Exam 5: Cost Behavior Cost-Volume-Profit Analysis

The following information describes a product expected to be produced and sold by Garrison Company: Selling price $80 per unit Variable costs $32 per unit Total fixed costs $630,000 Required: (a) Calculate the contribution margin ratio. (b) Calculate the break-even point in dollar sales. (c) What dollar amount of sales would be necessary to achieve a pretax income of $120,000?

Varigon Co. produces and sells three products-Household, Commercial, and Industrial, and has total fixed costs of $52,000. Sales and cost data follow: Household Commercial Industrial Sales price per unit……….. $6 $8 $10 Variable costs per unit…… 4 6 7 Sales mix……………..….. 3 2 1 Calculate the break-even point in composite units.

The proportion of sales volumes for various products in a multiproduct company is known as the sales mix.

On a typical cost-volume-profit graph, unit sales are shown on the horizontal axis and both dollars of sales and dollars of costs are represented on the vertical axis.

The contribution margin per unit is the price at which a unit must be sold in order for the company to break even.

The high-low method of deriving an estimated cost line uses all the data points available.

Three important assumptions in cost-volume-profit analysis is that (1) ________ per unit is constant, (2) ________ per unit is constant, and (3) ________ are constant in total.

A visual line fit to points in a scatter diagram may be used to identify the approximate relation between past cost and unit data.

Kent Manufacturing produces a product that sells for $50.00 and has variable costs of $24.00 per unit. Fixed costs are $260,000. Kent can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. Compute the contribution margin per unit if the machine is purchased.

A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials, $10 per unit, Direct labor, $6 per unit, Variable overhead, $70,000, and Fixed overhead, $120,000. The total product cost per unit under variable costing is:

What are the basic assumptions of CVP analysis with regard to variable cost, fixed cost, and selling price per unit? (Assume a single product).

Examining strategies that impact several estimates in the CVP analysis is known as ________.

The ratio (proportion) of the sales volumes of the various products sold by a company is called the ________.

Locus Company has total fixed costs of $112,000. Its product sells for $35 per unit and variable costs amount to $25 per unit. Next year Locus Company wishes to earn a pretax income that equals 10% of fixed costs. How many units must be sold to achieve this target income level?

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

Raven Company has a target of earning $70,000 pre-tax income. The contribution margin ratio is 30%. What amount of dollar sales must be achieved to reach the goal if fixed costs are $36,000?

Define variable cost, fixed cost, and mixed cost.

As the volume increases, fixed cost per unit of output remains constant.

The extent, or relative size, of fixed costs in the total cost structure is known as operating leverage.

A company's product sells at $12 per unit and has a $5 per unit variable cost. The company's total fixed costs are $98,000. The contribution margin per unit is: