Exam 20: Cost-Volume-Profit Analysis

Accounting terminology Listed below are nine technical accounting terms introduced or emphasized in this chapter: Each of the following statements may (or may not)describe one of these technical terms.In the space provided beside each statement,indicate the accounting term described,or answer "None" if the statement does not correctly describe any of the terms. ________ (a)The amount by which sales revenue exceeds total variable cost expressed as a percentage of sales. ________ (b)The amount by which sales volume exceeds the break-even point. ________ (c)The study of financial statements by a potential investor or creditor as a means of evaluating the profitability and solvency of a business. ________ (d)A type of activity that has a causal effect in the occurrence of a particular cost. ________ (e)The level of sales at which revenue equals operating expenses. ________ (f)A cost that responds to changes in sales volume by less than a proportionate amount. ________ (g)A mathematical technique used to determine the fixed and variable elements of a mixed or semi-variable cost.

A company's relevant range of production is:

Executive salaries are typically considered variable costs.

[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 required for Grand Gimmicks to break-even? (Round the intermediate percentage to one decimal place,and round the answer up to the next whole unit. )

Cost-volume-profit analysis and strategy A manufacturing company experiencing severe financial difficulties has applied for a large government guaranteed loan.As a condition for obtaining the guarantee,the government mandates that the company significantly reduce its annual break-even point.What steps might the company take to achieve the required reduction in its break-even point?

[The following information applies to the questions displayed below.] The levels of production and of manufacturing overhead for the first five months of 2018 for Duke & Duchess Products are shown below: -Using the high-low method,compute the variable element of manufacturing overhead per unit.

Relevant range What is meant by the phrase "relevant range of activity?"

In cost-volume-profit analysis,income tax expense:

The break-even point is the level of activity at which operating income is equal to cost of goods sold.

[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,what dollar volume of sales per month is required to break-even? (Round your intermediate percentage to one decimal place and final answer to nearest whole dollar. )

If the unit sales price is $12,variable costs are $6 per unit,and fixed costs are $36,000,what sales volume (in dollars)is necessary to break-even?

All other things held constant,how will an increase in selling price affect the break-even point measured in units?

[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 monthly sales volume in dollars necessary to break-even? (Round the answer to the nearest dollar. )

A fixed cost may include all of the following except:

If the unit sales price is $12,variable costs are $6 per unit and fixed costs are $26,000 what is the contribution margin ratio per unit?

The contribution margin is the difference between total revenue and fixed costs.

Cost-volume-profit analysis is often complex when applied to a company with different products.

In order to calculate break-even sales units,fixed costs are divided by the:

The break-even point in a cost-volume-profit graph is always found:

[The following information applies to the questions displayed below.] The following data are available for product no.CK74,manufactured and sold by Ruby Corporation: -The number of units of CK74 that Ruby must sell to break- even is: