Exam 3: Cost-Volume-Profit Analysis

Answer the following questions using the information below: The following information is for Alex Corp: -If the sales mix shifts to one unit of Product X and two units of Product Y, then the breakeven point will ________.

The following information is for High Corp: The number of units that High Corp must sell to reach targeted operating income of $25,000 is ________. (Round up to the nearest unit.)

Maria makes tortillas and sells them from her house. She is concerned about purchasing too many ingredients and having to throw away unsold tortillas at the end of the day. It costs her $5.00 to make 100 tortillas and she sells them for $20.00 per 100. She has kept track of sales and discovered that she can sell 1,500 tortillas about 25% of the time, 1,000 tortillas about 50% of the time and only 500 tortillas the rest of the time. What is the minimum number of tortillas should she make daily to maximize profit? Round to the nearest 100 tortillas.

Pacific Company sells only one product for $12 per unit, variable production costs are $3 per unit, and selling and administrative costs are $1.70 per unit. Fixed costs for 11,000 units are $6,000. The operating income is ________ when 11,000 units are sold.

The risk-return tradeoff across alternative cost structures can be measured as operating leverage.

Assume only the specified parameters change in a CVP analysis. The contribution margin percentage increases when ________.

Only variable production costs are used when calculating contribution margin.

Sky High sells helicopters. During the current year, 130 helicopters were sold resulting in $820,000 of sales revenue, $250,000 of variable costs, and $345,000 of fixed costs. Breakeven point in units is ________.

Fixed costs equal $16,000, unit contribution margin equals $35, and the number of units sold equal 1,300. Operating income is ________.

One of the first steps to take when using CVP analysis to help make decisions is ________.

The margin of safety refers to how many more sales are needed in order to breakeven,

The difference between total revenues and total variable costs is called profit margin.

If breakeven point is 1,000 units, each unit sells for $31, and fixed costs are $30,000, then on a graph the ________.

In the graph method of CVP analysis, the horizontal line above the x-axis represents the total cost line.

The breakeven point is the activity level where ________.

If variable costs per unit increase, then the breakeven point will decrease.

James Corporation gathered the following information: Required: a.Calculate the fixed costs, assuming breakeven revenue is $2,000,000. b.Calculate sales volume in dollars to produce an after-tax net income of $150,000.

Companies that are substituting variable costs for fixed costs receive a greater per unit return above the breakeven point.

Which of the following is true of net income?

Frazer Corp sells several products. Information of average revenue and costs is as follows: If the company decides to lower its selling price by 14.25%, but continues to sell 16,000 units, the operating income is reduced by ________.