accounting 2 chapter 6 smartbook
A company has fixed costs of $564,000 and wishes to earn a profit of $800,000 this year. If Company A has a contribution margin ratio of 62%, sales dollars needed to reach the target profit equals
$2,200,000
Given fixed costs of $30,000, variable costs of $2.00 per unit, and a contribution margin of $5.00 unit, units have to be sold in order to break even.
6000
Seth's Speakers had actual sales of $1,630,000. If break-even sales equals $935,000, Seth's margin of safety in dollars is
695,000
Larson's Ltd. sells its product for $12.00 per unit. The contribution margin per unit is $8.00 and fixed costs are $75,000. Larson has to sell to
9,375
Paula's Perfumes has a target profit of $4,000 per month. Perfume sells for $15.00 per bottle and variable costs are $13.50 per bottle. Fixed costs are $3,200 per month. The number of bottles that must be sold each month to earn the target profit is
4,800
Sniffles, Inc. produces facial tissues. The company's contribution margin ratio is 77%. Fixed expenses are $240,400. To achieve a target profit of $930,000, Sniffles' sales rounded to the nearest dollar must be
$1,520,000
Chitter-Chatter sells phones and has set a target profit of $975,000. The contribution margin ratio is 65%, and fixed costs are $195,000. Sales dollars needed to earn the target profit total
$1,800,000
Steel, Inc. has a margin of safety in dollars of $559,740. If actual sales were $2,946,000, Steel's margin of safety percentage is
19
Given sales of $110,000, a contribution margin of $75,000 and net operating income of $30,000, operating leverage is
2.5
Run Like the Wind sells ceiling fans. Target profit for the year is $470,000. If each fan's contribution margin is $32 and fixed costs total $222,640, the number of fans that must be sold to meet the company's goal is
21,645
Cakes by Jacki has $144,000 of fixed costs per year. The contribution margin ratio is 59%. The sales dollars to break-even rounded to the nearest dollar equals
244,068
Desks by Daisy sells a student desk for $100 per unit. The variable cost per desk is $40 and Daisy's fixed costs of producing the desks equals $15,000 per month. Daisy needs to sell Blank 1Blank 1 \ , Incorrect Unavailable desks per month in order to break-even
250
A company sells a product for $80 per unit and has a contribution margin ratio of 45%. Fixed costs total $180,000. Sales dollar to break even equals
400,000
company sells its product for $40 per unit. Variable costs are $12 per unit. Total fixed costs are $50,000. In order to reach the profit goal of $90,000 the company must sell
5000
Given sales of 10,000 units per month, sales price per unit of $4.00, variable costs of $1.80 per unit and and total fixed costs of $5,000, the contribution margin ratio is
55
Jacki's Jewels sells 10,000 necklace & earring sets per year. Fixed costs are $80,000 and variable costs are $20 per set. Jacki is planning to increase the quality of the stones, which will increase variable costs by $8 per set and increase sales by 25%. If Jacki increases the quality of the stones, what price will she need to charge to attain her target profit of $60,000 per year?
$39.20
Given budgeted sales of $982,000, break-even sales of $932,200, and fixed expenses of $429,000, the budgeted margin of safety in dollars is
$49,800
The formula used to calculate the sales volume needed to achieve a target profit is
(Target profit + Fixed expenses) ÷ Unit contribution margin
JVL Enterprises has set a target profit of $126,000. The company sells a single product for $50 per unit. Variable costs are $15 per unit and fixed costs total $98,000. How many units does JVL have to sell to BREAK EVEN?
2800
Given net operating income of $50,000, contribution margin of $150,000 and sales of $300,000, the degree of operating leverage of
3
The equation for the profit equation method is
Total Sales Revenue - Total Variable Costs - Total Fixed Costs = Profit
Contribution margin equals sales minus
all variable costs
CVP
allows managers to see how changing one variable can impact another can be used to make many different decisions can be used for "what-if" analysis
The difference between break-even analysis and target profit analysis is the
amount that profit is set to
To prepare a CVP graph, lines must be drawn representing total revenue,
and total cost
The weighted average unit contribution margin
assumes that the percentage of each product sold is constant is based on the relative percentage of each unit sold is used instead of the single product contribution margin in multi-product break-even analysis
If a company raises the price of a product with no change in costs, the unit contribution margin and contribution margin ratio will
both increase
The contribution margin stated as a percentage of sales dollars is the
contribution margin ratio
Sweet Dreams sells 15,000 pillows per year for $25 per unit. Variable cost per unit is $14. Sweet Dreams wants to improve customer satisfaction by using higher quality direct materials which will increase the variable cost per unit to $19. Fixed costs per year total $90,000. If sales increase by 5,000 units per year, what price will Sweet Dreams have to charge to earn the same profit it is earning now ($75,000 per year)?
27.25
A company has fixed costs of $25,000 and a weighted average unit contribution margin of $25. Of the sales, 65% are Product XYZ and 35% are Product TDW. In order to break even the company must sell units of Product XYZ and units of Product TDW.
650, 350
Given total fixed costs of $35,000 and a contribution margin ratio of 40%, $ of revenue must be earned to break even.
87500
Degree of operating leverage equals
Contribution margin ÷ Net operating income
The extent to which a company uses fixed costs (as opposed to variable costs) in its operations is called
cost structure
Contribution margin
covers fixed cost and profit
When a company increases the selling price of a product with no change in variable cost per unit or total fixed costs, the break-even point for that product will
decrease
An increase in sales will increase net operating income by a multiple of that increase in sales. The multiple is known as the
degree of operating leverage
When constructing a CVP graph, the vertical axis represents
dollars
The break-even point is reached when total revenue is
equal to
True or false: The margin of safety is the excess of break-even sales dollars over budgeted (or actual) sales dollars.
false
A degree of operating leverage greater than one means that managers are using Blank______ to create operating leverage.
fixed costs
If operating leverage is high, a small percentage increase in sales produces a(n) Blank______ percentage increase in net operating income than if operating leverage is low.
higher
Tasty Tangerine is currently selling 50,000 boxes for $25 per box. Variable cost per box is $17 and fixed costs total $260,000. A plan is being considered to increase advertising which will increase fixed costs by $60,000. Management believes the advertising along with a $2 reduction in the selling price per box will increase sales volume by 24,000 boxes. If management's predictions are correct, making these changes will cause net income for the year to
increase by 16000
Setting two profit equations so that they yield the same profit allows managers to calculate the
indifference point
The margin of safety percentage is
margin of safety in dollars ÷ total budgeted (or actual) sales in dollars
The weighted average unit contribution margin is the average unit contribution margin of multiple products weighted according to
percentage of units sold
The break-even point can be affected by
product mix total fixed costs sales mix
How much contribution margin is generated per dollar of sales revenue is the contribution margin___________
ratio
An extension of break-even analysis that allows managers to determine units or sales needed to achieve an earning's goal is called analysis.
target profit analysis
At the break-even point,
total revenue equals total cost profit is zero
The amount that each unit sold contributes to fixed costs and profit is
unit contribution margin
When preparing a CVP graph, the slope of the total cost line represents
variable cost per unit
Contribution margin equals sales minus
variable manufacturing costs variable selling and administrative costs
The goal of break-even analysis is to find the level of sales where profit is equal to
zero