Exam 3: Cost-Volume-Profit Analysis

How many units would have to be sold to yield a target income of $11,000 assuming variable costs are $30 per unit,total fixed costs are $1,000,and the unit selling price is $40?

Suppose a company decided to automate a production line.Explain what effects this would have on a company's cost structure using CVP terminology.Could these changes have any possible negative effect on the firm?

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. -How many units will he need to sell in order to break-even assuming Brian incurred $10,000 in expenses to advertise the sale,and there are no other expenses?

If planned net income is $21,000 and the tax rate is 30%,then planned operating income would be $27,300.

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

Ballpark Concessions currently sells hot dogs.During a typical month,the stand reports a profit of $9,000 with sales of $50,000,fixed costs of $21,000,and variable costs of $0.64 per hot dog. Next year,the company plans to start selling nachos for $3 per unit.Nachos will have a variable cost of $0.72 and new equipment and personnel to produce nachos will increase monthly fixed costs by $8,808.Initial sales of nachos should total 5,000 units.Most of the nacho sales are anticipated to come from current hot dog purchasers,therefore,monthly sales of hot dogs are expected to decline to $20,000. After the first year of nacho sales,the company president believes that hot dog sales will increase to $33,750 a month and nacho sales will increase to 7,500 units a month. Required: a.Determine the monthly break-even sales in dollars before adding nachos. b.Determine the monthly break-even sales during the first year of nachos sales,assuming a constant sales mix of 1 hotdog and 2 units of nachos. c.What is the expected monthly operating income for the second year that nachos are sold?

Target net income is computed by multiplying operating income by one minus the entity's tax rate,or by multiplying operating income by the tax rate,and subtracting that amount from operating income.

Chris Muss is going to sell Ad-hoc compact disks for $40 a box;one box is considered to be one unit.The disks cost Chris $10 a unit.She is planning to rent a booth at the up-coming Area Computer Show.She has three options for attending the show: 1.paying a fixed fee of $3,000; 2.paying a $1,000 fee plus 10% of her revenue made at the convention,or; 3.paying 25% of her revenue made at the convention. Which of the following statements is TRUE?

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 the procedure is performed 200 times?

Arthur's Plumbing reported the following: Required: a.Compute contribution margin. b.Compute contribution margin percentage. c.Compute gross margin. d.Compute gross margin percentage. e.Compute operating income.

Information Inc. ,sells accounting software.Each unit's cost may be separated as follows: selling price of $100 and variable costs of $30.Fixed costs are $10,000. What is Information Inc.'s operating income assuming 1,000 units are sold?

Seamless Gutter sells 10 metre sections of eaves trough for $12.The unit variable costs per section are $8.80.Fixed costs total $4,800. Required: a.What is the contribution margin per section? b.What is the break-even point in sections? ...in dollars? c.How many sections must be sold to earn a pre-tax income of $4,000? d.What is the margin of safety assuming 1,800 sections are sold?

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

Sensitivity analysis may be used to determine how a result will change if the original data are changed or if the original results are not achieved.

Use the information below to answer the following question(s). Franscioso Company sells several products.Information of average revenue and costs is as follows: -The Franscioso Company break-even in sales dollars is

Auto Tires Inc.sells tires to service stations for an average of $45 each.The variable costs of each tire are $30 and monthly fixed manufacturing costs total $15,000.Other monthly fixed costs of the company total $12,000. Required: a.What is the break-even level in tires? b.What is the margin of safety assuming sales total $90,000? c.What is the break-even level in tires assuming variable costs increase by 20 percent? d.What is the break-even level in tires assuming the selling price goes up by 10 percent,fixed manufacturing costs decline by 10 percent and other fixed costs decline by $150?

"Uncertainty" may be defined as

Sales total $200,000 when variable costs total $150,000 and fixed costs total $30,000.The break-even point in sales dollars is

How many dresses are sold when operating income is zero?

Berhannan's Cellular sells phones for $100.The unit variable cost per phone is $50 plus a selling commission of 10%.Fixed manufacturing costs total $1,250 per month,while fixed selling and administrative costs total $2,500. Required: a.What is the contribution margin per phone? b.What is the break-even point in phones? c.How many phones must be sold to earn pre-tax income of $7,500?