Exam 4: Cost-Volume-Profit Relationships

Once the break-even point is reached,which of the following statements is true?

Once the break-even point has been reached,each additional unit sold increases the company's operating profit by the amount of the unit CM.

A company has sales of $87,500 at the break-even point and fixed costs are $35,000.Assuming cost behaviour does not change if sales increase by $20,000 how much will operating income will increase by?

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?

Hurst Co. manufactures and sells a single product. Price and cost data regarding this product are as follows: Selling price \ 40 per unit Variable manufacturing cost \ 20 per unit Variable selling \& administrative expenses \ 6 per unit Fixed manufacturing overhead \ 208,000 per year Fixed selling \& administrative expenses \ 324,000 per year -What is the break-even point in units per year?

Loren Company's single product has a selling price of $15 per unit.Last year,the company reported total variable expenses of $180,000,fixed expenses of $90,000,and an operating income of $30,000.A study by the sales manager discloses that a 15% increase in the selling price would reduce unit sales by 10%.If her proposal is adopted,what would the outcome be for operating income?

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

For a given level of sales,a low contribution margin ratio will produce less operating income than a high contribution margin ratio.

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?

The following data pertain to last month's operations: Selling price \ 30 per unit Variable production cost \ 15 per unit Fixed production cost \ 80,000 Variable selling \& administrative expenses \ 3 per unit Fixed selling \& administrative expenses \ 40,500 What is the break-even point in dollars?

How is the degree of operating leverage calculated?

The following is Addison Corporation's contribution format income statement for last month: Sales \ 1,000,000 Less: variable expenses Contribution margin 300,000 Less: fixed expenses Operating income \ 120,000 The company has no beginning or ending inventories. A total of 20,000 units were produced and sold last month. -What is the company's margin of safety in dollars?

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 following is Allison Corporation's contribution format income statement for last month: Sales \ 800,000 Less: variable expenses Contribution margin 500,000 Less: fixed expenses Operating income \ 100,000 The company has no beginning or ending inventories. The company produced and sold 10,000 units last month. -How many units would the company have to sell to attain after-tax profits of $72,000,assuming it is subject to a 40% income tax rate?

The following data relate to a company that produces and sells a travel guide that is updated monthly: Fixed costs: Copy editing \ 6,000 Art work \ 2,000 Typesetting \ 72,000 Variable costs: Printing and binding \ 3.20 per copy Bookstore discounts \ 4.00 per copy Salespersons' commissions \ 0.50 per copy Author's royalties \ 2.00 per copy Each book sells for $20.00. The company sold 8,000 books in June and 10,000 books in July. -What is the unit contribution margin per book?

The following is last month's contribution format income statement: Sales (15,000 units) \ 1,500,000 Less: variable expenses 900,000 Contribution margin 600,000 Less: fixed expenses \ 00,000 Operating income \ 100,000 What is the company's margin of safety in dollars?

The following is Addison Corporation's contribution format income statement for last month: Sales \ 1,000,000 Less: variable expenses Contribution margin 300,000 Less: fixed expenses Operating income \ 120,000 The company has no beginning or ending inventories. A total of 20,000 units were produced and sold last month. -What is the company's contribution margin ratio?

McGordon Corporation has provided the following data: Sales \ 800,000 Variable expenses \ 560,000 Fixed expenses \ 168,000 -What is the break-even point in sales dollars?

At a break-even point of 400 units sold,variable expenses were $4,000 and fixed expenses were $2,000.What will the 401^st unit sold contribute to operating income?

Gerber Company is planning to sell 200,000 units for $2.00 a unit and will just break even at this level of sales.The contribution margin ratio is 25%.What are the company's fixed expenses?