Accounting Unit 2

$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 ______.

net loss

If the total contribution margin is less than the total fixed expenses, a ______ occurs.

variable expenses

The contribution margin is equal to sales minus ______.

sales volume

When preparing a CVP graph, the horizontal axis represents ______.

In multi product companies, the sales mix is constant. Costs are linear and can be accurately divided into variable and fixed elements.

Which of the following are assumptions of cost-volume-profit analysis?

unit contribution margin, unit sales, and total fixed costs

Which of the following is needed to calculate profit?

contribution margin

To calculate profit, multiply the ______ per unit by sales volume and subtract total fixed cost.

sales, variable expenses

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

false

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

$301,100

A company has total sales of $1,430,000. Fixed expenses are $657,000 and the contribution margin ratio is 67%. Company profit (loss) is ______.

fixed, profit

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

total sales = $1,925 profits = $875 total variable costs = $350

Elle's Elephant Shop sells giant stuffed elephants for $55 each. Each elephant has variable costs of $10 and total fixed costs are $700. If Ellie sells 35 elephants this month, ______.

53%

Gifts Galore had sales revenue of $189,000. Total contribution margin was $100,170 and total fixed expenses were $27,500. The contribution margin ratio was ______.

selling price

To simplify CVP calculations, it is assumed that ______ will remain constant.

variable expense

Variable expenses ÷ Sales is the calculation for the ______________ _____________________ ratio.

the higher the margin of safety, the lower the risk of incurring a loss

Which of the following statements is correct?

CVP analysis

Which tool can be used to easily calculate the change in profit resulting from a change in sales price, sales volume, variable costs, or fixed costs?

cm ratio x 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 ______.

change in sales dollars resulting specifically from the decision Change in cost resulting specifically from the decision

When making a decision using incremental analysis consider the ______.

contribution margin; sales

Contribution margin ratio is equal to ________________ _________________divided by ______________________ .

contribution margin/sales

The calculation of contribution margin (CM) ratio is ______.

$10,000 net operating loss

Given sales of $100,000 a contribution margin of $40,000, and fixed expenses of $50,000, the result is a ______.

$695,000

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 ______.

27%

Spice sells paprika for $9.00 per bottle. Variable cost is $2.43 per bottle and Spice's annual fixed costs are $825,000. The variable expense ratio for paprika is ______.

total expense, and total fixed expense

To prepare a CVP graph, lines must be drawn representing total revenue, ______.

break-even

Solving for the sales level needed to achieve a profit of zero is the same process as solving for the sales level needed to ______.

$1,800,000

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 ______.

the break-even point profit equals zero

The single point where the total revenue line crosses the total expense line on the CVP graph indicates ______.

34%

Given sales of $1,452,000, variable expenses of $958,320 and fixed expenses of $354,000, the contribution margin ratio is ______.

becomes profit after fixed expenses are covered

Contribution margin ______.

total revenue equals total cost net operating income is zero

At the break-even point ______.

equals

A company has reached its break-even point when the contribution margin ___________________ fixed expenses.

(P x Q) - (V x Q) - fixed expenses

Profit equals ______.

(unit sales -- unit sales to break even) x unit contribution margin

Net operating income equals ______.

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 ______.

accept the idea because profit will increase by $24,000

A company is currently selling 10,000 units of product monthly for $40 per unit. The unit contribution margin is $27. The company believes that spending $50,000 per month on advertising will allow them to increase the selling price to $45 and that sales will increase by 750 units per month. The company should ______.

$100

A company reported $100,000 in sales and $80,000 in variable costs at the breakeven point of 200 units. If the company sells 201 units, net profit will be ______.

$450 increase

A company sells 500 sleds per month for $80. Variable costs are $41 per unit and fixed expenses are $3,500 per month. The company thinks that using a new material would increase sales by 70 units per month. If the new material increases variable costs by $4 per unit, the impact on net income would be a ______.

$180,000

A company sold 20,000 units of its product for $20 each. Variable cost per unit is $11. Fixed expenses total $150,000. The company's contribution margin is ______.

$36,000

A company sold 750 units with a contribution margin of $120 per unit. If the company has a break-even point of 450 units, the net operating income or (loss) is ______.

increase by $6,000

A company's current sales are $300,000 and fixed expenses total $225,000. The contribution margin ratio is 30%. The company has decided to expand production which is expected to increase sales by $70,000 and fixed expenses by $15,000. If these results occur, net operating income will ______.

decrease in the unit variable cost

According to the CVP analysis model and assuming all else remains the same, profits would be increased by a(n) ______.

$137,500

Adam's Sports Store has a contribution margin ratio of 55% and has already passed the break-even point for the year. If Adam's generates additional sales of $250,000 by year-end, net operating income will increase by ______.

$334,040

Chrissy's Cupcakes has $832,000 in sales and $265,000 in fixed expenses. Given a contribution margin ratio of 72%, Chrissy's profit (loss) is ______.

$0.35

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

reached the break-even point a contribution margin equal to fixed costs

Company A has sales of $500,000, variable costs of $350,000, and fixed costs of $150,000. Company A has ______.

$168,000

Company A sold 200,000 units. Selling price is $7 per unit, contribution margin is $4 per unit, and the fixed expenses total $632,000. Company A's profit (loss) is ______.

increase by $7,000

Goldin Corporation currently pays its salesperson a flat salary of $5,000 per month and is considering paying $20 per unit instead. Sales are currently 200 units per month. Goldin believes the compensation change will increase unit sales by 50%. The current contribution margin is $80 per unit. If the change is implemented, net operating income will ______.

break-even sales dollars

Multiplying unit selling price times the number of units required to break-even is one way to calculate ______.

decrease by $16,000

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 spend $60,000 on advertising and reduce the selling price by $2 per box. Management believes the advertising along with the price reduction 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 ______.

net operating income will increase by $0.70 total contribution margin will increase by $0.70

Terry's Trees has reached its break-even point and has a contribution margin ratio of 70%. For each $1 increase in sales ______.

margin; safety

The amount by which sales can drop before losses are incurred is the ______________ of __________________ .

total fixed expenses

The break-even point is reached when the contribution margin is equal to ______.

zero

The break-even point is the level of sales at which the profit equals _________________.

margin of safety in dollars/total budgeted (or actual) sales in dollars

The margin of safety percentage is:

equal to

Once the break-even point is reached, the sale of an additional unit increases contribution margin by an amount that is ______ the increase in net operating income.

4,800

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 ______.

the sale of 12,000 putters results in net operating income of $380,000 the contribution margin per putter is $65

Pete's Putters sells each putter for $125. The variable cost is $60 per putter and fixed costs total $400,000. Based on this information ______.

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. Instructions

sales

The variable expense ratio is the ratio of variable expense to ______.

$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 ______.

30

Given a sales price of $100, variable costs of $70 and a break-even point of 500 units, net operating profit for sale of 501 units will be $ __________.

decrease

Assuming sales price remains constant, an increase in the variable cost per unit will ______ the contribution margin per unit.

$174,000

Anne's Antique Store has a contribution margin ratio of 29%. The break-even point has been reached. If the store generates an additional $600,000 of sales for the year, net operating income will increase by ______.

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 Blissful Blankets need to sell in order to achieve its target profit is ______.

168,000

Lance, Inc. has sales of 9,000 units. The contribution margin per unit is $32 and fixed costs total $120,000. Lance's profit is $ ________________.;

profit or loss

The vertical distance between the total revenue line and the total expense line on a CVP graph represents the total ______.

increase by $7,750

A company currently has sales of $700,000 and a contribution margin ratio of 45%. As a result of increasing advertising expense by $8,000, the company expects to increase sales to $735,000. If this is done and these results occur, net operating income will ______.

8,400

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 ______.

5,000

A product has a selling price of $10 per unit, variable expenses of $6 per unit and total fixed costs of $35,000. If 10,000 units are sold, net operating income will be $.

increase by $7,000

Bluin Corporation pays its salesperson a flat salary of $5,750 per month and is considering paying $30 per unit instead. Current unit sales are 250 per month, but Bluin believes the compensation change will increase unit sales by 50%. Bluin's current contribution margin is $100 per unit. If Bluin switches the compensation and sales grow as expected, net operating income will ______ per month.

selling price, volume, costs

CVP analysis allows companies to easily identify the change in profit due to changes in _________.

unit variable cost, mix of products sold, sales volume, selling price, and total fixed costs

CVP analysis focuses on how profits are affected by ______.

Cost-Volume-Profit

CVP is the acronym for ____________________________.

$55

Company A's product sells for $90 and has a variable cost of $35 per unit. Fixed costs total $550,000. If Company A sells 16,000 units, the contribution margin per unit is ______.

2,800

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?

variable; fixed

Profit = (selling price per unit × quantity sold) - ( _________________ expense per unit × quantity sold) - ___________________expenses.

21,645

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 required to meet the company's goal is ______.

40,000

Sales total $500,000, and fixed costs total $300,000. The contribution margin ratio is 68%. Profit = _________________$.

45

Seating Galore sells high-end desk chairs. The variable expense per chair is $85.05 and the chairs sell for $189.00 each. The variable expense ratio for Seating Galore's chairs is _______________ %.

26,980

Shonda's Shoes sell for $95 per pair. If Shonda must sell 284 pairs of shoes to break-even, sales dollars needed to break-even equals $ ___________________.

$1,520,000

Softie, 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, Softies' sales must be ______.

29%

The Cutting Edge sells ice skates. Total sales are $845,000, total variable expenses are $245,050 and total fixed expenses are $302,000. The variable expense ratio is ______.

cost, selling price, volume

The contribution margin income statement allows users to easily judge the impact of a change in ______ on profit.

sales

The equation used to calculate the variable expense ratio using total values is total variable expenses divided by total ______.

False

True or false: Knowledge of previous sales is necessary when using incremental analysis to evaluate a change in profits.

contribution margin

Users can easily judge the impact on profits of changes in selling price, cost or volume when using an income statement constructed under the ______ approach.

change from zero to a net operating profit

When a company sells one unit above the number required to break-even, the company's net operating income will ______.

dollars

When constructing a CVP graph, the vertical axis represents ______.