Exam 4: Costvolumeprofit Analysis: a Managerial Planning Tool

Catelina Company manufactures two products.Information about the two products is as follows: 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). Product A Froduct B Selling price per unit \ 80 \ 30 Variable costs per unit 45 15 Contribution margin ner unit \ 35 \ 15 A. Calculate the contribution margin per package. 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 $\$ 135,000$ .

Date Company makes calendars. Information on cost per unit is as follows: Fixed marketing expense totalled $13,000, and fixed administrative expense totalled $35,000. The price per calendar is $10. Direct materials \ 1.50 Direct labour 1.20 Variable overhead 0.90 Variable marketing expense 0.40 -Refer to the Figure.What is the contribution margin ratio?

The operating leverage measures the difference between actual sales and break-even sales.

Desjardin's makes power tools. The budgeted sales are $550,000, budgeted variable costs are $230,000, and budgeted fixed costs are $227,500. -Refer to the Figure.What is the break-even point in sales dollars?

Desjardin's makes power tools. The budgeted sales are $550,000, budgeted variable costs are $230,000, and budgeted fixed costs are $227,500. -Refer to the Figure.What is the contribution margin?

Zena Inc.has the following information for the current year: Required: Prepare a cost-volume-profit graph identifying the following items: Selling price per unit \ 10 Variable costs per unit \ 6 Fixed costs \ 1,000 A. Total costs line B. Total fixed costs line C. Total variable costs line D. Total revenues line E. Break-even point in sales dollars F. Break-even point in units G. Profit area H. Loss area

The profit-volume graph shows the relationship between operating income and the number of units sold.

Which of the following can be considered a measure of risk in cost-volume-profit analysis?

Managers can use CVP analysis to handle risk and uncertainty.

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

In the equation to determine the number of units that must be sold to earn a target income,targeted income is added to fixed expense in the numerator.

Match each item with the correct statement below. -Fixed costs that are directly traceable to a given segment and,consequently,disappear if the segment is eliminated

Woods Company originally expected to earn operating income of $150,000 next year. Woods's degree of operating leverage is 2.4. Recently, Woods revised its plans and now expects to increase sales by 20% next year. -Refer to the Figure.What is the percent change in operating income expected by Woods in the coming year?

Green Acres Company provides home health care. Green Acres charges $35 per hour for professional care. Variable casts are $21 per hour and fixed costs are $78,000. Next year, Green Acres expects to charge out 12,000 hours of home health care. -Refer to the Figure.What is the break-even point in hours (rounded to the nearest whole hour)?

ePiano makes electronic keyboards. The practice model price is $220, and its variable expenses are $190. The deluxe model price is $340, and its variable expenses are $250. The professional model price is $1,200 and its variable expenses are $800. Total fixed expenses are $187,000. In general, ePiano sells six practice models and three deluxe models for every professional model sold. -Refer to the Figure.How many practice models are sold at break-even?

Smart Inc.expects to produce and sell 4,000 units next month.Data on costs follows: Per unit costs: Selling price \ 80 Variable manufacturing costs \ 20 Variable selling costs \ 12 Total costs: Fixed manufacturing costs \ 32,000 Fixed selling costs \ 16,000 A. What is the variable cost per unit? B. What is contribution margin per unit? C. What is the variable cost ratio? D. What is the contribution margin ratio?

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

Income statements for two different wineries are as follows: White Wine Red Wine Company Company Sales \ 400,000 \ 400,000 Less: Variable costs 300,000 200,000 Contribution margin \ 100,000 \ 200,000 Less: Fixed costs 50,000 150,000 Operating income \ 50,000 \ 50,000 A. Calculate the degree of operating leverage for each firm. B. Calculate the margin of safety in dollars for each firm. C. Determine the operating income for each firm if sales increase by $20 \%$ .

Which of the following should be used to compute the sales mix so that the break-even computation is meaningful to management?

ePiano makes electronic keyboards. The practice model price is $220, and its variable expenses are $190. The deluxe model price is $340, and its variable expenses are $250. The professional model price is $1,200 and its variable expenses are $800. Total fixed expenses are $187,000. In general, ePiano sells six practice models and three deluxe models for every professional model sold. -Refer to the Figure.How many deluxe models are sold at break-even?