Exam 7: Cost-Volume-Profit Analysis

The breakeven point on a CVP graph is the point where the sales revenue line intersects the total expense line.

Dairy Days Ice Cream sells ice cream cones for $4 per customer.Variable costs are $3 per cone.Fixed costs are $2,500 per month.What is Dairy Days' contribution margin per ice cream cone?

CVP assumes that inventory levels will not change.

Prince Paper has budgeted the following amounts for its next fiscal year: If Price Paper spends an additional $12,500 on advertising,sales volume should increase by 2,300 units.What effect will this have on operating income?

CVP analysis helps managers prepare for and respond to economic changes,such as increasing costs and pressure to drop sales price.

Wallace Industrial sells two products,large forklifts and small forklifts.A large forklift sells for $50,000 per unit with variable costs of $26,000 per unit.Small forklifts sell for $30,000 per unit with variable costs of $12,000 per unit.Total fixed costs for the company are $1,600,000.Wallace Industrial typically sells one large forklifts for every two smalls.What is the breakeven point in total units?

Crossroads Packaging Co.has budgeted the following amounts for its next fiscal year: To maintain the original breakeven sales in units if fixed expenses were to increase by 10%,the selling price per unit would have to be

The Settler's Chuck Wagon sells tickets for dinner and a show for $50 each.The cost of providing dinner is $23 per ticket and the fixed cost of operating the theater is $115,000 per month.The company can accommodate 13,500 patrons each month.What is the contribution margin per patron?

Mom and Pop's Ice Cream Shoppe sells ice cream cones for $5.00 per customer.Variable costs are $2.25 per cone.Fixed costs are $3,000 per month.What is the company's contribution margin per ice cream cone?

I Scream For Ice Cream sells specialty ice cream in three flavors: Rocky Road,Peanut Butter,and Fruity Tooty.It sold 15,000 gallons last year.For every five gallons of ice cream sold,one pound is Fruity Tooty and the remainder is split evenly between Peanut Butter and Rocky Road.Fixed costs for I Scream For Ice Cream are $27,000 and additional information follows: The weighted average contribution margin per pound for the three products of I Scream For Ice Cream is

Gross margin is another term for net income.

Deen Enterprises currently sells its products for $1,200 per unit.Management is contemplating a 10% increase in the selling price for the next year.Variable costs are currently 40% of sales revenue and are not expected to change next year.Fixed expenses are $147,000 per year. What is the breakeven point in units at the anticipated selling price per unit next year?

The breakeven point is the sales level where operating income is positive.

Della's e-Portfolio Design Service has $4,900 fixed expenses.The company's operating income is $0 and the contribution margin ratio is 60%. What are the company's sales in dollars using the shortcut approach to the contribution margin ratio?

Mr.Pattison is the managerial accountant at the Beach Bum Surf Shoppe.Mr.Pattison advised the Sales Manager that budgeted sales at the store were 100 units,and the store's breakeven point is 14 units.What is the margin of safety in units at the Beach Bum Surf Shoppe?

On a CVP graph,the vertical distance between the total expense line and the total fixed cost line equals the variable expenses.

If a company sells 15 of Product A for every 2 of Product B that it sells,the sales mix can be stated as

Moe's Garage management has budgeted the following amounts for its next fiscal year: If Moe's can reduce fixed expenses by $20,000,by how much can variable expenses per unit increase and still allow the company to maintain the original breakeven sales in units?

If the contribution margin ratio is 45%,target operating income is $50,000,and the sales revenue needed to achieve the target operating income is $300,000,what are total fixed expenses?

Geneva Bottled Water Co.is assembling a weighted average contribution margin chart to better analyze differences between sales on 36 oz.and the 20 oz.bottled water.The sales price per unit of the 36 oz.bottled water is $3.79 while the sales price per unit of the 20 oz.bottled water is $1.19.The contribution margin per unit for the 36 oz.bottle is $1.35 and the contribution margin of the 20 oz.bottle is $0.28.The 20 oz.bottle outsells the 36 oz.bottle by a 5:1 relationship. What is the weighted average contribution margin per unit on these two products?