Exam 20: Cost-Volume-Profit Analysis

[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,the contribution margin ratio is approximately:

In cost-volume-profit analysis,the number of units sold is assumed to be equal to the number of units produced.

High-low method The following information is available regarding the total manufacturing overhead costs of Paymore,Inc. ,for five months in 2018: (a)Using the high-low method,compute the following (round all answers): (1)The variable element of overhead cost per machine-hour: (2)The fixed element of monthly overhead cost: (b)Use the cost relationship determined in part (a)to estimate the total manufacturing overhead costs for July 2018,given that 7,250 machine-hours are scheduled.

Estimating costs and profit International,Inc.expects total sales of $55 million,a margin of safety of $25 million,and a contribution margin ratio of 25%.Compute the following: (a)Variable costs: $________ (b)Break-even sales volume (in dollars): $________ (c)Fixed costs: $________ (d)Operating income: $________

[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,the contribution margin ratio is:

The range over which output may be expected to vary is called the relevant range.

[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,the dollar volume of sales per month necessary for Accents to break-even is:

A semivariable cost:

Estimating costs and profit First-Class Company sells a single product.The per-unit selling price is $250,and variable costs are 60% of this selling price.Fixed costs are currently $68,000 per month. (a)Calculate the monthly break-even point in units.________ Units. (b)First-Class is considering the acquisition of new robotic equipment.Depreciation on the new robots will increase monthly fixed costs by $8,000,but reduce variable costs to 50% of the current selling price.If First-Class acquires the robots what will be the new monthly break-even point in units? ________ Units.

Using cost-volume-profit formulas Fantasy Corporation manufactures a single product.The selling price is $125 per unit,and variable costs amount to $81 per unit.The fixed costs are $28,500 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? ________% (Rounded to 1 decimal place) (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 $50,000? ________units (e)What is the monthly margin of safety (in dollars)if 1,500 units are sold each month? $________ (f)What will be the monthly operating income if 1,500 units are sold each month? $________

A company with an operating income of $72,000 and a contribution margin ratio of 56% has a margin of safety of: (Round the answer to the nearest whole number. )

How many units must be sold each month to earn a monthly operating income of $8,000? (Round your final answer up to the nearest whole number. )

When volume increases,fixed cost per unit:

Margin of safety is the dollar amount by which actual sales volume exceeds the break-even sales volume.

Contribution margin ratio is equal to contribution margin per unit divided by unit sales price.

Product X sells for $35 per unit and has related variable costs of $25 per unit.The fixed costs of producing product X are $65,000 per month.How many units of product X must be sold each month to earn a monthly operating income of $85,000?

One characteristic common to all types of costs is the tendency to rise and fall in direct proportion to changes in the volume of business output.

A company with monthly revenue of $120,000,variable costs of $50,000,and fixed costs of $40,000 has a contribution margin of:

[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. -Olsen's projected August operations will require approximately 120,000 machine hours.Using the high-low method,compute total manufacturing overhead estimated for August.

Cost-volume-profit relationships The following data are available for a product manufactured and sold by Logan Company: Compute the following: (a)Contribution margin per unit: $________ (b)Number of units that must be sold to break-even: ________ units (c)Dollar sales volume to produce income of $864,000 before taxes (round units to the next highest full unit): $________