Exam 3: Cost-Volume-Profit Analysis

If variable costs per unit increase, then the breakeven point will decrease.

Answer the following questions using the information below: Nancy's Niche sells a single product. 8,000 units were sold resulting in $80,000 of sales revenue, $20,000 of variable costs, and $10,000 of fixed costs. -If variable costs decrease by $1 per unit, the new breakeven point is:

Answer the following questions using the information below: Holly's Ham, Inc. sells hams during the major holiday seasons. During the current year 11,000 hams were sold resulting in $220,000 of sales revenue, $55,000 of variable costs, and $24,000 of fixed costs. -Fixed costs equal $12,000, unit contribution margin equals $20, and the number of units sold equal 1,600. Operating income is:

Answer the following questions using the information below: Assume the following cost information for Fernandez Company: -If Bel Air Realtor plans an operating income of $210,000 and the tax rate is 30%, then Bel Air's planned net income should be:

Furniture, Inc., sells lamps for $30. The unit variable cost per lamp is $22. Fixed costs total $9,600. Required: a. What is the contribution margin per lamp? b. What is the breakeven point in lamps? c. How many lamps must be sold to earn a pretax income of $8,000? d. What is the margin of safety, assuming 1,500 lamps are sold?

The degree of operating leverage at a specific level of sales helps the managers calculate the effect that potential changes in sales will have on operating income.

Mrs. Tannenbaum is going to sell Christmas tree lights for $40 a box. The lights cost Mrs. Tannenbaum $10 a box and any unsold lights can be returned for a full refund. She is planning to rent a booth at the upcoming Happy Holidays Convention, which offers three options: Which of the following statements is FALSE?

Breakeven point is that quantity of output where total revenues equal total costs.

Cost-volume-profit analysis assumes all of the following EXCEPT:

Answer the following questions using the information below: Bush Manufacturing produces a single product that sells for $100. Variable costs per unit equal $25. The company expects total fixed costs to be $60,000 for the next month at the projected sales level of 1,000 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately. -Suppose that management believes that a $24,000 increase in the monthly advertising expense will result in a considerable increase in sales. Sales must increase by how much to justify this additional expenditure?

Answer the following questions using the information below: Assume the following cost information for Fernandez Company: -If the tax rate is t, it is possible to calculate planned operating income by:

The breakeven point in CVP analysis is defined as:

Fixed costs:

The difference between total revenues and total variable costs is called contribution margin.

Answer the following questions 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 breakeven point will:

Events, as distinguished from actions, would include:

An expected value is the weighted average of the outcomes, with the probability of each outcome serving as the weight.

When making net income evaluations, CVP calculations for target income must be stated in terms of target operating income instead of target net income.

Bob's Textile Company sells shirts for men and boys. The average selling price and variable cost for each product are as follows: Required: a. What is the breakeven point in units for each type of shirt, assuming the sales mix is 2:1 in favor of men's shirts? b. What is the operating income, assuming the sales mix is 2:1 in favor of men's shirts, and sales total 9,000 shirts?

Companies that are substituting fixed costs for variable costs receive a greater per unit return above the breakeven point.