Elliott was a professional classical guitar player until his motorcycle accident that left him disabled.After long months of therapy,he hired an experienced luthier (maker of stringed instruments)and started a small shop to make and sell Spanish guitars.The guitars sell for $1,000 and the fixed monthly operating costs are as follows: \[\begin{array} { | l | r | } \hline \text { Rent and utilities } & \$ 1,240 \\ \hline \text { Wages and benefits to luthier } & 2,600 \\ \hline \text { Other expenses } & 800 \\ \hline \end{array}\] Elliott's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales,$0.90 went to cover his fixed costs,and that anything past that point was pure profit. Elliott wishes to earn $5,500 of operating profit each month.Calculate the amount of sales revenue required to achieve the target profit.

A) $4,640 B) $5,500 C) $11,267 D) $6,112 A) $4,640 B) $5,500 C) $11,267 D) $6,112

Ito Company has provided the following information: \[\begin{array} { | l | r | } \hline \text { Price per unit } & \$ 42 \\ \hline \text { Variable cost per unit } & 16 \\ \hline \text { Fixed costs per month } & \$ 25,000 \\ \hline \end{array}\] Calculate the contribution margin per unit.

A) $26 B) $42 C) $58 D) $10 A) $26 B) $42 C) $58 D) $10

Exam 21: Cost-Volume-Profit Analysis

Elliott was a professional classical guitar player until his motorcycle accident that left him disabled.After long months of therapy,he hired an experienced luthier (maker of stringed instruments)and started a small shop to make and sell Spanish guitars.The guitars sell for $1,000 and the fixed monthly operating costs are as follows: Rent and utilities \ 1,240 Wages and benefits to luthier 2,600 Other expenses 800 Elliott's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales,$0.90 went to cover his fixed costs,and that anything past that point was pure profit. Elliott wishes to earn $5,500 of operating profit each month.Calculate the amount of sales revenue required to achieve the target profit.

(Multiple Choice)

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Question 221

Neptune Company sold 2,200 units in November at a price of $45 per unit.The variable cost is $20 per unit.Calculate the total contribution margin.

(Multiple Choice)

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Question 222

Contribution margin ratio is the ratio of contribution margin to ________.

(Multiple Choice)

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Question 223

Which of the following is the right formula for calculating total mixed cost?

(Multiple Choice)

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Question 224

Sequoah Company sells its product for $60 and has variable costs of $31 per unit.The total fixed costs are $35,000.What will be the effect on the breakeven point in units if variable costs increase by $6 due to an increase in the cost of direct materials?

(Multiple Choice)

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Question 225

Which of the following statements is true of absorption and variable costing methods?

(Multiple Choice)

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Question 226

The fundamental assumption of cost-volume-profit (CVP)analysis is that in the long-run fixed costs become variable costs.

(True/False)

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Question 227

Ito Company has provided the following information: Price per unit \ 42 Variable cost per unit 16 Fixed costs per month \ 25,000 Calculate the contribution margin per unit.

(Multiple Choice)

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Question 228

Which of the following statements is true of the behavior of total fixed costs,within the relevant range?

(Multiple Choice)

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Question 229

Variable costing considers direct materials,direct labor,variable manufacturing overhead,and fixed manufacturing overhead as product costs.

(True/False)

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Question 230

Aspen Manufacturers produces flooring material.The monthly fixed costs are $12,000 per month.The unit selling price is $85 and variable cost per unit is $45.How many units should Aspen sell in order to earn $10,000 as operating income?

(Essay)

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Question 231

Fixed cost per unit is inversely proportional to the volume of units produced.

(True/False)

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Question 232

Costs that have both variable and fixed components are called ________.

(Multiple Choice)

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Question 233

Variable costing considers only ________ costs when determining product costs.

(Multiple Choice)

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Question 234

Lori sells hand-knit scarves at a flea market.Each scarf sells for $35.Lori pays $70 to rent a vending space for one day.The variable costs are $20 per scarf.How many scarves should she sell each day in order to break even?

(Multiple Choice)

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Question 235

Which of the following is a period cost?

(Multiple Choice)

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Question 236

The sales level at which operating income is zero is called the breakeven point.

(True/False)

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Question 237

The traditional income statement format is prepared under absorption costing.

(True/False)

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Question 238

Showing 221 - 238 of 238

Neptune Company sold 2,200 units in November at a price of $45 per unit.The variable cost is $20 per unit.Calculate the total contribution margin.

Contribution margin ratio is the ratio of contribution margin to ________.

Which of the following is the right formula for calculating total mixed cost?

Sequoah Company sells its product for $60 and has variable costs of $31 per unit.The total fixed costs are $35,000.What will be the effect on the breakeven point in units if variable costs increase by $6 due to an increase in the cost of direct materials?

Which of the following statements is true of absorption and variable costing methods?

The fundamental assumption of cost-volume-profit (CVP)analysis is that in the long-run fixed costs become variable costs.

Ito Company has provided the following information: Price per unit \ 42 Variable cost per unit 16 Fixed costs per month \ 25,000 Calculate the contribution margin per unit.

Which of the following statements is true of the behavior of total fixed costs,within the relevant range?

Variable costing considers direct materials,direct labor,variable manufacturing overhead,and fixed manufacturing overhead as product costs.

Aspen Manufacturers produces flooring material.The monthly fixed costs are $12,000 per month.The unit selling price is $85 and variable cost per unit is $45.How many units should Aspen sell in order to earn $10,000 as operating income?

Fixed cost per unit is inversely proportional to the volume of units produced.

Costs that have both variable and fixed components are called ________.

Variable costing considers only ________ costs when determining product costs.

Lori sells hand-knit scarves at a flea market.Each scarf sells for $35.Lori pays $70 to rent a vending space for one day.The variable costs are $20 per scarf.How many scarves should she sell each day in order to break even?

Which of the following is a period cost?

The sales level at which operating income is zero is called the breakeven point.

The traditional income statement format is prepared under absorption costing.

Introduction to Managerial Accounting

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Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

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