Exam 4: Costvolumeprofit Analysis

Answer the following questions using the information below: Koscuiszko Chalet,Inc.sells burgers during the major ski season.During the current year 11 000 burgers were sold resulting in $220 000 of sales revenue,$55 000 of variable costs,and $24 000 of fixed costs. -Contribution margin per burger is:

When variable costing is used,there will be more than one break-even point.

Court Tennis Foundation is a non-profit organisation that supplies tennis rackets during the summer to under-priviledged children.Fixed costs are $200 000.The tennis rackets cost $20.00 each.The organisation has a budgeted appropriation of $480 000.How many people can receive a tennis racket during the summer?

One of the first steps to take when using CVP analysis to help make decisions is:

Barbies Beer Emporium sells beer and ale in the proportions 3:5.This means if it sells 1200 items in total for the day it will sell 450 glasses of beer.

Answer the following questions using the information below: Ghan 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 2000 units.In an attempt to improve performance,management is considering a number of alternative actions.Each situation is to be evaluated separately. -What is the current break-even point in terms of number of units?

When fixed costs are $140 000 and variable costs are 30% of the selling price,then break-even sales will be:

Answer the following questions using the information below: The following information is for the Jeffries Corporation: Product A: Revenue \ 16.00 Variable Cost \ 12.00 Product B: Revenue \ 24.00 Variable Cost \ 16.00 Total fixed costs \ 75000 -What is the break-even point,assuming the sales mix consists of three units of Product A and one unit of Product B?

Gross margin is:

Harvey Cricket Bats Company sells two types of bat,Superdrive and Excalibre. Superdrive Excalibre Total Selling price \ 40 \ 50 Variable cost per unit \ 24 \ 40 Total fixed costs \ 840000 Harvey Cricket Bats sells two units of Superdrive for each unit it sells of Excalibre.If Harvey Cricket Bats has a tax rate of 30% and desires a net after-tax profit of $73 500,the break-even point in units would be:

For merchandising firms,contribution margin will always be a lesser amount than gross margin.

To incorporate income tax into cost-volume-profit calculations,managers should use:

Brightray Inc. ,sells lamps for $30.The unit variable cost per lamp is $22.Fixed costs total $9600. Required: a.What is the contribution margin per lamp? b.What is the break-even point in lamps? c.How many lamps must be sold to earn a pre-tax profit of $10 000? d.What is the margin of safety,assuming 1500 lamps are sold? _____________________________________________________________________________________________ _____________________________________________________________________________________________

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

Answer the following questions using the information below: Ghan 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 2000 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:

Answer the following questions using the information below: Kelly's Armoured Suits sells a single product.10 000 units were sold resulting in $100 000 of sales revenue,$40 000 of variable costs,and $12 000 of fixed costs. -Contribution margin per unit is:

Doug and Walter started the DW Restaurant two years ago.They rented a building,bought equipment,and hired two employees to work full time at a fixed monthly salary.Utilities and other operating charges remain fairly constant during each month. The business has grown steadily with average sales increasing 1% a month.This situation pleases both partners.However,they do not understand how sales can grow by 1% a month while profits are increasing at an even faster pace.They are afraid that one day they will wake up to increasing sales but decreasing profits. Required: Explain why the profits have increased at a faster rate than sales.Use the terms variable costs and fixed costs in your response. _____________________________________________________________________________________________ _____________________________________________________________________________________________

The break-even point in total sales dollars is:

Grout Footwear Inc. ,sells a single product,wicket-keeping boots.The company's most recent income statement is given below. Sales (8000 units) \ 240000 Less variable expenses (136000) Contribution margin 104000 Less fixed expenses \ (80000) Net profit \ 24000 Required: a. Contribution margin per unit is $\quad$ $\quad$$\$\underline{\quad\quad}\text {per unit}$ b. If sales are doubled to $\$ 480000$ , total variable costs will equal $\quad$ $\quad$$\$\underline{\quad\quad}$ c. If sales are doubled to $\$ 480000$ , total fixed costs will equal $\quad$ $\quad$$\$\underline{\quad\quad}$ d. If 10 more units are sold, profits will increase by $\quad$ $\quad$$\$\underline{\quad\quad}$ e. Compute how many units must be sold to break even. $\quad$ $\quad$$\#\underline{\quad\quad}$ f. Compute how many units must be sold to achieve profits of $\$ 40000$ . $\quad$ $\quad$$\#\underline{\quad\quad}$ _____________________________________________________________________________________________ _____________________________________________________________________________________________

When a company has at least some fixed costs,the degree of operating leverage is different at different levels of sales.