Exam 3: Cost-Volume-Profit Analysis

The Holiday Card Company, a producer of specialty cards, has asked you to complete several calculations based upon the following information: Required: a. What is the breakeven point in cards? b. What sales volume is needed to earn an after-tax net income of $13,028.40? c. How many cards must be sold to earn an after-tax net income of $18,480?

Answer the following questions using the information below: Ruben intends to sell his customers a special round-trip airline ticket package. He is able to purchase the package from the airline carrier for $150 each. The round-trip tickets will be sold for $200 each and the airline intends to reimburse Ruben for any unsold ticket packages. Fixed costs include $5,000 in advertising costs. -How many ticket packages will Ruben need to sell in order to achieve $60,000 of operating income?

Which of the following items is NOT an assumption of CVP analysis?

Answer the following questions using the information below: Franscioso Company sells several products. Information of average revenue and costs is as follows: -All of the following are assumed in the above analysis EXCEPT:

If a company's breakeven revenue is $1,000 and its budgeted revenue is $1,250, then its margin of safety percentage is 25%.

Which of the following statements about determining the breakeven point is FALSE?

Answer the following questions using the information below: The following information is for Barnett Corporation: -If the sales mix shifts to one unit of Product X and two units of Product Y, then the breakeven point will:

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. -In the merchandising sector:

Answer the following questions using the information below: Martha Manufacturing produces a single product that sells for $80. Variable costs per unit equal $32. The company expects total fixed costs to be $72,000 for the next month at the projected sales level of 2,000 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 10% reduction in the selling price will result in a 10% increase in sales. If this proposed reduction in selling price is implemented:

Many companies find even the simplest CVP analysis helps with strategic and long-range planning.

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. -Kenefic Company sells its only product for $9 per unit, variable production costs are $3 per unit, and selling and administrative costs are $1.50 per unit. Fixed costs for 10,000 units are $5,000. The contribution margin is:

Assuming a constant mix of 3 units of Small for every 1 unit of Large. The breakeven point in units would be:

What effect, and why, would an increase in the tax rate have on a company's breakeven point?

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. -At the breakeven point of 2,000 units, variable costs total $4,000 and fixed costs total $6,000. The 2,001st unit sold will contribute ________ to profits.

Answer the following questions using the information below: Southwestern College is planning to hold a fundraising 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. -Which option provides the greatest operating income if 600 people attend?

In 2011, Grant Company has sales of $800,000, variable costs of $200,000, and fixed costs of $300,000. In 2012, the company expects annual property taxes to decrease by $15,000. Required: a. Calculate operating income and the breakeven point for 2011. b. Calculate the breakeven point for 2012.

Answer the following questions using the information below: Patrick Ross has three booth rental options at the county fair where he plans to sell his new product. The booth rental options are: The product sells for $37.50 per unit. He is able to purchase the units for $12.50 each. -How many actions and events will a decision table contain?

Multiple cost drivers:

The margin of safety is the difference between:

If operating income is $40,000 and the income tax rate is 30%, then net income will be $28,000.