Exam 22: Cost-Volume-Profit Analysis

Dunkin Company manufactures and sells a single product that sells for $480 per unit; variable costs are $300. Annual fixed costs are $990,000. Current sales volume is $4,200,000. Dunkin company management targets an annual after-tax income of $843,750. The company is subject to a 25% income tax rate. Compute the dollar sales to earn the target after-tax net income.

Identify items a, b, and c in the cost-volume-profit graph shown below.

A method that estimates cost behavior by connecting the costs linked to the highest and lowest volume is called the:

Hiller Co. anticipates total fixed costs of $120,000 and variable costs equal to 40% of sales. What is the pretax income if sales are $650,000?

There are at least three different methods to separate costs into fixed and variable. These methods are the ______________, ______________, and _______________ methods.

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 number of units of Product Z Baines must sell to break even.

Contribution margin is the amount of sales that exceeds total variable costs.

Abington Corporation provides the following data from a recent period for its manufacture of shoes: variable manufacturing costs, $24,000; variable selling costs, $12,000; and total fixed costs, $40,000. Sales were $60,000 based on 12,000 units sold during the period. Calculate the contribution margin and the contribution margin ratio.

If a firm's forecasted sales are $250,000 and its break-even sales are $190,000, the margin of safety in dollars is:

Torville Company's contribution margin income statement is presented below. Sales for the current period consisted of 5,000 units. Determine the company's break-even point in dollars.

Cost-volume-profit analysis is based on three basic assumptions. Which of the following is not one of these assumptions?

Dunkin Company manufactures and sells a single product that sells for $480 per unit; variable costs are $300. Annual fixed costs are $990,000. Current sales volume is $4,200,000. Dunkin company management targets an annual after-tax income of $843,750. The company is subject to a 25% income tax rate. Compute the unit sales to earn the target after-tax net income.

Total variable costs change proportionately with changes in output activity.

One aid in measuring cost behavior involves creating a display of the data about past costs in graphical form. Such a visual display is called a _____________________.

When graphing cost-volume-profit data on a CVP chart:

Macleod Company's product has a contribution margin per unit of $62.50 and a contribution margin ratio of 25%. What is the per unit selling price of the product?

An important tool in predicting the volume of activity, the costs to be incurred, the sales to be earned, and the profit to be received is:

Browning Company sells a mix of three related products. Total fixed costs are $144,000. The following additional information is available for Browning Company. Use the weighted average method to determine the company's break-even point for composite units.

The high-low method is used to derive an estimated line of cost behavior by graphically connecting the two cost amounts identified with the highest and lowest volume levels.

Which of the following is the correct interpretation of a degree of operating leverage of 5?