Exam 3: Cost-Volume-Profit Analysis

Use the information below to answer the following question(s). Dr.Mickey Finn performs a certain procedure for $400.00.The fixed costs are $8,000 and variable costs are $200.00 per procedure. -What is the margin of safety assuming 100 procedures are performed?

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

Use the information below to answer the following question(s). Brian O'Neil intends to sell his customers a special round-trip airline ticket package.He is able to purchase the package from the airline carrier for $400 each.The airline intends to reimburse Brian for any unsold ticket packages.The round-trip tickets will be sold for $500 each.Brian has a tax rate of 30% on his business income. -What would his break-even point be assuming Brian incurred $31,200 in fixed expenses?

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

Use the information below to answer the following question(s). Dr.Mickey Finn performs a certain procedure for $400.00.The fixed costs are $8,000 and variable costs are $200.00 per procedure. -What is the budgeted contribution margin assuming the procedure is performed 200 times?

The contribution margin method of CVP analysis uses the equation: break-even units = unit contribution margin/fixed costs.

Atlanta Radio Supply sells only two products,Product X and Product Y. Atlanta Radio Supply sells three units of Product X for each two units it sells of Product Y;the tax rate is 25%. Required: a.What is the break-even point in units for each product,assuming the sales mix is 3 units of Product X for each two units of Product Y? b.How many units of each product would be sold if Atlanta Radio Supply desired an after-tax net income of $210,000,using its tax rate of 25%?

Answer the following question(s)using the information below. Stephanie's Bridal Shoppe sells wedding dresses.The average selling price of each dress is $1,000,variable costs are $400,and fixed costs are $90,000. -What is the Bridal Shoppe's operating income when 200 dresses are sold?

How many people must purchase tickets assuming option two is chosen,and Big Sports expects to raise $4,820 for the athletic fund? Assume no one pays more than the cost of his/her ticket.

In cost-volume-profit (CVP)analysis relevant costs include variable,fixed,and mixed costs.

Answer the following question(s)using the information below. Kaiser's Kraft Korner sells a single product.7,000 units were sold resulting in $70,000 of sales revenue,$28,000 of variable costs,and $12,000 of fixed costs. -Following is the Becker Company Ltd.partial income statement for the most recent year: What would the Becker Company sales have to be in order for the company to have an operating income of $500,000?

Answer the following question(s)using the information below. Southwestern College is planning to hold a fund raising 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 least amount of risk?

Bonnie and Clyde started the BC Restaurant a few 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. During the past two years the business has grown with average sales increasing one percent a month.This situation pleases both Bonnie and Clyde,but they do not understand how sales can grow by one percent 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.

Better Battery has been in the battery renewal business for four years.It rents a building but owns all of its equipment.All employees are paid a fixed salary except for the busy season (April - June),when temporary help is hired by the hour.Utilities and other operating charges remain fairly constant during each month,except those in the busy season. Selling prices per battery average $100,except during the busy season.Because a large number of customers buy batteries prior to winter,discounts run above average during the busy season.A 15 percent discount is given when two batteries are purchased at one time.During the busy months selling prices per battery average $90. The president of Better Battery is somewhat displeased with the company's management accounting system because the cost behaviour pattern displayed by the monthly break-even charts are inconsistent;the busy month's charts are different from the other months of the year.The president is never sure if the company has a satisfactory margin of safety or if it is just above the break-even point. Required: a.What is wrong with the accountant's computations? b.How can the information be presented in a better format for the president?

A profit-volume graph shows the impact on operating income from changes in the output level.

Sensitivity analysis is a "what-if" technique that managers use to examine how a result will change if the originally predicted data are not achieved or if an underlying assumption changes.

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.

The parent group of the local university football team organizes an end of training camp bar-b-que dinner each year.The 110 player roster and 12 coaches eat for free,and ticket sales are used along with a fixed amount subsidy to fund the event.Last season 250 meals were produced and served.The following financial statement was prepared by one of the team parents: Revenue: * The deficit was covered by a one-time donation from a parent whose son graduated and is consequently no longer on this years team. Required: Calculate the price per ticket that must be charged to breakeven based on the following assumptions: - the number of players and coaches meals remain the same,but the number of meals sold increases by 20 -the fixed costs are the same as last year -the variable costs per unit are the same as last year -the subsidy will remain at $3,000

Use the information below to answer the following question(s). Dr.Mickey Finn performs a certain procedure for $400.00.The fixed costs are $8,000 and variable costs are $200.00 per procedure. -What is the margin of safety in units assuming the procedure is performed 200 times?

If the sales mix shifts to four units of Product A and one unit of Product B,then the break-even point will