Exam 7: Cost-Volume-Profit Analysis

Bernard Corporation gathered the following information for the year just ended: During the year, Bernard produced and sold 50,000 units of product at a selling price of $9.00 per unit. There was no beginning inventory of product at the start of the year. What is the contribution margin for the year?

All else being equal, a company with a low operating leverage will have

Gray Company sells two products, X and Y. For the coming year, Gray predicts the sale of 10,000 units of X and 20,000 units of Y. The contribution margins of the two products are $4 and $6, respectively. The weighted-average contribution margin per unit would be $5.00.

Barbara's Candles provides the following information about its single product. How many units must be sold to earn the targeted operating income?

Heavenly Cupcakes has a monthly target operating income of $12,000. Variable expenses are 40% of sales and monthly fixed expenses are $8,000. Requirements: a. What is the monthly margin of safety in dollars if the business achieves its operating income goal? b. What is the monthly margin of safety as a percentage of target sales in dollars? c. What is Heavenly Cupcakes' operating leverage factor at the target level of operating income?

Boss Enterprises currently sells its products for $40 per unit. Management is contemplating a 40% increase in the selling price for the next year. Variable costs are currently 40% of sales revenue and are not expected to change next year. Fixed expenses are $120,000 per year. What is the breakeven point in units at the current selling price?

The weighted average contribution margin will always be the same as the contribution margin of the highest-volume product.

Kent Coffee Haus sells Drip Coffee, Cappuccino, or Lattes. It sold 20,000 total cups of various coffee products last year. Drip Coffee outsold Cappuccino 2 to 1. Sales of Lattes were the same as sales of Drip Coffee. Fixed costs for the company are $15,000 and additional information follows: a. Calculate the sales mix percentage of all three products (based upon the number of cups). b. Calculate the weighted average contribution margin for all three types of drinks. c. Calculate the breakeven volume in number of cups. d. Calculate the breakeven sales in dollars.

The area to the right of the breakeven point and between the total revenue line and the total expense line represents

The selling price of a RoadKing bicycle is $700, unit variable costs are $350, and total fixed costs are $12,600. What are breakeven sales in dollars?

Company A has a higher margin of safety while Company B has a lower margin of safety. Company A would be considered ________ Company B when considering only margin of safety:

Stanley's Candies is considering building a new plant in Europe. It predicts sales at the new plant to be 40,000 units at $4.00/unit. Below is a listing of estimated expenses: A European firm was contracted to sell the product and will receive a commission of 10% of the sales price. No U.S. home office expenses will be allocated to the new facility. The unit variable cost for Stanley's Candies is

Garfield Corporation is considering building a new plant in Canada. It predicts sales at the new plant to be 50,000 units at $5.00/unit. Below is a listing of estimated expenses: A Canadian firm was contracted to sell the product and will receive a commission of 10% of the sales price. No U.S. home office expenses will be allocated to the new facility. The unit variable cost for Garfield Corporation is

Stanley's Candies is considering building a new plant in Europe. It predicts sales at the new plant to be 40,000 units at $4.00/unit. Below is a listing of estimated expenses: A European firm was contracted to sell the product and will receive a commission of 10% of the sales price. No U.S. home office expenses will be allocated to the new facility. The margin of safety percentage for Stanley's Candies is

To find the weighted average contribution margin, a company adds up the individual unit contribution margins of the different products and then divides by the number of different products.

Assuming no other changes in the cost-volume-profit relationship, which of the following will decrease the breakeven point in units?

Claudia Enterprises has budgeted the following amounts for its next fiscal year: If Claudia Enterprises can reduce fixed expenses by $12,000, how will breakeven sales in units be affected?

Barkley Company sells two products, red cups and black mugs. Barkley predicts that it will sell 2,500 red cups and 1,000 black mugs in the next period. The unit contribution margins for red cups and black mugs are $2.80 and $3.50, respectively. What is the weighted-average unit contribution margin?

Stanley's Candies is considering building a new plant in Europe. It predicts sales at the new plant to be 40,000 units at $4.00/unit. Below is a listing of estimated expenses. A European firm was contracted to sell the product and will receive a commission of 10% of the sales price. No U.S. home office expenses will be allocated to the new facility. The contribution margin ratio for Stanley's Candies is:

The horizontal line intersecting the vertical y-axis at the level of total cost on a CVP graph represents