Exam 21: Cost-Volume-Profit Analysis

Total fixed costs can change from one relevant range to another.

Birch Manufacturers has provided the following information regarding the two products that it sells: Jet Boats Ski Boats Sales price per unit \ 10,000 \ 24,000 Variable cost per unit \ 4800 \ 18,000 Annual fixed costs are $300,000. How many units must be sold in order for Birch to break even,assuming that Birch sells five jet boats for every two ski boats sold? (Round any intermediate calculations to two decimal places,and your final answer to the nearest unit.)

Within the relevant range,the total fixed costs and the variable cost per unit remain the same.

In a cost-volume-profit (CVP)graph,the breakeven point is where the sales revenue line intersects the fixed cost line.

Ambrosia Foods produces a gourmet condiment that sells for $24 per unit.Variable cost is $6 per unit,and fixed costs are $8000 per month.If Ambrosia expects to sell 1500 units,compute the margin of safety in units.(Round any intermediate calculations and your final answer to the nearest whole unit.)

Within the relevant range,which of the following costs remains the same irrespective of the changes in production?

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

Identify each cost below as variable (V),fixed (F),or mixed (M),relative to units sold.Explain the reason for your answer. Units Produced 100 500 1,000 Total electric cost \ 1,500 \ 1,650 \ 1,700 Supervisor's monthly salary \ 4,500 \ 4,500 \ 4,500 Assembly line workers' per hour wage rate \ 30 \ 30 \ 30 Total materials cost \ 800 \ 4,000 \ 8,000 Depreciation on factory equipment \ 5,000 \ 5,000 \ 5,000 Total delivery costs \ 1,400 \ 1,800 \ 2,250

Psari's,a company that sells fishing nets,provides the following information about its product: Targeted operating income \ 54,000 Sales price per unit 10.00 Variable cost per unit 1.50 Total fixed costs 120,000 What is the contribution margin ratio? (Round any intermediate calculations and your final answer to two decimal places.)

Metro Manufacturers produces flooring material.The monthly fixed costs are $16,000 per month.The sales price per unit is $95 and variable cost per unit is $35.If Metro's managers create a CVP graph from volume levels of zero to 800 units,at what sales level (in units)will the revenue and total cost lines intersect? (Round your answer up to the nearest whole unit.)

________ is a "what if" technique that estimates profit or loss results if sales price,costs,volume,or underlying assumptions change.

The use of variable costing to determine managers' bonuses does not give the incentive to produce more products than needed.

If Saloli decreases its variable costs by $2 per unit,with no change in selling price per unit and sales volume,its new operating income will be ________.

If the volume of activity doubles in the relevant range,total variable costs will also double.

Mirabella Company assigns direct materials,direct labor and both variable and fixed overhead to its product costs.Mirabella Company is using

Docherty,Inc.reports the following information for the year ended December 31: Units sold 640 units Sales price \ 120 per unit Direct materials \ 28 per unit Direct labor \ 9 per unit Variable manufacturing overhead \ 15 per unit Fixed manufacturing overhead \ 12 per unit Variable selling and administrative costs \ 4 per unit Fixed selling and administrative costs \ 12,700 per year The operating income calculated using variable costing and absorption costing amounted to $9400 and $11,200,respectively.There were no beginning inventories.Determine the total number of units produced during the year.

Marshall,Inc.has collected the following data for the current year: Beginning Finished Goods Inventory 50 units Units produced 560 units Units sold 610 units Sales price \ 180 per unit Direct materials \ 27 per unit Direct labor \ 16 per unit Variable manufacturing overhead \ 15 per unit Fixed manufacturing overhead \ 16,900 per year Variable selling and administrative costs \ 7 per unit Fixed selling and administrative costs \ 13,500 per year The beginning Finished Goods Inventory costs were $3800 under absorption costing and $2000 under variable costing. What is the operating income using absorption costing? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)

If all other factors remain constant,an increase in fixed costs will increase the breakeven point.

The traditional income statement format calculates operating income as gross profit minus selling and administrative expenses.

If variable costs increase,and all other factors remain the same,the margin of safety will become smaller.