Chapter 2 accounting

Shonda's Shoes sell for $95 per pair. If Shonda must sell a total of 284 pairs of shoes to break-even, and a total of 450 pairs to achieve her target profit, sales dollars needed to earn the target profit equals ______.

$42,750

To calculate the effect on profits of a planned increase in sales, you need the increase in units sold, any change in fixed costs and the ______.

contribution margin per unit

The break-even point can be affected by ______.

contribution margin per unit total fixed costs sales mix

Sweet Dreams sells pillows for $25 each. Variable costs are $15 per pillow. The company is considering improving the quality of materials which will increase variable costs to $19. The company currently sells 1,200 pillows per month and expects that the improved materials would increase sales to 1,500 per month. The impact of this change on total contribution margin would be a(n) Blank 1Blank 1 increase , Incorrect Unavailable (increase/decrease) of $ Blank 2Blank 2 2800 , Incorrect Unavailable.

decrease, 3,000

Once the break-even point has been reached, the sale of an additional unit will lead to an increase in contribution margin that is ______ the increase in net operating income.

equal to

True or false: Without knowing the future, it is best to have a cost structure with high variable costs.

false

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 ______.

increase by $7,750

The contribution margin statement is ordinarily used by those ______.

inside the company only

Adams, Inc. has sales of $100,000 with contribution a contribution margin of $60,000 and net income of $20,000. Baron, Inc. has sales of $110,000 with a contribution margin of $44,000 and net income of $22,000. Thus, the degree of operating leverage is

3,2

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

34%

If sales increase by 15% and the degree of operating leverage is 6, net operating income should increase by

90

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

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

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 ______.

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

CM ratio is equal to ______ ________ ratio

variable expense