Exam 16: Cost-Volume-Profit Analysis

Sweet Things, Inc. had the following results for the year ended 31 December. Volume was 60 000 units this year. If volume increased to 70 000 units, what should Sweet Things, Inc. have expected net profit to be next year?

Under the assumptions used in cost-volume-profit analysis, as volume increases:

Jany Ltd produces 20 000 golf balls. Each golf ball sells for $4, and it costs $50 000 to produce the golf balls. The cost of the fixed plant and equipment needed to produce the golf balls is $15 000 per period. The break-even point for Jany Ltd is (to the nearest integer):

If a company is currently operating at its break-even point, which of the following statements is true? (Income tax considerations are ignored.)

Extra Extra Newspaper Company had the following results this year. How many additional units does Extra Extra have to sell to double current profit?

Jany Ltd produces 20 000 golf balls. Each golf ball sells for $4, and it costs $50 000 to produce the golf balls. However, Jany Ltd is considering switching to golf clubs, which have a contribution margin of $10. The cost of the fixed plant and equipment needed to produce the golf balls is $15 000. Jany Ltd expects to sell 1000 golf clubs per period at $100 each. Which of the following is true?

Extra Extra Newspaper Company had the following results this year. What is Extra Extra's contribution margin per unit?

The point where profit equals the total of fixed and variable costs is called the:

Heath Ltd owns and operates a textile manufacturing plant. Garments are sold for $40 each. The fixed plant and equipment costs are $51 600 per annum. Producing each garment incurs $15 of labour costs and $7.80 of material costs. If Heath Ltd is considering advertising costs of $4300, how many garments must be sold to break even?

Heath Ltd owns and operates a textile manufacturing plant. Garments are sold for $40 each. The fixed plant and equipment costs are $51 600 per annum. Producing each garment incurs $15 of labour costs and $7.80 of material costs. Heath Ltd's contribution margin per garment is:

Heath Ltd owns and operates a textile manufacturing plant. Garments are sold for $40 each. The fixed plant and equipment costs are $51 600 per annum. Producing each garment incurs $15 of labour costs and $7.80 of material costs. To make a profit of $4000, Heath Ltd must produce (to the nearest integer):

Which of the following situations would be most likely to violate cost-volume-profit assumptions about fixed costs?

Explain how the cost-volume-profit (CVP) assumptions about fixed costs may be violated. Give two examples of situations that may cause these assumptions to be violated.

The dollar value that is available to be contributed to fixed costs after deducting variable expenses from sales is called the:

The break-even point is the point at which the total contribution margin is equal to total:

The sales price is $60 per unit, variable costs are $25 per unit, and fixed costs are $175 000. What level of sales, in units, would achieve a target profit of $350 000?

List and explain two assumptions about costs and activities that are made in cost-volume-profit analysis.

Heath Ltd owns and operates a textile manufacturing plant. Garments are sold for $40 each. The fixed plant and equipment costs are $51 600 per annum. Producing each garment incurs $15 of labour costs and $7.80 of material costs. If Heath Ltd's cost of plant and equipment increases, which of the following is true?

A company's current sales are $400 000 at a volume of 10 000 units. Fixed costs are $120 000 and variable costs are $30 per unit. What is the company's break-even sales volume in units?

The contribution margin is equal to sales revenue less fixed costs.