Exam 3: Cost-Volume-Profit Analysis

Which of the following will increase a company's breakeven point?

Suppose a company decided to automate a production line. Explain what effects this would have on a company's cost structure using CVP terminology. Could these changes have any possible negative effect on the firm?

A planned increase in advertising would be considered an increase in variable costs in CVP analysis.

A revenue driver is defined as ________.

Query Company sells pillows for $25.00 each. The manufacturing cost, all variable, is $10 per pillow. The company is planning on renting an exhibition booth for both display and selling purposes at the annual crafts and art convention. The convention coordinator allows three options for each participating company. They are: 1.paying a fixed booth fee of $5,010, or 2.paying an $4,000 fee plus 10% of revenue made at the convention, or 3.paying 20% of revenue made at the convention. Required: a.Compute the breakeven sales in pillows of each option. b.Which option should Query Company choose, assuming sales are expected to be 800 pillows?

Assume the following cost information for Fernandez Company: What is the number of units that must be sold to earn an after-tax net income of $50,000? (Do not round interim calculations and round the final answer to the nearest unit.)

Ken's Beer Emporium sells beer and ale in both pint and quart sizes. If Ken's sells twice as many pints as it sells quarts, and sells 2,400 items total, it will sell 800 quarts of ale.

Tony Manufacturing produces a single product that sells for $80. Variable costs per unit equal $50. The company expects total fixed costs to be $82,000 for the next month at the projected sales level of 2,800 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately. Suppose that management believes that a 14% reduction in the selling price will result in a 14% increase in sales. If this proposed reduction in selling price is implemented ________.

MyArt sells framed art prints for $100. The unit variable cost per phone is $50 plus a selling commission of 10%. Fixed manufacturing costs total $1,250 per month, while fixed selling and administrative costs total $2,500. Required: a.What is the contribution margin per print? b.What is the breakeven point in prints? c.How many prints must be sold to earn pretax income of $7,500?

Answer the following questions using the information below: Southwestern College is planning to hold a fund raising banquet at one of the local country clubs. It has two options for the banquet: Southwestern College has budgeted $1,800 for administrative and marketing expenses. It plans to hire a band which will cost another $800. Tickets are expected to be $30 per person. Local business supporters will donate any other items required for the event. -Kanga Company is considering two different production plans. Option one: Fixed costs of $10,000 and a breakeven point of 500 units. Option two: Fixed costs of $20,000 and a breakeven point of 700 units. Which option should Kanga choose if it is expecting to produce 600 units?

Jacob's Manufacturing sales is equal to production.If Jacob's Manufacturing presented a Financial Accounting Income Statement emphasizing gross margin showing operating income of $180,000. A Contribution Income Statement emphasizing contribution margin would show a different operating income.

Answer the following questions using the information below: Southwestern College is planning to hold a fund raising banquet at one of the local country clubs. It has two options for the banquet: Southwestern College has budgeted $1,800 for administrative and marketing expenses. It plans to hire a band which will cost another $800. Tickets are expected to be $30 per person. Local business supporters will donate any other items required for the event. -Which option has the lowest breakeven point?

The shorter the time horizon, the lower the percentage of total costs considered fixed.

Rosewood company sells wooden carvings for $300 each. The direct materials cost per unit is $160 and the direct labor is 2 hours at a rate of $26 per hour. Manufacturing overhead is applied on the basis of labor hours at a rate of $36 per hour. Rosewood makes and sells 1,000 units per period. How many units must Rosewood sell to breakeven?

The contribution margin income statement ________.

While-You-Train is a not-for-profit organization that aids the unemployed by supplementing their incomes by $7,000 annually, while they seek new employment skills. The organization has fixed costs of $200,000 and the budgeted appropriation for the year totals $750,000. How many individuals can receive financial assistance this year?

Which of the following statements is true?

The selling price per unit is $25, variable cost per unit $15, and fixed cost per unit is $4 when sales are 10,000 units. If one more unit is sold, operating income will increase by $6.

Beta Corp reported the following: Required: a.Compute contribution margin. b.Compute gross margin. c.Compute operating income.

Ruben intends to sell his customers a special round-trip airline ticket package. He is able to purchase the package from the airline carrier for $170 each. The round-trip tickets will be sold for $200 each and the airline intends to reimburse Ruben for any unsold ticket packages. Fixed costs include $5,140 in advertising costs. For every $27,000 of ticket packages sold, operating income will increase by ________.