Exam 3: Cost-Volume-Profit Analysis

A widely used approach that is used to recognize uncertainty about individual economic variables while obtaining an immediate financial estimate of the consequences of possible prediction errors is:

The breakeven sales volume of the Encore Co. is 800,000 units. If the variable cost per unit increases by $1.50 and the selling price per unit increases by $2 next year, then the new breakeven point will be:

Which of the following is not an assumption of CVP analysis?

Terry's Donut Shop had the following activity for December: Total donuts sold 17,000 Total revenues \ 595,000 Total fixed costs 99,000 Total variable costs 357,000 What was Terry's margin of safety, in dollars?

Dynamite Co. has fixed costs of $50,000 (with 60% attributable to manufacturing overhead) and breakeven sales of $500,000. What is its projected gross margin at $1,000,000 in sales?

The contribution margin ratio of Yoshi enterprises is 60%. If total fixed costs are $200,000, then what is the cost of producing and selling $1,000,000 of Yoshi's product?

Because managers cannot usually be certain about their cost function, they also cannot be certain about the level of sales needed to earn a target profit.

Smith Oil Co. expects sales of $1,000,000 and total variable costs of $600,000 for 2016. Total budgeted fixed costs are $200,000. What is the dollar amount of sales necessary to achieve pre-tax profits of $400,000?

Austin Co. sells three products and incurs $18,000 per period in fixed costs. The three products have the following characteristics: Product Price Variable Cost Sales Mix P \ 40 \ 20 3 units Q 20 10 9 units R 49 24 12 units How many units of Product P will be sold at the breakeven point?

Melissa Moser expects next year's degree of operating leverage to increase. Which of the following statements is consistent with Melissa's expectations?

Ruben, Inc. is a management consulting firm specializing in pension plans. Its billing rate to clients is $120 per hour, and variable costs average $80 per hour. Fixed costs are $24,000 per month. The income tax rate is 20%. If variable costs increase by 10% and management increases its billing rate by 8%, what is the effect on the breakeven point, in billable hours?

Data extracted from the accounting information system of Turner Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x. The point where the dashed line intersects the solid line is the:

All of the following data can be used to develop CVP analysis except:

CVP analysis can be used to make decisions about discretionary expenditures, such as:

Data extracted from the accounting information system of Turner Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x. The vertical ("y") axis shows:

Somer Company's sales increased, but its pre-tax profits did not change. If the increase was within the relevant range, which of the following statements is true?

Accountants develop CVP analysis to help managers decide which products or services to emphasize.

Mike Moser prefers alternatives that lower the degree of operating leverage. Which of the following statements about Mike is probably true?

Sales mix reflects:

A limiting assumption in CVP analysis is that: