Exam 7: Cost-Volume-Profit Analysis

Richland Enterprises has budgeted the following amounts for its next fiscal year: If Richland Enterprises can reduce fixed expenses by $18,870, how will breakeven sales in units be affected?

Matthew's Fish Fry has a monthly target operating income of $6600. Variable expenses are 80% of sales and monthly fixed expenses are $840. What is the monthly margin of safety in dollars if the business achieves its operating income goal?

The unit contribution margin is computed by

Jack's Toys sells kites for $20 each. Variable costs are $5 per kite. Fixed costs are $1800 per month. What is the contribution margin per kite?

Grain Alternative Corporation has a predicted operating income of $80,000. The managerial accountant reported that total variable expenses are $25,000 and its total fixed expenses are $24,000. The company has a unit contribution margin of $20 on its sole product. Calculate the number of units needed to reach the operating income of $80,000.

Jackie's Creamery sells fudge, cookies, and popcorn to patrons in the local community. The manager at the creamery sold 6000 total boxes of merchandise last year. The popcorn outsold fudge by a margin of 2 to 1. The sales of caramels equaled the sales of popcorn. Total fixed costs for Jackie's Creamery total $10,000. The managerial accountant at Jackie's Creamery reported the following information: Which formula should the managerial accountant use to determine the number of boxes of each different snack sold?

Curvy Confections is considering building a new plant in Europe. It predicts sales at the new plant to be 38,000 units at $5.00/unit. Below is a listing of estimated expenses: A European firm was contracted to sell the product and will receive a commission of 20% of the sales price. No U.S. home office expenses will be allocated to the new facility. (Round intermediary dollar calculations to the nearest whole dollar and round percentages to one-tenth percent.) The margin of safety percentage for Curvy Confections is

Paint and Sip sells admission tickets for a painting class for $40 each. The cost of providing the canvas and supplies is $32 per ticket and the fixed cost of operating the art gallery is $35,000 per month. The company can accommodate 5600 patrons each month. What is the contribution margin per patron?

The weighted average contribution margin will always be the same as the contribution margin of the highest-volume product.

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

Larry Company makes and sells 2 models of dishwashers, Model ABC and Model XYZ. For every 2 Model ABC sold, 3 Model XYZ are sold. Larry Company incurs $1,120,000 in fixed costs per month. The following information is also provided: How many units of Model XYZ would the company need to sell at its breakeven point?

If a company sells 15 of Product A for every 4 of Product B that it sells, the sales mix can be stated as

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

A company's margin of safety is computed as

Slamburger's sells four cheeseburgers for every two regular hamburgers. A cheeseburger sells for $2.75 with a variable cost of $2.25. A regular hamburger sells for $2 with a variable cost of $0.50. What is the weighted average contribution margin?

Marie's Magic Shoppe provides the following information about its single product. What is the contribution margin ratio?

Yellow Company's variable expenses are 40% of sales and have monthly fixed expenses of $15,000. The monthly target operating income is $3600. What is Yellow Company's operating leverage factor at the target level of operating income?

Garfield Corporation is considering building a new plant in Canada. It predicts sales at the new plant to be 70,000 units at $3.00/unit. Below is a listing of estimated expenses: A Canadian firm was contracted to sell the product and will receive a commission of 20% of the sales price. No U.S. home office expenses will be allocated to the new facility. How much does the Canadian contractor expect to make in commissions?

Jackie's Snacks sells fudge, caramels, and popcorn. It sold 11,000 units last year. Popcorn outsold fudge by a margin of 2 to 1. Sales of caramels were the same as sales of popcorn. Fixed costs for Jackie's Snacks are $15,000. Additional information follows: The breakeven sales volume in units for Jackie's Snacks is (Round the final answer up to the nearest unit.)

Fixed costs divided by weighted average contribution margin per unit equals