Exam 7: Cost-Volume-Profit Analysis

Which of the following is not an approach used to calculate the breakeven point?

Grosheim Incorporated has fixed expenses of $213,000 per year. Right now, Grosheim Incorporated is selling its products for $250 per unit. Management is contemplating a 40% increase in the selling price for the next year. Variable costs are currently 20% of sales revenue and are not expected to change in dollar amount on a per unit basis next year (the company will pay the same amount for variable costs next year). If fixed costs increase 10% next year, and the new selling price per unit goes into effect, how many units will need to be sold to breakeven?

If the fixed costs increase while the sales price per unit and variable costs per unit remain constant, which of the following statements is true?

Perry Corporation produces and sells a single product. Data for that product are: Upper management is considering using a biodegradable packaging which costs $5 more per unit but it produces less waste in the long run. Management plans to increase advertising by $10,000 per month to advertise this new feature to their packaging. They believe that environmentally friendly people will switch to their product resulting in an increase in sales of 2,000 units per month. What is the effect to the company's breakeven point if these changes are implemented?

Madden Enterprises sells two products, Silver models and Gold models. Madden Enterprises predicts that it will sell 5700 Silver models and 3600 Gold models in the next period. The unit contribution margins for Silver models and Gold models are $70 and $130, respectively. What is the weighted average unit contribution margin?

Gabe Industries sells two products, Basic models and Deluxe models. Basic models sell for $41 per unit with variable costs of $15 per unit. Deluxe models sell for $45 per unit with variable costs of $45 per unit. Total fixed costs for the company are $1310.4. Gabe Industries typically sells four Basic models for every Deluxe model. What is the breakeven point in total units?

Jack's Toys sells kites for $40 each. Variable costs are $4 per kite. Fixed costs are $2400 per month. What is the contribution margin ratio for the kites?

Which of the following is an underlying assumption of the cost-volume-profit graph?

Who Done It Mystery Theater sells tickets for dinner and a show for $30 each. The cost of providing dinner is $26 per ticket and the fixed cost of operating the theater is $120,000 per month. The company can accommodate 13,000 patrons each month. What is the contribution margin per patron?

To find the breakeven point using the shortcut formulas, you use

The area to the right of the breakeven point and between the total revenue line and the total expense line represents

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

Franklin Producers sells its core product for $5 per unit and has variable costs of $3 per unit. Total fixed costs are $22,000. Suppose variable costs increase by 30% due to an increase in the cost of direct materials. What will be the effect on the breakeven point in units?

The horizontal line intersecting the vertical y-axis at the level of total cost on a CVP graph represents

All of the following would be considered a company with high operating leverage, except

If the selling price per unit is $26, the variable expense per unit is $22.00, and the breakeven sales in dollars is $52,000, what are total fixed expenses?