Exam 9: Short-Term Profit Planning: Cost-Volume-Profit CVP Analysis

Daley Co. manufactures computer monitors. Following is a summary of its basic cost and revenue data:Assume that Daley Co. is currently selling 700 computer monitors per month. Fixed costs are $96,000 per month. Required: Calculate Daley Co.'s: 1. Breakeven sales volume, in units (round your answer up, to the nearest whole number) 2. Current level of operating income, πB.

Calculating the margin of safety (MOS) measure will help a firm answer which of the following questions?

Staley Co. manufactures computer monitors. The following is a summary of its basic cost and revenue data:Assume that Staley Co. is currently selling 600 computer monitors per month and monthly fixed costs are $80,000. Staley Co.'s margin of safety ratio (MOS%) if 600 units are sold would be (round intermediate calculation up to nearest whole number of units):

The contribution margin per unit multiplied by the number of units sold is the:

Stylish Sitting is a retailer of office chairs located in San Francisco, California. Due to increased market competition, the CFO of Stylish Sitting has grown worried about the firm's upcoming income stream. The CFO asked you to use the company financial information provided below.The annual breakeven point, in dollar sales, is:

A relatively low margin of safety ratio (MOS%) for a product is usually an indication that the product:

Garner Stores, Inc.is a multiple-store chain retailer of women's clothing.You are provided with the following budgeted income statement for the coming year. Required: 1. Determine the breakeven point in dollars for 2019. 2. What is the required sales dollars if desired profit is to increase by 10% over the budgeted pre-tax profit? 3. What is the indifference point between reducing the commissions to 10% of sales dollars, and at the same time increasing total fixed cost per year by $2.4 million, relative to the current budget?

Framing House, Inc. produces and sells picture frames. Variable costs are expected to be $17 per frame; fixed costs for the year are expected to total $130,000. The budgeted selling price is $25 per frame. The sales units required by Framing House to make a before-tax profit (πB) of $15,000 would be:

Gallery 12 Company operates the franchise for grade school and high school pictures taken annually at some 4,000 sites in the upper Midwestern U.S. One of the continuing problems in this industry is retakes—returning to a site to re-photograph students who do not like the results of their first sitting. Until now, no charge has been made for the second picture session; the cost is spread over all customers and reflected in the pricing of photo packages. Gallery 12 executives have proposed a $4 charge for a second sitting with slightly lowered picture prices for students who select poses from the first sitting. You are part of a management team that has analyzed the alternative proposal, and your team has just presented the following data to top management. Required: 1. The current level of sittings is 1.4 million, and contribution margin per sitting is unchanged at $2.76. Calculate the projected change in operating profit from an increase of 100,000 sittings that the company could produce because of time savings from reduced picture retake sittings. Fixed costs are not expected to change under the new proposal. 2. Explain why the margin of safety (MOS) almost doubles from 12 percent to 20 percent, while the degree of operating leverage (DOL) falls by almost one-third (3.63 down to 2.37). As above, assume that fixed costs do not change.

Gralyn Corp. compares two products' margin of safety ratios (MOS%). Product A has a ratio of 0.13 and product B has a ratio of 0.31. Everything else held constant, what should the managers at Gralyn Corp. do and why?

The name for a variety of methods used to examine how an amount will change if factors involved in predicting that amount change is:

Crown Co. can produce two types of lamps, the Enlightner and Foglighter. The data on the two lamp models are as follows:It takes one machine hour to produce each product. Total fixed costs for the manufacture of both products are $90,000. Demand is high enough for either product to keep the plant operating at maximum capacity. Assuming that sales mix in terms of dollars remains constant, what is the breakeven point in dollars? (Round intermediate calculations to 4 decimal places and final answer up to the nearest whole number.)

Hart Company sold 5,000 units for a price of $50 per unit and had the following information:If the sales price per unit were to increase by 10%, variable expenses were to increase by 12.5%, and fixed expenses were to increase by 20%, what would be the new contribution margin per unit?

The calculation of an amount, given different levels of a factor that influences that amount, is called:

The equation method for CVP analysis:

In the current year, Becker Sofa Company expected to sell 12,000 leather sofas. Fixed costs for the year were expected to be $8,400,000; unit sales price was budgeted at $4,600; and unit variable costs were expected to be $2,200. Becker Sofa Company's margin of safety (MOS) in sales dollars is:

The form of the income statement that is used in CVP analysis is referred to as:

Framing House, Inc. produces and sells picture frames. Variable costs are expected to be $17 per frame; fixed costs for the year are expected to total $130,000. The budgeted selling price is $25 per frame. The sales dollars required to make a before-tax profit (πB) of $20,000 for Framing House would be:

The difference between sales price per unit and variable cost per unit is the:

Firms Y and Z both produce and sell small gasoline engines.The sales price is $200 per engine.Data for both firms at a sales volume of 50 units are as follows: Required: From the existing level of sales, which firm's operating income is more sensitive to changes in sales volume? Show calculations and round your answers to 2 decimal places.