Exam 21: Cost-Volume-Profit Analysis

Fixed costs divided by the contribution margin ratio equals the breakeven point in sales dollars.

Variable costing is used for external reporting purposes,and absorption costing is used for internal decision-making purposes.

Which of the following is true of the traditional format of the income statement?

The amount by which sales can decrease before the company incurs an operating loss is called breakeven point.

In absorption costing,the manufacturing costs expensed are greater than the amount expensed in variable costing when units produced are less than sold because the units in beginning inventory under absorption costing were assigned a greater cost in the previous accounting period.

Fixed costs per unit decrease as production levels decrease.

When the selling price per unit decreases,the breakeven point ________.

Satinwood Company sells two product finishes-Mahogany and Aspen.Satinwood predicts that it will sell 7,200 units of Mahogany and 5,600 units of Aspen in the next period.The unit contribution margins are $3.15 and $6.30,respectively.What is the weighted-average unit contribution margin?

The breakeven point represents the sales volume at which the company's net income is zero.

Gloria's Bakery sells three large muffins for every two small ones.A small muffin sells for $6 with a variable cost of $2.A large muffin sells for $8 with a variable cost of $2.50.What is the weighted-average contribution margin? (Round your intermediate calculations to one decimal place.)

Badlands,Inc.reports the following information for the year ended December 31: Units sold 590 units Sales price \ 130 per unit Direct materials \ 28 per unit Direct labor \ 9 per unit Variable manufacturing overhead \ 15 per unit Fixed manufacturing overhead \ 25 per unit Variable selling and administrative costs \ 6 per unit Fixed selling and administrative costs \ 12,400 per year The operating income calculated using variable costing and absorption costing amounted to $10,000 and $13,300,respectively.There were no beginning inventories.Determine the total number of units produced during the year.

Bryant Company sells glass vases at a wholesale price of $2.6 per unit.The variable cost of manufacture is $0.35 per unit.The monthly fixed costs are $9,000.Bryant's current sales are 25,000 units per month.If Bryant wants to increase operating income by 25%,how many additional units,must Bryant sell? (Round your intermediate calculations to two decimal places.)

Herrera Company's Model A generator sells for $569 and Model B sells for $499.The variable cost of Model A is $514 and of Model B is $416.If Herrera Company's sales incentives reward sales of the goods with the highest contribution margin,the sales force will be motivated to push sales of Model A more aggressively than Model B.

If the variable cost per unit decreases,the total number of units required to breakeven will increase.

Penny's Pies,Inc.has provided the following financial information for the year: Finished Goods Inventory: Beginning balance, in units 650 Units produced 4,200 Units sold Ending balance, in units 550 Production Costs: Variable manufacturing costs per unit \ 50 Total fixed manufacturing costs \ 50,400 What is the unit product cost for the year using variable costing?

Higher fixed costs increase the total number of units required to break even.

Zest Soda,a local convenience store,sells soft drinks.It sells two large drinks for every small drink.A large drink sells for $1.70 with a variable cost of $0.40.A small drink sells for $1.10 with a variable cost of $0.30.What is the weighted average contribution margin? (Round your intermediate calculations and final answer to two decimal places.)

Dessa,Inc.reports the following information for the year ended December 31: Beginning Finished Goods Inventory 50 units Units produced 430 units Units sold 480 units Sales price \ 150 per unit Direct materials \ 25 per unit Direct labor \ 14 per unit Variable manufacturing overhead \ 15 per unit Fixed manufacturing overhead \ 15,500 per year Variable selling and administrative costs \ 10 per unit Fixed selling and administrative costs \ 14,000 per year The beginning Finished Goods Inventory costs were $3,600 under absorption costing and $2,700 under variable costing. What is the operating income using variable costing?

Allentown Aqua,Inc.has provided the following information for the year. Units produced 9,000 units Sales price \ 600 per unit Direct materials \ 25 per unit Direct labor \ 30 per unit Variable manufacturing overhead \ 50 per unit Fixed manufacturing overhead \ 440,000 per year Variable selling and administration costs \ 75 per unit Fixed selling and administration costs \ 240,000 per year What is the unit product cost using variable costing?

Answer the following variable costing questions: Question Variable Costing Which costs are included as product costs? Which costs are included as period costs?