Exam 3: Cost-Volume-Profit Analysis

Anglico's most recent income statement is given below. Required: a. Contribution margin per unit is $ ________ per unit b. If sales are doubled total variable costs will equal $ ________ c. If sales are doubled total fixed costs will equal $ ________ d. If 20 more units are sold, profits will increase by $ ________ e. Compute how many units must be sold to break even. # ________ f. Compute how many units must be sold to achieve operating income of $60,000.# ________ g. Compute the revenue needed to achieve an after tax income of $30,000 given a tax rate of 30%. $ ________

Service companies and not-for-profit organizations ________.

In the profit-volume graph the point at which the profit-volume line and x-axis intersect is the breakeven point.

Quality Stores, Inc., sells several products. Information of average revenue and costs is as follows: The revenues that the company must earn annually to make a profit of $144,000 are ________. (Round the final answer to the nearest dollar.)

A company with a higher degree of operating leverage is at greater risk during economic downturns because of its higher fixed costs.

To apply CVP analysis in a not-for profit organization ________.

Sensitivity analysis is a simple approach to recognizing uncertainty.

Assume the following cost information for Fernandez Company: What minimum volume of sales dollars is required to earn an after-tax net income of $40,000? (Do not round interim calculations and round the final answer to the nearest dollar.)

The following information is for High Corp: If targeted operating income is $50,000, then targeted sales revenue is ________. (Round the final answer to the nearest dollar.)

Ruben is a travel agent. He intends to sell his customers a special round-trip airline ticket package. He is able to purchase the package from the airline 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 $5,500 in advertising costs. What is the contribution margin per ticket package?

Explain sensitivity analysis and how do managers use sensitivity analysis to evaluate its implications?

Sparkle Jewelry sells 800 units resulting in $9,000 of sales revenue, $3,000 of variable costs, and $1,500 of fixed costs. Contribution margin per unit is ________. (Round the final answer to the nearest cent.)

What is meant by the term breakeven point? Why should a manager be concerned about the breakeven point and what helps them study the breakeven analysis?

The following information is for the Jeffries Corporation: What is the breakeven point, assuming the sales mix consists of three units of Product A and one unit of

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 provides the greatest degree of operating leverage if 600 people attend?

Which of the following is an assumption of CVP analysis?

Orion Company sells several products. Information of average revenue and costs is as follows: The company sells 12,000 units at the end of the year. The contribution margin per unit is ________.

Assume only the specified parameters change in a cost-volume-profit analysis. If the contribution margin increases by $6 per unit, then ________.

If a company would like to increase its degree of operating leverage it should ________.

A firm operating at breakeven point will pay an income tax of 10%.