Exam 21: Cost-Volume-Profit Analysis

Kumar produces large decorative tiles used in home decor.The tiles sell for $700 and the fixed monthly operating costs are as follows: Kumar's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales,$0.70 went to cover his fixed costs,and that anything past that point was pure profit. Kumar is planning to increase the selling price to $760.What impact will the increase in selling price have on the contribution margin ratio?

Pfeiffer Company incurs both fixed and variable production costs.Assuming the production is within the relevant range,if volume goes up by 25%,then the total costs would ________.

Diaz Foods produces a gourmet salsa which sells for $28 per unit.Variable costs are $8 per unit,and fixed costs are $7,000 per month.If Diaz expects to sell 1,700 units,compute the margin of safety in units.

Kaycom,Inc.reports the following information: What is the amount of unit product cost that will be considered for external reporting purposes? (Round any intermediate calculations and your final answer to the nearest cent. )

E-trax,Inc.has provided the following financial information for the year: What is the unit product cost for the year using absorption costing?

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

If the selling price of Product A1 is $10.50 per unit and unit fixed cost is $5.50,its contribution margin per unit is $5.00.

Contribution margin is calculated by deducting the total cost of goods sold from sales revenue.

Americana Replics is owned and operated by a craftsman who makes replicas of historic firearms for museums,sportsmen,and collectors.He is currently producing 63 flintlock muskets per month.Cost data for the muskets are as follows: If Rustic expects to sell 60 units per month,how much is his margin of safety expressed in sales revenue? (Round unit calculations up to the next whole unit. )

If variable costs go down,and all other factors remain the same,the margin of safety will become larger.

Miranda was reviewing the water bill for her dog day care and spa and determined that her highest bill,$4,600,occurred in July when she washed 500 dogs and her lowest bill,$3,200,occurred in February when she washed 175 dogs.What was the fixed cost associated with Miranda's water bill?

Oxygen,Inc.reports the following information: Assume that the production costs and sales prices were the same in the previous year.Assume no beginning inventories. Requirements: a)Calculate unit product cost using absorption costing and variable costing. b)Calculate the operating income using absorption costing and variable costing.

The dollar amount that provides for covering fixed costs and then provides for operating income is called ________.

Kumar produces large decorative tiles used in home decor.The tiles sell for $720 and the fixed monthly operating costs are as follows: Kumar's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales,$0.60 went to cover his fixed costs,and that anything past that point was pure profit. Kumar's is planning to increase the selling price to $840.What impact will the increase in selling price have on the breakeven point in units?

Steven 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 $800 and the fixed monthly operating costs are as follows: Steven's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales,$0.65 went to cover his fixed costs,and that anything past that point was pure profit. Steven wishes to earn $6,000 of operating profit each month.Calculate the number of guitars Steven will have to sell to achieve the target profit.

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.

In its first year of business,Smith,Inc.produced and sold 600 units.If Smith uses variable costing,________.

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

In variable costing,fixed manufacturing overhead is considered a period cost because ________.

Both the traditional income statement approach and the contribution margin approach will yield the same answer for net income.