Exam 21: Cost-Volume-Profit Analysis

Mosaic Tile Company has estimated the following amounts for its next fiscal year: Total fixed costs \ 832,000 Sales price per unit 44 Variable costs per unit 20 What will happen to the breakeven point (in units)if Mosaic can reduce fixed costs by $22,000? (Round your answer up to the nearest whole unit.)

Complete the table below for contribution margin per unit,total contribution margin and contribution margin ratio. Alpha Beta Number of units 2,460 12,800 Sales price per unit \ 21 \ 78 Variable costs per unit \ 10 \ 32 Calculate: Contribution margin per unit Total contribution margin Contribution margin ratio

Comet Canisters,Inc.has collected the following data for the current year: Beginning Finished Goods Inventory 60 units Units produced 560 units Units sold 620 units Sales price \ 170 per unit Direct materials \ 40 per unit Varect labor \ 13 per unit Fixed manufacturing overhead \ 14 per unit Variable selling and administrative costs \ 19,500 per unit Fixed selling and administrative costs \ 6 per unit What is the unit product cost using absorption costing? (Round your answer to the nearest cent.)

Complete the statement,using the following terms: increase,decrease,or have no effect on. Decreases in sales price per unit_______ contribution margin per unit and ________ the breakeven point.

In variable costing,all fixed manufacturing overhead costs are expensed in the period incurred.

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

Phoenix was a professional classical guitar player until a motorcycle accident left him disabled.After long months of therapy,he hired an experienced luthier and started a small shop to make and sell Spanish guitars.The guitars sell for $700,and the fixed monthly operating costs are as follows: Rent and utilities \ 810 Wages and benefits to luthier 2500 Other expenses 480 Phoenix's accountant told him about contribution margin ratios,and Phoenix understood clearly that for every dollar of sales,$0.60 went to cover his fixed costs,and anything above that point was profit. Phoenix is planning to increase the sales price to $750.What impact will the increase in sales price have on the contribution margin ratio?

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

Locklear,Inc.reports the following information for the year ended December 31: Units sold 650 units Sales price \ 130 per unit Direct materials \ 25 per unit Direct labor \ 8 per unit Variable manufacturing overhead \ 15 per unit Fixed manufacturing overhead \ 15 per unit Variable selling and administrative costs \ 6 per unit Fixed selling and administrative costs \ 14,000 per year The operating income calculated using variable costing and absorption costing amounted to $9100 and $11,200,respectively.There were no beginning inventories.Determine the total fixed manufacturing overhead that will be expensed under absorption costing for the year.

Under variable costing,the units in the beginning Finished Goods Inventory contain fixed manufacturing overhead costs.

When units produced are less than units sold,how does operating income differ between variable costing and absorption costing? Explain your answer.

What is the margin of safety? List three ways in which margin of safety can be expressed.

Identify the breakeven point in the graph given below.

The contribution margin format of the income statement categorizes costs by their behavior.

The terms unit contribution and contribution margin are used interchangeably.

Boyko,Inc.has fixed costs of $400,000.Total costs,both fixed and variable,are $550,000 when 40,000 units are produced.Calculate the total costs if the volume increases to 64,000 units.(Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)

Zander Company has fixed costs of $14,000.The company's contribution margin ratio is 46%.What is the breakeven point in sales dollars? (Round your answer to the nearest dollar.)

Artisan Works is owned and operated by a craftsman who makes replicas of historic firearms for museums,sportsmen,and collectors.The data are as follows: Sales price per unit \ 780 Variable cost per unit 470 Fixed costs per month 8370 If Artisan expects to sell 60 units per month,what is his margin of safety expressed in units per month?

Bethel,Inc.has collected the following data.(There are no beginning inventories.) Units produced 600 units Sales price \ 120 per unit Direct materials \ 10 per unit Direct labor \ 10 per unit Variable manufacturing overhead \ 7 per unit Fixed manufacturing overhead \ 16,400 per year Variable selling and administrative costs \ 7 per unit Fixed selling and administrative costs \ 11,700 per year What is the operating income using variable costing if 500 units are sold?

Ferric Chemicals,Inc.has fixed costs of $34,000 per month.The highest production volume during the year was in January when 100,000 units were produced,71,000 units were sold,and total costs of $640,000 were incurred.In June,the company produced only 60,000 units.What was the total cost incurred in June? (Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar.)