Exam 7: Cost-Volume-Profit Analysis

A company, subject to a 40% tax rate, desires to earn $500,000 of after-tax income. How much should the firm add to fixed costs when figuring the sales revenues necessary to produce this income level?

Yellow Dot, Inc. sells a single product for $10. Variable costs are $4 per unit and fixed costs total $120,000 at a volume level of 10,000 units. What dollar sales level would Yellow Dot have to achieve to earn a target profit of $240,000?

Barrey, Inc. is subject to a 40% income tax rate. The following data pertain to the period just ended when the company produced and sold 45,000 units: Sales revenue \ 1,350,000 Variable costs 810,000 Fixed costs 432,000 How many units must Barrey sell to earn an after-tax profit of $225,000?

Jamal & Co. makes and sells two types of shoes, Plain and Fancy. Data concerning these products are as follows: Plain Fancy Unit selling price \ 20.00 \ 35.00 Variable cost per unit 12.00 24.50 Sixty percent of the unit sales are Plain, and annual fixed expenses are $45,000. Assuming that the sales mix remains constant, the number of units of Fancy that Jamal must sell to break even is:

Which of the following underlying assumptions form(s) the basis for cost-volume-profit analysis?

Narchie sells a single product for $50. Variable costs are 60% of the selling price, and the company has fixed costs that amount to $400,000. Current sales total 16,000 units. Each unit that Narchie sells will:

Once upon a time, two brothers (Barry and Larry) dreamt about owning and operating companies in the same line of business. Barry believed in maintaining a very large, highly efficient manual labor force; Larry, on the other hand, favored automated-production processes. One business was located in Madison and the other was located in Austin. Recent data follow. Required: A. Which of the two businesses, Madison or Austin, has the higher level of (1) variable cost and (2) higher level of fixed cost? Explain how you determined your answer. B. Determine the probable owner of the firm located in (1) Madison and (2) Austin. Briefly explain your logic. C. Compute the operating leverage factor for Madison and Austin. D. Suppose that both Madison and Austin had the opportunity to increase sales by 10%. Which of the two locations would experience a larger percentage change in net income? Why?

At a volume of 20,000 units, Dries reported sales revenues of $1,000,000, variable costs of $300,000, and fixed costs of $260,000. The company's break-even point in units is:

A company has fixed costs of $900 and a per-unit contribution margin of $3. Which of the following statements is true?

Narchie sells a single product for $50. Variable costs are 60% of the selling price, and the company has fixed costs that amount to $400,000. Current sales total 16,000 units. Narchie:

Brooklyn sells a single product to wholesalers. The company's budget for the upcoming year revealed anticipated unit sales of 31,600, a selling price of $20, variable cost per unit of $8, and total fixed costs of $360,000. Brooklyn's safety margin in units is:

High Point Corporation reported sales revenues of $1,850,000 for the period just ended. Cost of goods sold, selling expenses, and administrative expenses totaled $1,200,000, $280,000, and $170,000, respectively. A detailed analysis of the latter three amounts revealed respective fixed cost components of $780,000, $60,000, and $130,000. Required: A. Determine the amounts, if any, that High Point would report on a traditional income statement for (1) gross margin, (2) contribution margin, and (3) income. B. Determine the amounts, if any, that High Point would report on a contribution income statement for (1) gross margin, (2) contribution margin, and (3) income. C. Which of the two income statements (traditional or contribution) is more useful for studying a company's cost-volume-profit relationships?

Which of the following would produce the largest increase in the contribution margin per unit?

Which of the following would occurs if a company increases its variable cost per unit?

Edmonco Company produced and sold 45,000 units of a single product last year, with the following results: Sales revenue \ 1,350,000 Manufacturing costs: Variable 585,000 Fixed 270,000 Selling costs: Variable 40,500 Fixed 54,000 Administrative costs: Variable 184,500 Fixed 108,000 If Edmonco's sales revenues increase 15%, what will be the percentage increase in income before income taxes?

The break-even point is that level of activity where:

Ribco Co. makes and sells only one product. The unit contribution margin is $6 and the break-even point in unit sales is 24,000. The company's fixed costs are:

Miller Company has an operating leverage factor of 5. Which of the following statements is true? Thus, an 8% change in ______ should result in a 40% change in _____. The respective amounts that change are:

The difference between budgeted sales revenue and break-even sales revenue is the:

The contribution income statement differs from the traditional income statement in which of the following ways?