Exam 22: Cost-Volume-Profit

Hurly Co. has fixed costs totaling $165000. Its unit contribution margin is $1.50 and the selling price is $5.50 per unit. Instructions Compute the break-even point in units.

Kaplan Inc. produces flash drives for computers which it sells for $27 each. The variable cost to make each flash drive is $13. During April 700 drives were sold. Fixed costs for April were $2 per unit for a total of $1400 for the month. How much is the monthly break-even level of sales in dollars for Kaplan?

Usher Inc. has prepared the following cost-volume-profit graph: Instructions For the items listed below enter to the left of the item the letter in the graph which best corresponds to the item.

Dollywood Corporation accumulates the following data concerning a mixed cost using miles as the activity level. Milles Driven Total Cost Milles Driven Total Cos January 10,000 \ 16,500 March 9,000 \ 12,500 February 8,000 \ 14,500 April 7,000 \ 12,000 Instructions Compute the variable and fixed cost elements using the high-low method.

Englehart Inc. reports the following operating results for the month of August: Sales $450000 (units 5000); variable costs $280000; and fixed costs $115000. Management is considering the following independent courses of action to increase net income. 1. Increase selling price by 10% with no change in total variable costs. 2. Reduce variable costs to 65% of sales. 3. Reduce fixed costs by $15000. Instructions Compute the net income to be earned under each alternative. Which course of action will produce the highest net income?

Keene Inc. produces flash drives for computers which it sells for $20 each. Each flash drive costs $6 of variable costs to make. During March 1000 drives were sold. Fixed costs for March were $5.60 per unit for a total of $5600 for the month. If variable costs decrease by 10% what happens to the break-even level of units per month for Keene?

Hayduke Corporation reported the following results from the sale of 5000 units in May: sales $300000 variable costs $180000 fixed costs $90000 and net income $30000. Assume that Hayduke increases the selling price by 5% on June 1. How many units will have to be sold in June to maintain the same level of net income?

Fixed costs are $900000 and the variable costs are 75% of the unit selling price. What is the break-even point in dollars?

If the activity level increases 10% total variable costs will

Bill Braddock is considering opening a Fast 'n Clean Car Service Center. He estimates that the following costs will be incurred during his first year of operations: Rent $9200 Depreciation on equipment $7000 Wages $16400 Motor oil $2.00 per quart. He estimates that each oil change will require 5 quarts of oil. Oil filters will cost $3.00 each. He must also pay The Fast 'n Clean Corporation a franchise fee of $1.10 per oil change since he will operate the business as a franchise. In addition utility costs are expected to behave in relation to the number of oil changes as follows: Number of Oil Changes Utility Costs 4,000 \ 6,000 6,000 \ 7,300 9,000 \ 9,600 12,000 \ 12,600 14,000 \ 15,000 Bill Braddock anticipates that he can provide the oil change service with a filter at $25 each. Instructions (a) Using the high-low method determine variable costs per unit and total fixed costs. (b) Determine the break-even point in number of oil changes and sales dollars. (c) Without regard to your answers in parts (a) and (b) determine the oil changes required to earn net income of $20000 assuming fixed costs are $32000 and the contribution margin per unit is $8.

Landon Company developed the following information for 2014: Selling and Administrative Expenses Variable \ 30,000 Fixed \ 50,000 Units in beginning inventory -0- Units sold 26,000 Direct materials used \ 65,000 Direct labor \ 105,000 Units produced 30,000 Manufacturing overhead Variable \ 40,000 Fixed \ 90,000 Instructions Answer the following questions. (a) What would be the amount of the cost of goods sold under the absorption costing approach? (b) What would be the cost of the ending inventory under the variable costing approach? (c) Which approach would show the greater income for 2014 and by how much?

Kipling Company has sales of $1500000 for the first quarter of 2016. In making the sales the company incurred the following costs and expenses. Variable Fixed Product costs \ 500,000 \ 550,000 Selling expenses 100,000 75,000 Administrative expenses 80,000 67,000 Instructions Calculate net income under CVP for 2016.

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

The high-low method is often employed in analyzing

At break-even point a company sells 1200 widgets. Its selling price is $6 per widget variable cost is $2 per widget and its fixed cost is $4 per widget. Instructions If it sells 200 additional widgets determine the company's incremental profit.

Which of the following costs are variable? Cost 10.000 Units 30.000 Units 1. \ 100,000 \ 300,000 2. 40,000 240,000 3. 90,000 90,000 4 50.000 150.000

The contribution margin ratio is calculated by multiplying the unit contribution margin by the unit sales price.

In applying the high-low method which months are relevant? Month Miles Total Cost January 80,000 \ 192,000 February 50,000 160,000 March 70,000 188,000 April 90,000 260,000

If a company had a contribution margin of $1000000 and a contribution margin ratio of 40% total variable costs must have been

Sandel Company makes 2 products footballs and baseballs. Additional information follows: Footballs Baseballs Units 4,000 2,500 Sales \ 60,000 \ 25,000 Variable costs 36,000 7,000 Fixed costs 9,000 9,000 Net income Profit per unit \ 3.75 \ 3,60 Instructions Sandel has unlimited demand for both products. Therefore which product should Sandel tell his sales people to emphasize?