about the Harmon Company's two products includes: Product X Product Y Unit selling price £9.00 £9.00 Unit variable costs: Manufacturing £5.25 £6.75 Selling .75 .75 Total £6.00 £7.50 Monthly fixed costs are as follows: Manufacturing £82,500 Selling and administrative Total £127,500 -Refer to Figure 8-5. What is the total monthly sales volume in units required to break even when the sales mix in units is 70 per cent Product X and 30 per cent Product Y?

Figure 8-2 Lewis Production Company had the following projected information for 2011: Selling price per unit £150 Variable cost per unit £90 Total fixed costs £300,000 -Refer to Figure 8-2. What is the profit when one unit more than the break-even point is sold?