Exam 7: Cost-Volume-Profit Relationships

The break-even point in unit sales increases when variable expenses do which of the following?

How is the margin of safety percentage computed?

The Deli City Sandwich Shop tries to maintain a constant mark-up on costs. Consequently, the owner felt that the shop's cost/expense function could be stated in terms relative to sales. The cost function was determined by fitting a regression line to monthly sales and monthly total expense figures. The 18 pairs of data were taken directly from the shop's general ledger. The fitted equation was: Total expenses = 2,400 per month + 0.60 x Sales Required: a. Identify the dependent variable and the independent variable (including its units of measurement) of the fitted regression equation. b. Provide economic interpretation, units of measurement, and one example of each of the following regression estimates for a typical sandwich shop: (i) $2,400 per month (ii) 0.60 c. What is your best estimate of shop's monthly break-even sales? d. If the shop plans for after-tax monthly profits of $600, what level of sales will be necessary to achieve this target? Assume a tax rate of 40%.

The following data pertain to last month's operations: What is the break-even point in dollars?

Carver Company produces a product that sells for $30.Variable manufacturing costs are $15 per unit.Fixed manufacturing costs are $5 per unit based on the current level of activity,and fixed selling and administrative costs are $4 per unit.A selling commission of 10% of the selling price is paid on each unit sold.What is the contribution margin per unit?

At a break-even point of 800 units sold,White Company's variable expenses are $8,000 and its fixed expenses are $4,000.What will the company's operating income be at a volume of 801 units?

Tanner Company's most recent contribution format income statement is presented below: The company sells its only product for $15 per unit. There were no beginning or ending inventories. Required: a) Compute the company's break-even point in units sold. b) Compute the total variable expenses at the break-even point. c) How many units would have to be sold to earn a target operating income of $9,000? d) The sales manager is convinced that a $6,000 increase in the advertising budget would increase total sales by $25,000. Would you advise the increased advertising outlay?

Curtis Company anticipates selling 10,000 units next year.The company wants to earn an operating income equal to 10% of sales.If variable expenses are $12 per unit,and fixed expenses total $78,000 per year,what selling price must be established to achieve the desired level of operating income?

At the break-even point: Sales - Variable expenses = Fixed expenses.

The basic cost-volume-profit model assumes no change in inventories when the model is applied to a manufacturing company. Required: Explain the reasoning behind this assumption.

Marston Enterprises sells three chemicals: petrol,septine,and tridol.Petrol's unit contribution margin is higher than septine's,which is higher than tridol's.Which one of the following events is most likely to increase the company's overall break-even point?

The company has an opportunity to secure a special order of 800 units if it is willing to drop the selling price on these units to $13.Costs of securing the special order would be $1,000.The special order would not affect the company's regular sales.If the special order is accepted,what will be the impact on the company's overall operating income?

Dorian Company produces and sells a single product. The product sells for $60 per unit and has a contribution margin ratio of 40%. The company's monthly fixed expenses are $28,800 -What is the break-even point in sales dollars?

The following data pertain to last month's operations: What is the break-even point in dollars?

Goodman Company has sales of 3,000 units at $80 per unit.Variable costs are 35% of the sales price.If total fixed costs are $66,000,what is the degree of operating leverage?

The following data relate to a company that produces and sells a travel guide that is updated monthly: Each book sells for $20.00. The company sold 8,000 books in June and 10,000 books in July. -The degree of operating leverage for July is closest to which of the following?

When interpreting a CVP graph which of the following is NOT correct?

Dorian Company produces and sells a single product. The product sells for $60 per unit and has a contribution margin ratio of 40%. The company's monthly fixed expenses are $28,800 -If the selling price is reduced by 5%,variable expenses reduced by $1.00,and fixed expenses increased to a total of $38,400,how many units would need to be sold to earn an operating income of $21,000?

Dorian Company produces and sells a single product. The product sells for $60 per unit and has a contribution margin ratio of 40%. The company's monthly fixed expenses are $28,800 -If Dorian Company desires a monthly operating income equal to 10% of sales,what will its monthly sales have to be?

A company increased the selling price for its product from $1.00 to $1.10 a unit when total fixed expenses increased from $400,000 to $480,000 and the variable expense per unit remained unchanged at $0.50.How would these changes affect the break-even point?