Exam 21: Cost-Volume-Profit Analysis

Riverside has gathered the following data in order to calculate the weighted-average contribution margin: Round intermediate and final answers to two decimal places. The weighted-average contribution margin is

Breakeven analysis adjusted for a targeted profit

Clark International produces designer watches.Each watch requires materials worth $14.50 and three direct labor hours.The company pays its production supervisor a salary of $500 per week.Hourly wage rate at Clark is $5.If 25 watches are produced in a week,what is the fixed cost per watch?

The relevant range of activity is the range in which actual operations of a company are likely to occur.

A product line's contribution margin represents its contribution to paying off variable costs and to generating a profit.

Is breakeven analysis a tool that can be used for a service-oriented business? Explain your answer.

Costs are not affected by the changes in the volume of production.

Linear approximation is a method of converting nonlinear variable costs into linear fixed costs.

The following graphical breakeven analysis is for Nicronea's new line of desktop computers.Questions related to the graph should be answered in the spaces provided. a.Production at point J would be at a __________. b.The area depicting profitable operations is __________. c.The fixed costs line is depicted by letters __________. d.The breakeven point for sales units is at letter __________. e.Letter A represents __________. f.The line H-B represents what CVP element? ___________. g.Total cost of operations is reflected in line __________.

Ryan's Landscaping sells a quality brand of hoes,shovels,and rakes in a sales mix of 2:4:2.The company's fixed costs are $61,600.Product data include the following: a.Compute the weighted-average contribution margin. b.Determine the weighted-average breakeven point. c.Calculate the breakeven point for each product. d.Determine the breakeven point in sales dollars.

If fixed costs are $24,000,variable costs are $25 per unit,and the product sells for $45,the total contribution margin at the breakeven point is $24,000.

Unit variable costs vary with changes in productive output,whereas total variable costs remain constant.

"Breakeven" is the point at which a company can begin to earn a profit.

Cost-volume-profit analysis cannot be used to estimate a targeted profit for service businesses.

Margin of safety is the excess of actual sales over break even sales.

If a company wants to know how many units of a certain product it must sell to make a desired level of profit,it should add the amount of profit to the numerator in the breakeven analysis.

Briefly explain the use of statistical methods to separate mixed cost components.

Cost-volume-profit analysis assumes a constant sales mix.

The contribution margin income statement divides costs into variable and fixed costs.

An increase in the unit sales price will increase unit variable price.