Chapter 6 Smart book

cm ratio × change in sales - change in fixed expenses

A change in profits that occurs due to a change in sales and fixed expenses may be calculated as ______.

7,625

A company has a target profit of $204,000. The company's fixed costs are $305,000. The contribution margin per unit is $40. The BREAK-EVEN point in unit sales is ______.

False

Account analysis involves a detailed analysis of what cost behavior should be, based on an industrial engineer's evaluation.

fixed, profit

Contribution margin is first used to cover _________ expenses Once the break-even point has been reached, contribution margin becomes ________

fixed

Cost structure refers to the relative portion of product and period costs in an organization.

True

True or false: The sales mix must be taken into consideration when calculating the break-even point for more than one product due to different selling prices, costs, and contribution margins among the products.

True

True or false: Without knowing the future, it is not obvious which cost structure is better: a structure with higher fixed costs and lower variable costs or a structure with lower fixed costs and higher variable costs.

engineering

Estimating the fixed and variable components of a mixed cost using the ___________ approach involves a detailed analysis of what cost behavior should be

8,400 units

A company's selling price is $90 per unit, variable cost per unit is $28 and total fixed expenses are $320,000. The number of unit sales needed to earn a target profit of $200,800 is ______.

40,000

Blissful Blankets' target profit is $520,000. Each blanket has a contribution margin of $21. Fixed costs are $320,000. The number of blankets that must be sold to achieve the target profit is ______.

1. mix of products sold 2. sales volume 3. selling price 4. unit variable cost 5. total fixed costs

CVP analysis focuses on how profits are affected by ______.

1. Sales 2. Variable expenses 3. Contribution margin 4. Fixed expenses 5. Net operating income

Place the following items in the correct order in which they appear on the contribution margin format income statement.

(P × Q - V × Q) - fixed expenses.

Profit equals:

margin of safety

The amount by which sales can drop before losses are incurred is the ___________ of ___________

1. costs per unit. 2. selling price per unit. 3. sales mix.

The break-even point calculation is affected by:

contribution margin ÷ sales

The calculation of contribution margin (CM) ratio is

variable

The contribution margin equals sales minus all ______ expenses.

degree of operating leverage

The measure of how a percentage change in sales affects profits at any given level of sales is the _____.

the high-low method

The rise-over-run formula for the slope of a straight line is the basis of

variable and fixed

The term "cost structure" refers to the relative proportion of ___________ and ________ costs in an organization

sales mix

The term used for the relative proportion in which a company's products are sold is ______.

$99,000

Vivian's Violins has sales of $326,000, contribution margin of $184,000 and fixed costs total $85,000. Vivian's Violins net operating income is ______.

1. each product most likely has different costs 2. a change in the sales mix will most likely change the break-even point 3. each product most likely has a unique contribution margin

When a company produces and sells multiple products

unit volume

When preparing a CVP graph, the horizontal axis represents:

$0.35

Company A has a contribution margin ratio of 35%. For each dollar in sales, contribution margin will increase by ______.

a straight line approximates the relationship between cost and activity

Cost behavior is considered linear whenever

$380,000

Daisy's Dolls sold 30,000 dolls this year. Each doll sold for $40 and had a variable cost of $19. Fixed expenses were $250,000. Net operating income for the year is Blank______.

variable

When using the high-low method, the slope of the line equals the _________ cost per unit of activity.

Sales and Variable expenses

Which of the following items are found above the contribution margin on a contribution margin format income statement?

Scattergraphs

_____________ are a way to diagnose cost behavior. Plotting data on a this is is an important diagnostic step.

Contribution margin

becomes profit after fixed expenses are covered.