Exam 22: Cost-Volume-Profit Analysis

A company sells a single product that has a contribution margin ratio of 24%. If the company's total fixed costs are $84,000, what is the break-even point in dollar sales?

The extent, or relative size, of fixed costs in the total cost structure is known as operating leverage.

The break-even point is the sales level at which a company neither earns a profit nor incurs a loss.

Magee Windows manufactures two standard size windows, F and M, in the ratio of 5:3. F has a selling price of $150 and M has a selling price of $200. The variable cost of F is $75.00 and the variable cost of M is $90.00. Fixed costs are $352,500. Compute the (a) weighted average contribution margin, (b) break-even point in units, (c) number of units of each product that will be sold at the break-even point.

Cost-volume-profit analysis is frequently based on the assumption that the production level is the same as the sales level.

Briefly describe a CVP chart, including its major components.

Baines Brothers manufactures and sells two products, A and Z in the ratio of 4:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the break-even point in composite units.

What is an important feature that must be remembered when using cost identifying and behavior methods?

The ratio of the sales volume for the various products sold by a company is called the:

Wayward Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's break-even point in sales dollars.

Legacy Company is considering the production and sale of a new product with the following sales and cost data: unit sales price $18; unit variable costs $8.10; and total fixed costs of $8,250. Legacy is subject to a 25% tax rate. Determine the dollar sales needed to generate an after-tax income of $33,000.

Rudy Co. has total fixed costs of $520,000. A unit of product sells for $15 and variable costs per unit are $11. a) Prepare a contribution margin income statement showing predicted net income (loss) if Rudy Co. sells 100,000 units for the year ended December 31. b) At a minimum, how many units must Rudy Co. sell in order not to incur a loss?

Define variable cost, fixed cost, and mixed cost.

A firm sells two different products, A and A. Total fixed costs for this firm are $1,260,000. Additional selling prices and cost information for both products follow: Required: (a) Calculate the contribution margin per composite unit. (b) Calculate the break-even point in units of each individual product. (c) If pretax income before taxes of $294,000 is desired, how many units of A and B must be sold? B. For each unit of B, the firm sells two units of

Brown Company's contribution margin ratio is 24%. Total fixed costs are $84,000. What is Brown's break-even point in sales dollars?

Bristol Company's contribution margin income statement is presented below. Sales for the current period consisted of 7,500 units. Compute the company's break-even point in (a) units, and (b) dollars. Compute the margin of safety in (c) dollars and (d) percent.

The unit contribution margin divided by the selling price per unit is the ___________________.

The excess of expected sales over the sales level at the break-even point is known as the:

A _______________ cost is one that remains unchanged in amount when volume of activity varies from period to period within a relevant range. A ______________ cost is one that changes in proportion to changes in volume of activity.

A CVP graph presents data on: