Exam 4: Cost-Volume-Profit Analysis: a Managerial Planning Tool

Better Bonds Better Bonds provided the following data: Sales \ 540,000 Variable costs \ 378,000 Fixed costs \ 120,000 Expected production and sales in units 40,000 -Refer to ePiano. What is the overall sales revenue at break-even?

Explain why cost-volume-profit analysis can be useful to managers.

To find the number of units to sell to earn a targeted income, it is quicker to simply adjust the break-even point in units equation by adding target income to the variable cost.

Refer to Desjardin Tools. What is the variable cost ratio?

Match each following terms with their correct description from the items listed below. -The sales price per unit

East Side Company produces two products, X and Y, which account for 60% and 40%, respectively, of total sales dollars. Contribution margin ratios are 50% for X and 25% for Y. Total fixed costs are $120,000. What is the break-even point in sales dollars?

Variable costs per unit consist of direct materials, direct labour, variable manufacturing overhead and variable selling and administrative costs.

Which term refers to the units sold or expected to be sold, or the sales revenue earned or expected to be earned, above the break-even volume?

What "what-if" technique examines the impact on an answer as a result of changes in underlying assumptions?

What formula calculates the number of units needed to earn a desired profit?

What is a contribution margin?

Contribution margin ratio + variable cost ratio = 100%.

Refer to Desjardin Tools. What is the contribution ratio?

Where is the break-even point on a cost-volume-profit graph?

Suppose the sales price per unit increases. What will be the effect on the break-even point in units?

Catelina Company manufactures two products. Information about the two products is as follows: Product A Product B Selling sales price per unit \ 80 \ 30 Variable costs per unit Contribution margin per unit \ 35 \ 15 The company expects fixed costs to be $189,000. The firm expects 60% of its sales (in units) to be Product A (a sales mix of 3:2). A. Calculate the contribution margin per package of 3 Products A's and 2 Product B's. B. Determine the break-even point in units for Products A and B. C. Determine the level of sales (in dollars) necessary to generate operating income of $135,000.

Most firms would like to earn operating income exactly equal to the income at the break-even point.

What is the result when actual sales equal break-even point in dollar sales?

Which statement describes a characteristic of the cost-volume-profit graph?

Suppose variable costs per unit decrease. What will be the effect on sales volume at the break-even point?