Exam 3: Cost-Volume-Profit Analysis

James Corporation gathered the following information: Variable costs \ 550,000 Income taxrate 40\% Contribution-margin ratio 30\% Required: a.Compute total fixed costs assuming a breakeven volume in dollars of $2,000,000. b.Compute sales volume in dollars to produce an after-tax net income of $150,000.

If a company has a degree of operating leverage of 4.0,that means a 10% increase in sales will result in a 40% increase in operating income.

Craylon Manufacturing Company produces two products,X and Y.The following information is presented for both products: X Y Selling price per unit \ 40 \ 25 Variable cost per unit 25 15 Total fixed costs are $275,000. Required: a.Calculate the contribution margin for each product. b.Calculate breakeven point in units of both X and Y if the sales mix is 3 units of X for every unit of Y. c.Calculate breakeven volume in total dollars if the sales mix is 2 units of X for every 3 units of Y.

In CVP analysis,focusing on target net income rather than operating income ________.

The selling price per unit is $25,variable cost per unit $15,and fixed cost per unit is $4.When this company operates above the breakeven point,the sale of one more unit will increase net income by $6.

Answer the following questions using the information below: Shine Jewelry sells 400 units resulting in $7,000 of sales revenue, $3,000 of variable costs, and $1,500 of fixed costs. -Calculate the variable cost per unit.

Ken's Beer Emporium sells beer and ale in both pint and quart sizes.If Ken's sells twice as many pints as it sells quarts,and sells 2,400 items total,it will sell 800 quarts of ale.

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. -What is the contribution margin per ticket package?

Alex Miller,Inc.,sells car batteries to service stations for an average of $30 each.The variable cost of each battery is $20 and monthly fixed manufacturing costs total $10,000.Other monthly fixed costs of the company total $8,000. Required: a.What is the breakeven point in batteries? b.What is the margin of safety,assuming sales total $60,000? c.What is the breakeven level in batteries,assuming variable costs increase by 20%? d.What is the breakeven level in batteries,assuming the selling price goes up by 10%,fixed manufacturing costs decline by 10%,and other fixed costs decline by $100?

Globus Autos 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.If a change is made in one parameter of CVP analysis,it is an example of ________.

In CVP analysis,the graph of total revenues versus total costs is linear in nature relation to units sold within a relevant range and time period.

Answer the following questions 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. -Option one: Fixed costs of $10,000 and a breakeven point of 500 units. Option two: Fixed costs of $20,000 and a breakeven point of 700 units. Which option should you choose if you are expecting to produce 600 units?

Produce Company needs to know the pounds of apples to have on hand each day.Each pound of apples costs $0.50 and can be sold for $0.80.Unsold apples are worthless at the end of the day.The following demands were found after studying the last six months' sales: 200 pounds of apples 30% of the time 300 pounds of apples 40% of the time 400 pounds of apples 30% of the time Required: Determine whether Produce Company should order 200,300,or 400 pounds of apples.

Answer the following questions using the information below: Alex Furniture sells a table for $850. His fixed costs are $25,000, while his variable costs are $500 per table. He currently plans to sell 175 tables this month. -What is the budgeted revenue for the month assuming that Alex sells 175 tables?

Sky High sells helicopters.During the current year,100 helicopters were sold resulting in $820,000 of sales revenue,$250,000 of variable costs,and $342,000 of fixed costs.The number of helicopters that must be sold to achieve $300,000 of operating income is ________.

If variable costs per unit increase,then the breakeven point will decrease.

Karen Hefner,a florist,operates retail stores in several shopping malls.The average selling price of an arrangement is $30 and the average cost of each sale is $18.A new mall is opening where Karen wants to locate a store,but the location manager is not sure about the rent method to accept.The mall operator offers the following three options for its retail store rentals: 1.paying a fixed rent of $15,000 a month,or 2.paying a base rent of $9,000 plus 10% of revenue received,or 3.paying a base rent of $4,800 plus 20% of revenue received up to a maximum rent of $25,000. Required: a.For each option,compute the breakeven sales and the monthly rent paid at break-even. b.Beginning at zero sales,show the sales levels at which each option is preferable up to 5,000 units.

As per CVP,operating income calculations use ________.

Answer the following questions using the information below: Tally Corp. sells softwares during the recruiting seasons. During the current year, 11,000 softwares were sold resulting in $440,000 of sales revenue, $110,000 of variable costs, and $48,000 of fixed costs. -If sales increase by $60,000,operating income will increase by ________.

To apply CVP analysis in not-for profit organization ________.