Exam 20: Cost-Volume-Profit Analysis

[The following information applies to the questions displayed below.] The following information is available regarding the total manufacturing overhead of Olsen Company for a recent four-month period. -Using the high-low method,compute the variable element of manufacturing overhead cost per machine hour.

Within the relevant range,fixed costs:

Cost-volume relationships (a)What is the effect of an increase or decrease in activity upon variable costs per unit of activity? (b)What is the effect of an increase or decrease in activity upon total fixed costs?

A 45% contribution margin ratio means that:

[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. -Nanu Corporation manufactures two products;data are shown below: If Nanu's monthly fixed costs average $425,000,what is its break-even point expressed in sales dollars?

Variable costs would include:

With fixed costs,the cost per unit varies with changes in volume.

What will be Mitchell's monthly operating income if 1,800 units are sold each month?

The following information is available: What is the operating income?

Using cost-volume-profit formulas Gary Corporation manufactures a single product.The selling price is $104 per unit,and variable costs amount to $78 per unit.The fixed costs are $36,000 per month (round any units to the next highest full unit). (a)What is the contribution margin per unit? $________ per unit (b)What is the contribution margin ratio? ________% (c)What is the monthly sales volume (in dollars)at the break-even point? $________ (d)How many units must be sold each month to earn a monthly operating income of $32,000? ________units (e)What is the monthly margin of safety (in dollars)if 3,000 units are sold each month? $________ (f)What will be the monthly operating income if 3,000 units are sold each month? $________

The contribution margin ratio is computed as:

[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 current selling price of $170 per unit,closest to what dollar volume of sales per month is necessary for Grand Gimmicks to generate monthly operating income of $12,000? (Round the intermediate percentage to one decimal place. )

If a product sells for $8,variable costs are $6 and fixed costs are $150,000,what would total sales have to be in order to break-even?

Any business that operates at less than capacity will have smaller fixed costs than variable costs.

[The following information applies to the questions displayed below.] The monthly high and low levels of direct labor hours and of total manufacturing overhead for Onyx Company are as shown: -On the basis of the above data,the cost formula for Onyx's monthly manufacturing overhead can be expressed as:

If the unit sales price is $7 and variable costs are $3,how many units have to be sold to earn a profit of $3,600 if fixed costs equal $5,000?

How many units must be sold each month to earn a monthly operating income of $25,000?

Montclair Company earns an average contribution margin ratio of 40% on its sales.The local store manager estimates that he can increase monthly sales volume by $45,000 by spending an additional $7,000 per month for direct mail advertising.Compute the monthly increase in operating income if the manager's estimate about the increased sales volume is accurate.

[The following information applies to the questions displayed below.] The following information is available regarding the total manufacturing overhead of Olsen Company for a recent four-month period. -Using the high-low method,compute the fixed element of Olsen's monthly overhead cost.

Multiple product companies Pet Park International sells cat food and dog food.Its monthly fixed costs average $620,000.Cat food sales represent 80% of the company's total revenue.Dog food sales constitute the remaining 20%.The company has provided the following information expressed on a per-case basis: (a)The total monthly sales revenue required to break-even is $________.(Rounded) (b)The total monthly sales revenue required to earn an operating income of $135,000 is $________. (c)The company's margin of safety at a monthly sales level of $2,500,000 is $________. (d)If monthly fixed costs increase by $10,000,the break-even point,expressed in sales dollars,will increase to $________.