Chapter 3: Random
FC + profit/ WA per unit
# of units to turn profit=
False
All other things being equal, decreasing fixed cost will increase the number of units that must be sold to earn a desired profit. This statement is
Decrease
All other things being equal, if Calpo Company increases its sales price per unit, the number of units necessary to reach the break-even point will
Increase
All other things being equal, if Kitts Company increases its total fixed cost, the number of units necessary to reach the break-even point will
(Sales Rev- Contribution Margin) / Sales Rev
Contribution margin ratio=
look @ study sheet for answer
Draw and interpret the cost margin graph
Fixed Costs / CM Ratio
Formula for break even point (dollars)
fixed costs / weighted average contribution margin
Formula for break even point (with more than one unit)
fixed costs / contribution margin per unit
Formula for break even point (with only one unit)
Budgeted sales (dollars)- BEP (dollars)
Margin of safety (dollars)=
Budgeted sales (units)- BEP (units)
Margin of safety (units)=
Budgeted sales - BEP /budgeted sales
Margin of safety ratio=
Sales rev-VC-FC
Profit=
Sensitivity Analysis
This is investigating a multitude of what-if possibilities for the impact that simultaneous changes in fixed cost, variable cost, and/or volume have on profitability
Break even point
This is when revenue is equal to the total of fixed plus variable costs.
True
True or False: A company that has a sales mix that includes several products should strive to sell more of the product that has the highest per unit contribution margin even if that product has the lowest per unit sales price.
True
True or False: All other things being equal, decreasing the contribution margin per unit will increase the number of units that must be sold to earn a desired profit.
True
True or False: The margin of safety is a measure of the distance between budgeted sales and the break-even point. It can be measured in dollars, in units or as a percentage.
CM x sales mix
Weighted average=
Variable cost line
What is normally not included in a break-even graph?