Exam 4: Cost-Volume-Profit Relationships

A total of 30,000 units were sold last year.The contribution margin per unit was $2,and total fixed expenses were $20,000 for the year.This year,fixed expenses are expected to increase to $26,000,but the contribution margin per unit will remain unchanged at $2.How many units must be sold this year to earn the same operating income as was earned last year?

A product sells for $20 per unit,and has a contribution margin ratio of 40%.Fixed expenses total $120,000 annually.The company that makes and sells the product has an income tax rate of 40%.How many units must be sold to yield an after-tax operating profit of $30,000?

Company Y is considering two production technologies,Bronze and Platinum,for producing its new product.The cost structures of the two technologies are as follows: At what level of sales volume in units (rounded to the nearest whole unit)would Company Y be indifferent in choosing between the Bronze and Platinum technologies?

Marston Enterprises sells three chemicals: petrol,septine,and tridol.Petrol's unit contribution margin is higher than septine's,which is higher than tridol's.Which one of the following events is most likely to increase the company's overall break-even point?

Assume sales next year total $240,000;product A $70,000,product B $90,000 and C $80,000.Total Contribution Margin for Fletcher will be closest to:

Marling Corporation has budgeted the following data: What is the break-even in sales dollars?

How many units need to be sold to earn an annual operating income equal to 10% of sales?

The total contribution margin decreases if sales volume remains the same and which of the following occurs?

Seco Corp. ,a wholesale supply company,uses independent sales agents to market the company's products.These agents currently receive a commission of 20% of sales,but are demanding an increase to 25% of sales.Seco had already prepared its budget for next year before learning of the sales agents' demand for an increase in commissions.That budgeted income statement appears below: Seco is considering the possibility of employing its own salespersons.Three individuals would be required,at a salary of $30,000 each,plus commissions of 5% of sales.In addition,a sales manager would be employed at a fixed annual salary of $160,000. Required: a)Compute Seco's break-even point in sales dollars based upon the company's budgeted income statement,assuming that the company continues to use independent sales agents and that they are paid the old commission rate of 20% of sales. b)Compute Seco's break-even point in sales dollars,assuming that the company employs its own salespersons. c)Compute the sales dollars required to attain the target profit of $1,900,000,assuming that the company continues to use independent sales agents and the company agrees to their demand for a 25% sales commission. d)Compute the sales dollars that would be required to generate the same operating income,whether Seco employs its own salespersons or continues to use the independent sales agents and pays them a 25% commission.

If two companies produce the same product and have the same total sales and same total expenses,operating leverage will be lower in the company with a higher proportion of fixed expenses in its cost structure.

Young Company has a margin of safety percentage of 20%.The break-even point is $400,000 and the variable costs are 40% of sales.Given this information,what is the operating income?

A company has provided the following data: If the dollar contribution margin per unit is increased by 10%,total fixed cost is decreased by 20%,and all other factors remain the same,what will the outcome be for operating income?

A product sells for $20 per unit,and has a contribution margin ratio of 40%.Fixed expenses total $120,000 annually.The company that makes and sells the product has an income tax rate of 40%.How many units must be sold to yield an after-tax operating profit of $30,000?

A company has provided the following data: If the sales volume decreases by 25%,the variable cost per unit increases by 15%,and all other factors remain the same,what will the outcome be for operating income?

The contribution margin ratio always increases when which of the following occurs?

Rawlings Company prepared the following budget information for the coming year: The budget assumes the sale of 20,000 units of A,100,000 units of B,and 80,000 units of C. Required: a)What is the company's break-even point given the sales mix above? b)If the budgeted sales mix is maintained,what is the total contribution margin and operating income if 300,000 units are sold?

At the break-even point: Sales - Variable expenses = Fixed expenses.

The basic cost-volume-profit model assumes no change in inventories when the model is applied to a manufacturing company. Required: Explain the reasoning behind this assumption.

The break-even in units sold will decrease if there is an increase in which of the following?

When interpreting a CVP graph which of the following is NOT correct?