Exam 20: Cost-Volume-Profit Analysis

[The following information applies to the questions displayed below.] Sultan Company produces a single product.The selling price is $50 per unit,and variable costs amount to $20 per unit.Sultan's fixed costs per month total $80,000. -What is the contribution margin ratio of Sultan 's product?

[The following information applies to the questions displayed below.] Grand Gimmicks Company produces a single product with a current selling price of $170.Variable costs are $130 per unit,and fixed costs per month average $6,240.Management is considering increasing the selling price to $190 per unit.Assume that the variable cost per unit of the product and monthly fixed expenses will not change as a result of the proposed increase in selling price. -At the proposed increased selling price of $190 per unit,closest to what dollar volume of sales per month is required to break-even? (Round your intermediate percentage to one decimal place. )

Cost-volume-profit graph Describe the important relationships shown on a cost-volume-profit graph.

As volume increases,total fixed costs remain the same.

[The following information applies to the questions displayed below.] Grayson Enterprises manufactures springs and shock absorbers.Springs account for 40% of the company's total sales revenue,whereas shocks account for about 60%.The contribution margin ratios for springs and shocks are 45% and 35%,respectively.Grayson's fixed costs average $450,000 per month. -Grayson's monthly break-even point expressed in sales dollars is: (Round the answer to the nearest dollar. )

The contribution margin is the amount by which revenue exceeds variable costs.

As volume increases,per unit variable costs will decrease on a per-unit basis and stay the same in total.

[The following information applies to the questions displayed below.] Accents Associates sells only one product,with a current selling price of $70 per unit.Variable costs are 40% of this selling price,and fixed costs are $12,000 per month.Management has decided to reduce the selling price to $65 per unit in an effort to increase sales.Assume that the cost of the product and fixed operating expenses are not changed by this reduction in selling price. -At the reduced selling price of $65 per unit,the contribution margin ratio is: (Round the answer to one decimal place. )

The contribution margin ratio is expressed as:

[The following information applies to the questions displayed below.] Accents Associates sells only one product,with a current selling price of $70 per unit.Variable costs are 40% of this selling price,and fixed costs are $12,000 per month.Management has decided to reduce the selling price to $65 per unit in an effort to increase sales.Assume that the cost of the product and fixed operating expenses are not changed by this reduction in selling price. -At the current selling price of $70 per unit,what dollar volume of sales per month is required for Accents to earn a monthly operating income of $15,000?

The Davidson Company's breakeven point in units is 40,000.Assuming that variable costs are 60% and fixed costs are $300,000,what is the company's projected operating income if sales are $1,000,000?

A product sells for $125,variable costs are $80,and fixed costs are $45,000.If the selling price can be increased by 20% with a similar increase in variable costs,how many fewer units would have to be sold to earn $300,000? (Round the answer to the nearest unit. )

Costs that increase in total amount in direct proportion to an increase in output are called variable costs.

If monthly fixed costs are $21,000 and the contribution margin ratio is 42%,the monthly sales volume required to break even is:

[The following information applies to the questions displayed below.] Grayson Enterprises manufactures springs and shock absorbers.Springs account for 40% of the company's total sales revenue,whereas shocks account for about 60%.The contribution margin ratios for springs and shocks are 45% and 35%,respectively.Grayson's fixed costs average $450,000 per month. -Unique Corporation manufactures two products;data are shown below: If Unique's monthly fixed costs average $400,000,what is its break-even point expressed in sales dollars? (Round the answer to the nearest dollar. )

The high-low method is the only method to be used when determining semivariable costs.

Stan Todd,Inc.wants to manufacture a new cell phone that can be worn on the wrist.Information from doing market research shows that he can sell this phone for $25 each.His fixed costs would be $145,000 a year and variable costs would amount to $10 per phone. (1)What would the contribution margin ratio be? (2)What sales volume in units would Stan need to break-even? (3)What sales volume in units would Stan need to earn $200,000 profit? (4)What would be the margin of safety if he sold 25,000 units (use the information calculated in #2)?

The dollar sales volume necessary to produce operating income of $245,000 is closest to: (Round the answer to the nearest whole number. )

A company with monthly fixed costs of $170,000 expects to earn monthly operating income of $25,000 by selling 6,500 units per month.What is the company's expected unit contribution margin?

Sales of products with high contribution margins often are described as quantity sales.