Exam 7: Cost-Volume-Profit Analysis

Which of the following would produce the largest increase in the contribution margin per unit?

The difference between budgeted sales revenue and break-even sales revenue is the:

A recent income statement of Dragonwood Corporation reported the following data: If the company desired to earn a target profit of $1,270,000,it would have to sell:

Grime-X is studying the profitability of a change in operation and has gathered the following information: Should Grime-X make the change?

Goldstone Company is studying the impact of the following: An increase in sales price on the break-even point. 2.A decrease in fixed costs on the contribution margin. 3.An increase in the contribution margin on the break-even point. 4.A decrease in the variable cost per unit on the sales volume needed to achieve Goldstone's $68,000 target profit. 5.An increase in sales commissions on the contribution margin and the break-even point. 6.A decrease in anticipated advertising outlays on fixed cost and the break-even point. Required: Determine the impact of these operating changes (increase,decrease,no effect)on the item(s)noted.

Thomlinson Company is considering the development of two products: no.65 or no.66.Manufacturing cost information follows. A.What is the break-even sales volume (in dollars)on product no.66? B.Which of the two products will be more profitable at a sales level of 25,000 units? C.At what unit-volume level will the profit/loss on product no.65 equal the profit/loss on product no.66? C.X = Number of units ($50 - $38)X - $220,000 = ($50 - $30)X - $340,000 $12X - $220,000 = $20X - $340,000 $8X = $120,000 X = 15,000 units

Cost-volume-profit analysis is based on certain general assumptions.One of these assumptions is that product prices will remain constant as volume varies within the relevant range.

Edmonco's operating leverage factor was:

Miller Company has an operating leverage factor of 5.Thus,an 8% change in ______ should result in a 40% change in ______.The respective amounts that change are:

Brooklyn sells a single product to wholesalers.The company's budget for the upcoming year revealed anticipated unit sales of 31,600,a selling price of $20,variable cost per unit of $8,and total fixed costs of $360,000.If Brooklyn's unit sales are 200 units less than anticipated,its breakeven point will:

You are analyzing Becker Corporation and Newton Corporation and have concluded that Becker has a higher operating leverage factor than Newton.Which one of the following choices correctly depicts (1)the relative use of fixed costs (as opposed to variable costs)for the two companies and (2)the percentage change in income caused by a change in sales?

The difference between budgeted sales revenue and break-even sales revenue is the operating leverage.

Ribco Co.makes and sells only one product.The unit contribution margin is $6 and the break-even point in unit sales is 24,000.The company's fixed costs are:

A company,subject to a 40% tax rate,desires to earn $500,000 of after-tax income.How much should the firm add to fixed costs when figuring the sales revenues necessary to produce this income level?

Wellcom Corporation has the following sales mix for its three products: A,20%;B,35%;and C,45%.Fixed costs total $400,000 and the weighted-average contribution margin is $100.How many units of product A must be sold to break-even?

Which of the following statements is (are)true regarding a company that has implemented flexible manufacturing systems and activity-based costing? I.The company has erred,as these two practices used in conjunction with one another will severely limit the firm's ability to analyze costs over the relevant range. II.Costs formerly viewed as fixed under traditional-costing systems may now be considered variable with respect to changes in cost drivers such as number of setups,number of material moves,and so forth. III.As compared with the results obtained under a traditional-costing system,the concept of break-even analysis loses meaning.

The contribution-margin ratio is calculated as unit contribution margin divided by the selling price per unit.

Assuming that the sales mix remains constant,the number of units of Fancy that Jamal must sell to break even is:

Narchie:

Many firms are moving toward flexible manufacturing systems and adopting the just-in-time (JIT)philosophy. Required: A.How is cost behavior altered in the typical flexible manufacturing environment as compared to a traditional manufacturing system? What is the impact on the break-even point? Explain. A.Variable manufacturing costs typically decrease in a flexible manufacturing environment and total fixed costs increase.Automation (along with accompanying depreciation,lease,and maintenance costs)and fewer people normally account for this change.The break-even point,as a result,often increases. B.One of the assumptions underlying cost-volume profit analysis is that sales volume and production volume are equal.Stated another way,inventories are assumed to remain constant.Is this assumption likely to be violated under an ongoing JIT philosophy? Explain. B.When a company first changes to JIT,there is likely to be a drop-off in inventories.However,the assumption of no significant change in inventories will probably not be violated for an ongoing JIT user.Any accompanying level changes are not likely to be significant relative to the volume of production and sales.