Ch 7 Managerial Accounting

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The manager at Vertical Wire Productions reported total sales revenue of $800,000. The variable expenses were $600,000, and there were $125,000 of total fixed expenses. Use the contribution margin shortcut formula to predict the breakeven point in dollars.

$500,000

Daphne's Floral Service has a monthly target operating income of $30,000. Variable expenses are 15% of sales. The manager reported fixed expenses of $20,000. What is Daphne Floral's operating leverage factor at the target level of operating income?

1.67

________ expresses the relationships amongst costs, volume, and organizational profits.

CVP analysis

Which of the following refers to the excess of sales revenue over variable expenses?

Contribution margin

(Sales revenue × contribution margin ratio) - fixed costs represents which of the following?

Operating income

The horizontal x-axis on the CVP graph represents ________.

volume of units

Sam's Appliance Outlet has variable expenses of 40% of sales. The manager reported monthly fixed expenses of $240,000. The monthly target operating income is $80,000. What is the monthly margin of safety in dollars if the manager at Sam's Appliance Outlet achieves the operating income goal?

$133,333

Terry's Frame & Art Shoppe produces and sells picture frames to clients at $8.00 per picture frame. The variable cost to produce each picture frame is $3.25. The fixed costs are $3,000 per month. What is the firm's contribution margin per picture frame?

$4.75

Brandy's Balloon Service currently sells 1,000 balloon bundles per month. The competition in the balloon industry continues to soar within a thirty-mile vicinity of the service location. Variable expenses were $2.00 per balloon and fixed expenses were $5,000. If Brandy changes the price of balloon bundles to $10, how many balloon bundles should she sell to achieve her target operating income of $6,000?

1,375 balloon bundles

The Lampost Production Company has $6,000 of fixed expenses. The manager reported that the company's operating income wass $0, and the contribution margin was 40%. What are the company's sales in dollars using the shortcut approach to the contribution margin ratio?

15,000

Daphne's Planter Company produces and sells planters. The manager reported $10,500 in fixed expenses, operating income of $0 at the breakeven point, and a contribution margin per unit of $60. What is the company's breakeven point in units using the shortcut approach?

175 units

Terry's Frame & Art Shoppe produces and sells picture frames to clients at $8.00 per picture frame. The variable cost to produce each picture frame is $3.25 per picture frame. The fixed costs are $3,000 per month. What is the firm's contribution margin ratio?

59.37%

The Coffee Factory sells two products, supreme and mild. The supreme sells for $120 per case (unit) with variable costs of $90 per unit. The mild sells for $90 per unit with variable costs of $10 per unit. The manager reported $42,600 total fixed costs. The Coffee Factory usually sells three supreme brands for each two mild brands. What is the breakeven point in total units?

852 units

How might a change in fixed costs affect the contribution margin?

A change in fixed costs does not affect the contribution margin.

Which of the following statements is NOT true about sensitivity analysis?

A manager will NOT use CVP analysis to conduct sensitivity analysis.

Which step in the CVP graph indicates the breakeven point?

Step 4

Which of the following is NOT an approach to compute the breakeven point?

Zero income approach

The weighted-average contribution margin ________.

can be used for a company that sells more than one product

The ________ is computed as the total contribution margin divided by total sales.

contribution margin ratio

The ________ refers to a company's amount of relative fixed and variable costs.

operating leverage

The ________ is the excess of actual or expected sales over breakeven sales.

margin of safety

The ________ is the combination of products that make up total sales.

sales mix


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