Exam 20: Cost-Volume-Profit Analysis

If employees accept a wage contract that increases the unit contribution margin, the break-even point will decrease.

If fixed costs are $500,000 and variable costs are 60% of break-even sales, profit is zero when sales revenue is $930,000.

Racer Industries has fixed costs of $900,000. The selling price per unit is $250, and the variable cost per unit is $130. a. How many units must Racer sell in order to break even? b. How many units must Racer sell in order to earn a profit of $480,000? c. A new employee suggests that Racer Industries sponsor a 10K marathon as a form of advertising. The cost to sponsor the event is $7,200. How many more units must be sold to cover this cost?

Match each of the following costs with the graph (a-e) that best portrays its cost behavior as the number of units produced and sold increases. -Sales commissions of $6,000 plus $0.05 for each item sold A)Graph 1 B)Graph 2 C)Graph 3 D)Graph 4 E)Graph 5

Match each of the following descriptions with the appropriate term (a-e). -Vary(ies) in proportion to changes in activity levels A)Relevant range B)Break-even point C)Contribution margin D)Fixed costs E)Variable costs

Match each of the following descriptions with the appropriate term (a-e). -The relative distribution of sales among products sold by a company A)Profit-volume chart B)Cost-volume-profit chart C)Sales mix D)Operating leverage E)Margin of safety

Match each of the following descriptions with the appropriate term (a-e). -Plots only the difference between total sales and total costs A)Profit-volume chart B)Cost-volume-profit chart C)Sales mix D)Operating leverage E)Margin of safety