Exam 22: Cost-Volume-Profit

The following monthly data are available for Fortner Industries which produces only one product which it sells for $18 each. Its unit variable costs are $8 and its total fixed expenses are $17000. Actual sales for the month of May totaled 2000 units. Instructions Compute the margin of safety in dollars for the company for May.

Contribution margin

How should mixed costs be classified in CVP analysis? What approach is used to effect the appropriate classification?

The increased use of automation and less use of the work force in companies has caused a trend towards an increase in

An assumption of CVP analysis is that all costs can be classified as either variable or fixed.

Webber Inc. developed the following information for its product: Per Unit Sales price \ 90 Variable cost Contribution margin Total fixed costs \ 1215.000 Instructions Answer the following independent questions and show computations using the contribution margin technique to support your answers. 1. How many units must be sold to break even? 2. What is the total sales that must be generated for the company to earn a profit of $60000? 3. If the company is presently selling 50000 units but plans to spend an additional $108000 on an advertising program how many additional units must the company sell to earn the same net income it is now making? 4. Using the original data in the problem compute a new break-even point in units if the unit sales price is increased 20% unit variable cost is increased by 10% and total fixed costs are increased by $236250.

Erickson Inc. makes student book bags that sell for $20 each. For the coming year management expects fixed costs to be $225000. Variable costs are $14 per unit. Instructions (a) Compute break-even sales in dollars using the mathematical equation. (b) Compute break-even sales using the contribution margin ratio. (c) Compute margin of safety ratio assuming actual sales are $937500. (d) Compute the sales required to earn net income of $150000 using the mathematical equation.

_________________ divided by the contribution margin ratio will give the amount of _________________ to break even.

Variable costs for Abbey Inc. are 25% of sales. Its selling price is $100 per unit. If Abbey sells one unit more than break-even units how much will profit increase?

Fixed costs normally will not include

If graphed fixed costs that behave in a curvilinear fashion resemble a(n)

Cost behavior analysis is a study of how a firm's costs

If the unit contribution margin is $1 and unit sales are 10000 units above the break-even volume then net income will be $10000.

In Henkel Company 50000 units are produced and 40000 units are sold. Variable manufacturing costs per unit are $8 and fixed manufacturing costs are $120000. The cost of the ending finished goods inventory under each costing approach is: Absorption Variable A) \ 104,000 \ 80,000 B) 104,000 100,000 C) 112,000 80,000 D) 1,120,000 100,000

A mixed cost has both selling and administrative cost elements.

Wendy Industries produces only one product. Monthly fixed expenses are $12000 monthly unit sales are 4000 and the unit contribution margin is $10. How much is monthly net income?

In applying the high-low method what is the unit variable cost? Month Miles Total Cost January 80,000 \ 192,000 February 50,000 160,000 March 70,000 188,000 April 90,000 260,000

Matt Sampson asks your help in understanding the term "activity index." Explain the meaning and importance of this term for Matt. (b) State the two ways that variable costs may be defined.

A CVP income statement provides more detail about specific variable and fixed-cost items.

Vintage Wines has fixed costs of $20000 per year. Its warehouse sells wine with variable costs of 80% of its unit selling price. How much in sales does Vintage need to break even per year?