Exam 4: Cost-Volume-Profit Analysis: a Managerial Planning Tool

Figure 4-5.Standlar Company makes wireless speakers. The standard model price is $360 and variable expenses are $210. The deluxe model price is $500 and variable expenses are $300. The superior model price is $1,600 and variable expense per unit is $600. Total fixed expenses are $300,000. Generally, Standlar sells 8 standard models and 4 deluxe models for every superior model sold. -Using the sales mix stated in the facts from Figure 4-5 to form a package, what is the total package contribution margin?

Figure 4-3.Paney Company makes calendars. Information on cost per unit is as follows: Fixed marketing expense totaled $13,000 and fixed administrative expense totaled $35,000. The price per calendar is $10. -Refer to Figure 4-3. What is the variable product expense per unit?

Figure 4-4.Yerke Company makes jungle gyms and tree houses for children. For jungle gyms, the price is $120 and variable expenses are $90 per unit. For tree houses, the price is $200 and variable expenses are $100. Total fixed expenses are $253,750. Last year, Yerke sold 12,000 gyms and 4,000 tree houses. -Refer to Figure 4-4. Now suppose that Yerke expects tree house demand to increase from 4,000 to 8,000 units. What is the number of jungle gyms sold at break-even?

Sales revenue minus total variable cost or price minus unit variable cost.

Figure 4-2.Pauley Company provides home health care. Pauley charges $35/hour for professional care. Variable costs are $21/hour and fixed costs are $78,000. Next year, Pauley expects to charge out 12,000 hours of home health care. -Refer to Figure 4-2. What is the contribution margin per hour?

A measure of the sensitivity of profit changes to changes in sales volume.

Match each item with the correct statement below. -the selling price per unit

Match each item with the correct statement below. -measured in dollars

Figure 4-5.Standlar Company makes wireless speakers. The standard model price is $360 and variable expenses are $210. The deluxe model price is $500 and variable expenses are $300. The superior model price is $1,600 and variable expense per unit is $600. Total fixed expenses are $300,000. Generally, Standlar sells 8 standard models and 4 deluxe models for every superior model sold. -Refer to Figure 4-5. What is the number of superior models sold at break-even?

Arnold Corporation has the following information for the current year: Required: Prepare a cost-volume-profit graph identifying the following items:

The linear equation for total cost is (Unit variable cost * Units) + Fixed cost.

If the contribution margin ratio increases

The linear equation for revenue is price multiplied by fixed cost.

Fixed costs that are not traceable to the segments and would remain even if one of the segments was eliminated are known as _____________________________.

Biggers Company expects the following results for the next accounting period: The sales manager believes sales could be increased by 400 units if advertising expenditures were increased by $10,000. If advertising expenditures are increased and sales increase by 400 units, the effect on operating income will be a(n)

Figure 4-3.Paney Company makes calendars. Information on cost per unit is as follows: Fixed marketing expense totaled $13,000 and fixed administrative expense totaled $35,000. The price per calendar is $10. -Refer to Figure 4-3. How many units must be sold to yield targeted income of $36,000?

Firm X and Firm Y are competitors within the same industry. Firm X produces its product using large amounts of direct labor. Firm Y has replaced direct labor with investment in machinery. Projected sales for both firms are 15% less than in the prior year. Which statement regarding projected profits is true?

Travel On Inc. sells luggage. They sell a duffle bag, a carry-on suitcase and a deluxe suitcase. The price and variable cost for each type of luggage is listed below. The total fixed costs for Travel On Inc. equals $60,000. For every 8 duffle bags Travel On Inc sells it sells 3 carry-on suitcases and 1 deluxe suitcase. Required: A.) Calculate the package contribution margin. B.) Calculate the break-even point in units for duffle bags, carry-on suitcases and deluxe suitcases. C.) If Travel On Inc. has a target income for the coming year of $300,000, how many packages will company have to sell? D.) Based on your answer in Part C, prepare a contribution margin income statement for the coming year. E.) What is the company's margin of safety in packages?

Figure 4-8.A company provided the following data: -Refer to Figure 4-8. What is the break-even point in sales dollars?

If variable costs per unit decrease, sales volume at the break-even point will