Exam 7: Cost-Volume-Profit Analysis

Which of the following statements is true if the sales price per unit decreases while the variable cost per unit and total fixed costs remain constant?

The Winner's Circle sells two products, medals and trophies. The Winner's Circle predicts that it will sell 25,000 medals and 5,000 trophies in the next period. The unit contribution margins for medals and trophies are $6.00 and $15.00, respectively. What is the weighted-average unit contribution margin?

If total fixed expenses are $65,000, the target operating income is $15,000 and the contribution margin is $25 per unit, the sales needed to achieve the target operating income will be 3,200 units.

Palmer's Gourmet Chocolates produces and sells assorted boxed chocolates. The unit selling price is $50, unit variable costs are $25, and total fixed costs are $2,000. How many boxes of chocolates must Palmer's Gourmet Chocolates sell to breakeven?

Deen Enterprises currently sells its products for $1,200 per unit. Management is contemplating a 10% 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 $147,000 per year. What is the breakeven point in units at the anticipated selling price per unit next year?

The contribution margin per unit is how much profit each unit contributes after fixed costs are considered.

If unit sales prices, unit variable costs and total fixed costs all remain the same, but the sales mix changes, there is an effect on the breakeven point.

Monroe Manufacturing produces and sells a product with a price of $100/unit. The following data has been prepared for its estimated upper and lower levels of activity. The only variable expenses for this company are

All else being equal, a company earns more income by selling low-contribution margin products than by selling an equal number of high-contribution margin products.

If target sales in units is 80,000, total fixed expenses are $10,000, and the unit contribution margin is $0.30, what is the target operating income?

If the contribution margin ratio is 45%, target operating income is $50,000, and the sales revenue needed to achieve the target operating income is $300,000, what are total fixed expenses?

The selling price of a particular product is $38.00 per unit, fixed costs total $175,000, and the breakeven sales in dollars is $875,000, what will the variable expense per unit be?

Martin Enterprises has a predicted operating income of $140,000. Its total variable expenses are $50,000 and its total fixed expenses are $20,000. The unit contribution margin for the company's sole product is $10. The number of units that Martin Enterprises needs to sell to achieve the predicted operating income would be

Fast as Lightning is an oil change service drive-through that charges each customer $24.00 for an oil and filter change service. Fast as Lightning has found that it costs its business $16.00 per oil and filter change. Monthly fixed costs are $44,000; current sales are 8,000 services. a. Compute the breakeven sales in units. b. Compute Fast as Lightning's margin of safety in units and sales dollars. c. Compute Fast as Lightning's margin of safety as a percentage. d. Compute Fast as Lightning's operating leverage factor. e. Compute Fast as Lightning's % of operating income decline if sales fall by 18%.

All of the following would be considered a company with high operating leverage, except

Sandy Incorporated sells two products, larges and smalls. Larges sell for $90 per unit with variable costs of $60 per unit. Smalls sell for $30 per unit with variable costs of $10 per unit. Total fixed costs for the company are $41,600. Sandy Incorporated typically sells three larges for every two smalls. What is the breakeven point in total units?

Crossroads Packaging Co. has budgeted the following amounts for its next fiscal year: To maintain the original breakeven sales in units if fixed expenses were to increase by 10%, the selling price per unit would have to be

Martin Enterprises has a predicted operating income of $140,000. Its total variable expenses are $50,000 and its total fixed expenses have doubled from $20,000 to $40,000. The unit contribution margin for the company's sole product is $10. The number of units that Martin Enterprises needs to sell to achieve the predicted operating income would be

Total contribution margin less total fixed expenses equals

Cartman Enterprises management has budgeted the following amounts for its next fiscal year: If Cartman Enterprises can reduce fixed expenses by $16,000, how will breakeven sales in units be affected?