Exam 4: Cost-Volume-Profit Relationships

Spencer Company's most recent monthly contribution format income statement is given below: The company sells its only product for $10 per unit.There were no beginning or ending inventories. Required: a)What is the company's contribution margin ratio? b)What are total sales in dollars at the break-even point? c)What are total variable expenses at the break-even point? d)If unit sales were increased by 10% and fixed expenses were reduced by $2,000,what would be the company's expected operating income? (Prepare a new income statement. )

How many units would the company have to sell to attain target operating profits of $150,000?

Gerber Company is planning to sell 200,000 units for $2.00 a unit and will just break even at this level of sales.The contribution margin ratio is 25%.What are the company's fixed expenses?

The total volume in sales dollars that would be required to attain a given target operating profit is determined by dividing the sum of the fixed expenses and the target operating profit by the contribution margin ratio.

The following is last month's contribution format income statement(Do not round intermediate computations): What is the company's break-even in sales dollars?

Dodero Company produces a single product that sells for $100 per unit.Fixed expenses total $12,000 per month,and variable expenses are $60 per unit.The company's sales average 500 units per month.Which of the following statements is correct?

The following is last month's contribution format income statement: What is the company's margin of safety percentage,rounded to the nearest whole percent?

Tanner Company's most recent contribution format income statement is presented below: The company sells its only product for $15 per unit.There were no beginning or ending inventories. Required: a)Compute the company's break-even point in units sold. b)Compute the total variable expenses at the break-even point. c)How many units would have to be sold to earn a target operating income of $9,000? d)The sales manager is convinced that a $6,000 increase in the advertising budget would increase total sales by $25,000.Would you advise the increased advertising outlay?

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?

What is the degree of operating leverage for July?

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?

What is the company's break-even sales in dollars?

Belli-Pitt,Inc produces a single product.The results of the company's operations for a typical month are summarized in contribution format as follows: The company produced and sold 120,000 kilograms of product during the month.There were no beginning or ending inventories. Required: a)Given the present situation,compute 1 The break-even sales in kilograms. 2 The break-even sales in dollars. 3 The sales in kilograms that would be required to produce operating income of $90,000. 4 The margin of safety in dollars. b)An important part of processing is performed by a machine that is currently being leased for $20,000 per month.Belli-Pitt has been offered an arrangement whereby it would pay $0.10 royalty per kilogram processed by the machine rather than the monthly lease. 1 Should the company choose the lease or the royalty plan? 2 Under the royalty plan,compute the break-even point in kilograms. 3 Under the royalty plan,compute the break-even point in dollars. 4 Under the royalty plan,determine the sales in kilograms that would be required to produce operating income of $90,000.

What is the company's margin of safety percentage?

Wallace,Inc. ,prepared the following budgeted data based on a sales forecast of $6,000,000: What would be the amount of sales dollars at the break-even point?

Last year,Black Company reported sales of $640,000,a contribution margin of $160,000,and an operating loss of $40,000.Based on this information,what was the break-even point?

Which of the following is defined as the ratio of fixed expenses to the unit contribution margin?

Roberts Company sells a single product at a selling price of $55 per unit.Variable costs are $30.25 per unit,and fixed costs are $113,850.What is Roberts Company's break-even point?

Which of the following is defined as the amount by which a company's sales can decline before operating losses are incurred?

How many units would the company have to sell to attain after-tax profits of $72,000,assuming it is subject to a 40% income tax rate?