Exam 21: Cost-Volume-Profit Analysis

Contribution margin ratio is the ratio of contribution margin to:

Colin was a professional classical guitar player until his motorcycle accident that left him disabled. After long months of therapy, he hired an experienced luthier (maker of stringed instruments)and started a small shop to make and sell Spanish guitars. The guitars sell for $700 and the fixed monthly operating costs are as follows: Colin's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales, $0.60 went to cover his fixed costs, and that anything past that point was pure profit. Colin is planning to increase the selling price to $750. What impact will the increase in selling price have on the contribution margin ratio?

The breakeven point is the point where the sales revenues are equal to the fixed costs.

Jenna Manufacturers produces flooring material. The monthly fixed costs are $10,000 per month. The unit selling price is $75 and variable cost per unit is $35. Jenna wishes to earn an operating income of $25,000. Using the contribution martin ratio, calculate the total revenue. (Round your intermediate calculations to five decimal places.)

Arturo Company's Model A generator sells for $456 and Model B sells for $390. The variable cost of Model A is $404 and of Model B is $320. If Arturo Company's sales incentives reward sales of the goods with the highest contribution margin, the sales force will be motivated to push sales of Model A more aggressively than Model B.

Browning Company sells two products-X and Y. Product X is sold for $25 per unit and has a variable cost per unit of $15. Product Y is sold for $30 per unit and has a unit variable cost of $20. Total fixed costs for the company are $20,000. Browning Company typically sells three units of Product X for every unit of Product Y. What is the breakeven point in total units?

A company's proportion of fixed costs to variable costs is called its:

Moylan Company has provided the following information: Which of the following statements is true, if the sales volume increases by 10%?

The high-low method requires the identification of lowest and highest levels of total costs, not activity, over a period of time.

Lightfoot Company sells its product for $55 and has variable costs of $30 per unit. The total fixed costs are $25,000. What will be the effect on the breakeven point in units if variable costs increase by $5 due to an increase in the cost of direct materials?

The operating income of Jutox Inc. is $40,000 for March using both variable costing and absorption costing. Which of the following statements must be true of Jutox for the above statement to be true?

Within the relevant range, the total fixed costs and the variable cost per unit remain the same.

The breakeven point represents the sales volume at which the company's net income is zero.

Allston Products sells a special kind of effects pedal for musical performers. Each unit sells for $20.00. Additional data for the month of April, 2014, are as follows: Using absorption costing, how much is the net operating income for April?

The sales level at which operating income is zero is called breakeven point.

The phone bill for an accounting firm consists of both fixed and variable costs. Refer to the 4-month data below and apply the high-low method to answer the question. (Round your intermediate calculations to two decimal places) What is the fixed portion of the total cost?

The high-low method is used to:

Dorothy Products sells its products for $40 per unit. Additional data for the month of April, 2014, are as follows: Calculate the product cost per unit produced using absorption costing.

Margaret sells hand-knit scarves at the flea market. Each scarf sells for $25. Margaret pays $30 to rent a vending space for one day. The variable costs are $15 per scarf. What total revenue amount does she need to earn to break even?

Pluto Company sold 2,000 units in October at a price of $35 per unit. The variable cost is $20 per unit. The monthly fixed costs are $10,000. What is the operating income earned in October?