Exam 7: Cost-Volume-Profit Analysis

Electric Jet Skis operates a jet ski rental business. Assume the jet skis rent for $50 per 6 hours. The variable costs are $40 per 6 hours rental, and its fixed costs are $85,000 each month. What is the contribution margin ratio?

Stallard Corporation gathered the following information for the year just ended: During the year, Stallard produced and sold 30,000 units of product at a selling price of $10.23 per unit. There was no beginning inventory of product at the start of the year. What is the contribution margin for the year?

Hyde's Headphones sells deluxe headphones for $70 each. Unit variable expenses total $60. The breakeven sales in units is 1700 and budgeted sales in units is 4177. What is the margin of safety in dollars?

Poplar Mills Incorporated desires an operating income of $73,000. Its variable expenses are $25,000 and its total fixed expenses have increased from $52,500 to $56,000. Its unit contribution margin is $15. Its sales in units to achieve the target profit is

Pittsboro Corporation produces and sells a single product. Data for that product are: Management is discussing increasing the price to $525 to cover an increase in fixed expenses of $80,000. Management believes they might lose 2% of sales per month. What should be the overall effect on the company's monthly operating income if this change is implemented?

Tom's Taxidermy expects to sell 1200 units of its specialty preservation product. The managerial accountant reported that manager must sell 700 units of specialty product to breakeven. Compute the margin of safety in units.

To calculate the weighted average contribution margin, divide the sum of the individual product contribution margins by the sales mix in units.

Scott Incorporated has been in business for several months. Because of increased competition in the region for part adapters, the managers at Scott Incorporated is considering cutting sales price from $30 per adapter to $26 per adapter. If the variable expenses remain at $20 per adapter and the fixed expenses remain at $6200, how many adapters will the managers need to sell to break even? Compute the breakeven sales in units.

The following information pertains to the Flying Fig Corporation: How many units need to be sold in order to reach the target profit?

J&A Corporation has a monthly target operating income of $41,400. Variable expenses are 10% of sales and monthly fixed expenses are $12,600. What is the monthly margin of safety in dollars if the business achieves its operating income goal?

Green Beans Corporation currently has a sales price of $2.00 per can of organic green beans with a variable cost of $0.75 per can. The company currently sells 50,000 cans a month and hopes that increased advertising of $3,000 will increase its sales by 5,000 cans. The company currently has $20,000 in fixed costs per month. How will this change affect its breakeven point in terms of cans?

I Scream For Ice Cream sells specialty ice cream in three flavors: Rocky Road, Peanut Butter, and Fruity Tooty. It sold 17,000 gallons last year. For every five gallons of ice cream sold, one gallon is Fruity Tooty and the remainder is split evenly between Peanut Butter and Rocky Road. Fixed costs for I Scream For Ice Cream are $7500 and additional information follows: The breakeven sales volume in gallons for I Scream For Ice Cream is

The higher the operating leverage factor, the

LPS Corporation's management has budgeted the following amounts for its next fiscal year: If LPS Corporation spends an additional $21,000 on advertising, sales volume should increase by 5000 units. What effect will this have on operating income?

If unit sales prices, unit variable costs and total fixed costs all remain the same, but the sales mix changes, there is an effect on the breakeven point.

When calculating the breakeven point in terms of sales revenue, variable costs should be divided by the contribution margin ratio.

By multiplying ________ and then subtracting fixed costs, managers can quickly forecast the operating income.

J&A Corporation has a monthly target operating income of $26,100. Variable expenses are 10% of sales and monthly fixed expenses are $9900. What is the monthly margin of safety as a percentage of target sales in dollars?

Medoc Company provides the following information about its single product. What is the contribution margin per unit?

To find the number of units that need to be sold in order to breakeven or generate a target profit, the formula used is