Exam 3: Cost-Volume-Profit Analysis

What is the break-even point in units, assuming a product's selling price is $100, fixed costs are $8,000, unit variable costs are $20, and operating income is $32,000?

Stephanie's Stuffed Animals reported the following: Required: a. Compute contribution margin. b. Compute gross margin. c. Compute operating income.

What is the break-even point in units for a product line, assuming a unit selling price of $200, total fixed costs are $4,000, unit variable costs are $40, and target operating income is $16,000,000?

CVP analysis assumes that the behaviour of total costs is non-linear.

Margin of safety measures the difference between budgeted revenues and break-even revenues.

Gilley Inc., sells a single product. The company's most recent income statement is given below. Required:

ABC Grocery needs to know the kilograms of bananas to have on hand each day. Each kilogram of bananas costs $0.25 and can be sold for $0.40. Unsold bananas are worthless at the end of the day. The following demands were found after studying the last six month's sales: 200 kilograms of bananas one-fourth of the time 300 kilograms of bananas one-half of the time 400 kilograms of bananas one-fourth of the time Required: Determine whether ABC Grocery should order 200, 300, or 400 kilograms of bananas.

A social agency receives a budget appropriation of $11,000 monthly from the municipality. Annual fixed costs are projected to be $20,000 and the variable cost per client was $238.50 last year. Although the agency projects its case load to increase by the usual 15% this year (as it has done historically), the municipality appropriated funds based on last year's case load. Which of the following strategies would be ineffective in dealing with the expected shortfall in budget appropriation for the agency?

The number of units that must be sold to achieve $60,000 of operating income is

In multi-product situations when sales mix shifts toward the product with the highest contribution margin, operating income will be higher.

Use the information below to answer the following question(s). The following information is for Winnie Company: -What is the operating income assuming actual sales are 300,000 units, and the sales mix is one unit of Product A and two units of Product B?

Popcorn Inc. currently sells plain popcorn at the ballpark. During a typical month the stand reports a profit of $18,000 with sales of $100,000 and fixed costs of $42,000 and variable costs of $0.64 per box. Next year the company plans to start selling candy-coated popcorn for $3 a box. The candy-coated popcorn will have a variable cost of $0.72. The new equipment and personnel to handle the popcorn will increase monthly fixed costs by $17,616. Two boxes of candy-coated popcorn are expected to sell for every box of plain popcorn. Required: a. Determine the monthly break-even sales in units before adding the candy-coated popcorn product. b. Determine the monthly break-even sales in units of each product during the first year of candy-coated popcorn sales assuming a constant sales mix.

What is the break-even point in cases?

To perform cost-volume-profit analysis, a company must be able to separate costs into fixed and variable components.

CVP analysis assumes that total costs can be separated into the fixed component and variable component with respect to the level of output.

Contribution margin per unit is

Mount Carmel Company sells only two products, Product A and Product B. Mount Carmel sells two units of Product A for each unit it sells of Product B. Mount Carmel faces a tax rate of 30%. Mount Carmel desires a net after-tax income of $73,500. The number of units needed to be sold to achieve the desired after-tax profit would be

Answer the following question(s) using the information below. The following information is for the Jeffries Corporation: -What is the operating income, assuming actual sales total 25,000 units, and the sales mix is three units of Product A and one unit of Product B?

Operating income is equal to net income plus income taxes.

Determining the number of units that must be produced in order to generate enough profit to cover total fixed costs is one reason for using a break-even analysis.