Exam 3: Cost-Volume-Profit Analysis

Loretta's Grocery needs to know the kilograms of pears to have on hand each day.Each kilogram of pears costs $2.40 and can be sold for $3.40.Unsold pears are worthless at the end of the day.The following demands were found after studying the last six month's sales: 100 kilograms of pears one-fourth of the time 150 kilograms of pears one-half of the time 175 kilograms of pears one-fourth of the time Required: Determine whether Loretta's Grocery should order 200, 300, or 400 kilograms of pears.

Suppose a company decided to automate a production line.Explain what effects this would have on a company's cost structure using CVP terminology.Could these changes have any possible negative effect on the firm?

Auto Tires Inc.sells tires to service stations for an average of $45 each.The variable costs of each tire are $30 and monthly fixed manufacturing costs total $15,000.Other monthly fixed costs of the company total $12,000.Required: a.What is the break-even level in tires? b.What is the margin of safety assuming sales total $90,000? c.What is the break-even level in tires assuming variable costs increase by 20 percent? d.What is the break-even level in tires assuming the selling price goes up by 10 percent, fixed manufacturing costs decline by 10 percent and other fixed costs decline by $150?

How many units would have to be sold to yield a target income of $11,000 assuming variable costs are $30 per unit, total fixed costs are $1,000, and the unit selling price is $40?

Use the information below to answer the following question(s).Bartwell Company sells several products.Information of average revenue and costs is as follows: -The Bartwell Company break-even in sales dollars is

Atlanta Radio Supply sells only two products, Product X and Product Y. Atlanta Radio Supply sells three units of Product X for each two units it sells of Product Y; the tax rate is 25%.Required: a.What is the break-even point in units for each product, assuming the sales mix is 3 units of Product X for each two units of Product Y? b.How many units of each product would be sold if Atlanta Radio Supply desired an after-tax net income of $210,000, using its tax rate of 25%?

The contribution margin is computed by deducting all costs which vary on the basis of an output-related cost driver from revenues.

Which of the following statements is TRUE concerning operating leverage?

Use the information below to answer the following question(s).Franscioso Company sells several products.Information of average revenue and costs is as follows: -The Franscioso Company break-even in units is

Answer the following question(s)using the information below.Southwestern College is planning to hold a fund raising banquet at one of the local country clubs.It has two options for the banquet: Southwestern College has budgeted $1,800 for administrative and marketing expenses.It plans to hire a band which will cost another $800.Tickets are expected to be $30 per person.Local business supporters will donate any other items required for the event. -What is the degree of operating leverage for both options if 600 people attend?

Comparing contribution margin [CM] to gross margin [GM], which of the following is TRUE?

Which of the following is an assumption of CVP analysis?

Ballpark Concessions currently sells hot dogs.During a typical month, the stand reports a profit of $9,000 with sales of $50,000, fixed costs of $21,000, and variable costs of $0.64 per hot dog.Next year, the company plans to start selling nachos for $3 per unit.Nachos will have a variable cost of $0.72 and new equipment and personnel to produce nachos will increase monthly fixed costs by $8,808.Initial sales of nachos should total 5,000 units.Most of the nacho sales are anticipated to come from current hot dog purchasers, therefore, monthly sales of hot dogs are expected to decline to $20,000.After the first year of nacho sales, the company president believes that hot dog sales will increase to $33,750 a month and nacho sales will increase to 7,500 units a month.Required: a.Determine the monthly break-even sales in dollars before adding nachos. b.Determine the monthly break-even sales during the first year of nachos sales, assuming a constant sales mix of 1 hotdog and 2 units of nachos. c.What is the expected monthly operating income for the second year that nachos are sold?

Use the information below to answer the following question(s).Dr.Mickey Finn performs a certain procedure for $400.00.The fixed costs are $8,000 and variable costs are $200.00 per procedure. -What is the margin of safety assuming the procedure is performed 200 times?

Use the information below to answer the following question(s).Jill Bishop makes homemade soap.She sells it for $100 a case.Her variable costs are $40 per case.She has fixed costs of $600. -What is the break-even point in cases?

Gates Rubber Company sells cases of hydraulic hoses for $80.The unit variable costs per case are $40 plus a selling commission of 10 percent of sales.Fixed manufacturing costs total $1,000 per month, while fixed selling and administrative costs total $2,000.The company has a tax rate of 40%.Required: a.What is the contribution margin per case? b.What is the break-even point in cases? c.How many cases must be sold to earn pre-tax profit of $6,000? d.How many cases must be sold to earn an after-tax income of $6,000?

An expected value decision model is used for

Pennsylvania Valve Company makes three types of valves: Speedy Flow, Sure Flow, and Fine Flow.Each of the three products has a different contribution margin, and the proportions of the three products sold have remained steady over the years.How could Pennsylvania valve compute a break-even point given this situation?

Answer the following question(s)using the information below.The following information is for the Jeffries Corporation: -What is the break-even point, assuming the sales mix consists of three units of Product A and one unit of Product B?

Answer the following question(s)using the information below.The following information is for the Jeffries Corporation: -If the sales mix shifts to four units of Product A and one unit of Product B, then the break-even point will