Exam 3: Cost-Volume-Profit Analysis

The planned operating income is calculated by ________.

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. -How many ticket packages will Ruben need to sell to break even?

Stella Company sells only two products,Product A and Product B. Product A Product B Total Selling price \ 40 \ 50 Variable cost per unit \ 24 \ 40 Total fixed costs \ 840,000 Stella sells two units of Product A for each unit it sells of Product B.Stella faces a tax rate of 30%.Stella desires a net after-tax income of $73,500.The breakeven point in units would be ________.

Craylon Manufacturing produces a single product that sells for $100.Variable costs per unit equal $25.The company expects total fixed costs to be $60,000 for the next month at the projected sales level of 1,000 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 $10,000 increase in the monthly advertising expense will result in a considerable increase in sales.Sales must increase by ________ to justify this additional expenditure.

Sensitivity analysis helps to evaluate the risk associated with decisions.

Lobster Liquidators will make $500,000 if the fishing season weather is good,$200,000 if the weather is fair,and would actually lose $50,000 if the weather is poor during the season.If the weather service gives a 40% probability of good weather,a 25% probability of fair weather,and a 35% probability of poor weather,what is the expected monetary value for Lobster Liquidators?

Craylon Manufacturing produces a single product that sells for $100.Variable costs per unit equal $25. The company expects total fixed costs to be $60,000 for the next month at the projected sales level of 1,000 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 effect on operating income with the increase of advertising expenses?

A firm operating at breakeven point will pay an income tax of 10%.

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

A company with a higher degree of operating leverage is at greater risk during economic downturns because of its higher fixed costs.

How many units would have to be sold to yield a target operating income of $23,000,assuming variable costs are $25 per unit,total fixed costs are $2,000,and the unit selling price is $30?

Frazer Corp sells several products.Information of average revenue and costs is as follows: Selling price per unit \ 28.50 Variable costs per unit: Direct material \ 5.50 Direct manufacturing labor \ 1.15 Manufacturing overhead \ 0.85 Selling costs \ 2.50 Annual fixed costs \ 125,000 What is the operating income earned if the company sells 15,000 units?

The breakeven point is the quantity of output at which total revenues equal fixed costs.

The breakeven point revenues is calculated by dividing ________.

If a company's breakeven revenue is $1,000 and its budgeted revenue is $1,250,then its margin of safety percentage is 20%.

Dr.Charles Hunter,MD,performs a certain outpatient procedure for $1,000.His fixed costs are $20,000,while his variable costs are $500 per procedure.Dr.Hunter currently plans to perform 200 procedures this month.What is the breakeven point for the month assuming that Dr.Hunter plans to perform the procedure 200 times?

If selling price per unit is $40,variable costs per unit are $25,total fixed costs are $20,000,the tax rate is 30%,and the company sells 5,000 units,net income is ________.

Which of the following is the mathematical expression of contribution margin ratio?

If a company's sales mix is 2 units of product A for every 3 units of product B,and the company sells 3,000 units in total of both products,only 2,000 units of product A will be sold.

If the breakeven point is 1,000 units and each unit sells for $50,then ________.