Exam 3: Cost-Volume-Profit Analysis

Ferguson Co. incurs $568,000 in fixed costs while producing three products with the following characteristics: Sales Mix Unit Contribution Contribution Product (Units) Margin Margin Ratio 5 \ 900 45\% 3 600 40\% 2 400 35\% At the breakeven point, what is the dollar sales volume for Product Q?

When performing CVP analysis for a multi-product organization:

Stain Manufacturer's contribution margin is $200, after-tax income is $96, and the tax rate is 40%. What are the fixed costs?

How is the relevant range of activity related to CVP analysis?

Compared to organizations with low operating leverage, organizations with high operating leverage have:

Del Co. has fixed costs of $100,000 and breakeven sales of $800,000. What is its projected profit at $1,200,000 in sales?

If the sales mix changes:

If all other factors remain unchanged, a 10% decrease in both the selling price and variable costs for a product will:

Which of the following is the amount by which sales could drop before profits reach the breakeven point?

Chisholm Co. has a contribution margin ratio of 40% and a breakeven point of $200,000 in sales. If the firm reports net income of $50,000 after taxes of 50%, what were total sales for the year?

In CVP analysis, managers usually assume that the revenue function is linear. Which of the following equations best represents a linear revenue function if the cost is a variable cost?

The assumption of cost function linearity means: I. Fixed costs remain fixed. II. Sales mix remains constant. III. The average cost per unit remains constant.

Apple Enterprises projects the following for next year: Sales \ 300,000 Fixed costs \ 100,000 After-tax profit \ 12,000 Tax rate 40\% What is the firm's margin of safety in revenue?

When performing CVP analysis for a single product:

If the selling price per unit and the variable cost per unit both increase by 5%, what is the effect on the contribution margin per unit and on the contribution margin ratio? Contribution margin per unit Contribution margin ratio a) Increase Increase b) Increase No effect c) Decrease No effect d) Decrease Increase

BETA sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows: If BETA increases its sales volume by 10%, what will happen to its breakeven point?

Sunny Manufacturing sells its product for $40 per unit. Last year, variable costs per unit were $15, and fixed costs were $400,000. How many units must be sold this year to earn a pre-tax profit of $45,000 if variable costs increase by 10%?

The contribution margin ratio is:

The Puppet Co. has the following unit and mix data: $\begin{array}{lll}&\text { Do }&\text { Dah }&\text { Total }\\\text { Unit sales price } & \$ 5.00 & \$ 4.00 \\\text { Unit contribution margin } & 0.75 & 0.6 \\\text { Sales mix }(\$) & 80 \% & 20 \%\\\text { Fixed costs }&&&\$99,000\\\text { Target profit }&&&24,750\end{array}$ How many units of Dah must be sold at the breakeven point?

Grady, Inc. produces a single product and projects the following costs for a normal month in which 100 units are produced and sold: Manufacturing Non-manufacturing Fixed costs \ 8,000 \ 5,000 Total variable costs 7,700 6,050 The selling price per unit is $300. What volume, in units, must Grady sell to break even?