Exam 7: Cost-Volume-Profit Analysis

Management at the Forrest Company currently sells its products for $225 per unit and is contemplating a 40% increase in the selling price for the next year. Variable costs are currently 25% of sales revenue and are not expected to change in dollar amount on a per unit basis next year (the company will still pay the same variable cost per unit). Fixed expenses are $120,750 per year. If fixed costs were to decrease 10% during the current year and the new selling price goes into effect, how many units will need to be sold to breakeven?

Contribution margin ratio is computed by

Yellow Company's variable expenses are 40% of sales and have monthly fixed expenses of $15,000. The monthly target operating income is $3,750. What is the monthly margin of safety in dollars if Yellow Company achieves its operating income goal?

Antonio's Flowers sells bouquets for $65 each. The variable costs for each kit are $45. The total contribution margin for 30 kits is

A breakeven mix is the combination of products that are available for sale.

Oscar Incorporated currently sells its products for $400 per unit. Management is contemplating a 10% increase in the selling price for the next year. Variable costs are currently 20% of sales revenue and are not expected to change next year. Fixed expenses are $140,000 per year. If fixed costs were to decrease 10% during the current year and the new selling price goes into effect, how many units will need to be sold to breakeven?

The breakeven point is the sales level where operating income is positive.

Dairy Days Ice Cream sells ice cream cones for $4 per customer. Variable costs are $3 per cone. Fixed costs are $2,500 per month. What is Dairy Days' contribution margin per ice cream cone?

The same CVP formulas that are used to perform CVP analysis for a company with a single product can be used for any company that sells more than one product, as long as a company uses the weighted-average contribution margin of all products, rather than the contribution margin of a sole product.

The Settler's Chuck Wagon sells tickets for dinner and a show for $50 each. The cost of providing dinner is $23 per ticket and the fixed cost of operating the theater is $115,000 per month. The company can accommodate 13,500 patrons each month. What is the contribution margin per patron?

Fixed expenses total $31,000, the breakeven sales in dollars is $93,000 and the selling price per unit is $99. The variable expense per unit is

If fixed expenses are $45,000, the breakeven in sales dollars is $60,000 and the selling price per unit is $100, then the variable expense per unit is

If the selling price per unit is $100, total fixed expenses are $600,000, and the breakeven sales in dollars is $800,000, what is the variable expense per unit?

By multiplying the operating leverage factor by the anticipated percentage change in volume, one can find

The intersection of the sales revenue line and the variable expense line on a CVP graph is known as

Fave Motion Pictures sells movie tickets for $10 per movie patron. Variable costs are $7.50 per movie patron and fixed costs are $50,000 per month. The company's relevant range extends to 35,000 movie patrons per month. What is Fave Motion Pictures' projected operating income if 25,000 movie patrons see movies during a month?

What will be the effect on the contribution margin ratio if the selling price per unit decreases and variable cost per unit remains the same?

LaComedia Dinner Theater sells tickets for dinner and a show for $40 each. The cost of providing dinner is $26 per ticket and the fixed cost of operating the theater is $100,000 per month. The company can accommodate 12,000 patrons each month. What is the contribution margin ratio?

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 fixed expenses for this company are

CVP analysis assumes that the only factor that affects costs is a change in sale price.