MGMT 201 Midterm 2
Which of the following are assumptions of cost-volume-profit analysis? A: In multi product companies, the sales mix is constant. B: Fixed costs per unit stay the same within the relevant range. C: Costs are linear and can be accurately divided into variable and fixed elements. D: Variable costs per unit increase over the relevant range of activity.
A and C
The break-even point calculation is affected by ____ A: Costs per unit B: Selling price per unit C: Sales Mix D: Number of batches produced
A, B, and C
CVP analysis focuses on how profits are affected by ______ A: break-even point B: Mix of products sold C: Unit Variable Costs D: Selling Price E: Sales Volume F: Total Fixed Costs
B, C, D, E, and F
The sales volume level at which profits equal zero is the ___
Break-even Point
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?
CVP Analysis
The contribution margin equals sales minus all ______ expenses.
Variable
Variable expenses ÷ Sales is the calculation for the ___ ____ ratio
Variable Expense
The equation that should be used in setting a target selling price for a special order bulk sale that does not affect a company's normal sales is: selling price per unit = ____
Variable cost per unit + desired profit per unit
Contribution Margin Ratio Equation
(Sales - Variable expenses) / Sales
Unit Sales to Attain Target Profit Equation
(Target Profit + Fixed Expenses) / Unit CM
Costs are separated into variable and fixed categories when using the _____ approach.
Contribution
Net Operating Income Equation
Contribution Margin - Fixed Expenses
Degree of Operating Leverage Equation
Contribution Margin / Net Operating Income
The calculation of contribution margin (CM) ratio is ______.
Contribution Margin / Sales
What does CVP mean?
Cost Volume Profit
True or False If operating leverage is low, a small percentage increase in unit sales can produce a much larger percentage increase in net operating income.
False
Unit Sales to Break-even Equation
Fixed Expenses/ Unit CM
A measure of how sensitive net operating income is to a given percentage change in unit sales is known as operating _____
Leverage
Operating leverage is a measure of how sensitive ______ is to a given percentage change in unit sales.
Net Operating Income
The contribution margin as a percentage of sales is referred to as the contribution margin or CM ____
Ratio
The variable expense ratio equals variable expenses divided by ______.
Sales
The relative proportions in which a company's products are sold is referred to as ___ ___
Sales Mix
To simplify CVP calculations, it is assumed that ______ will remain constant.
Selling Price
Estimating the sales volume required to earn a given amount of net income is known as ____ ____ analysis
Target Profit
Margin of safety in dollars is ____
budgeted (or actual) sales minus break-even sales
Percentage Change in Net Operating Income Equation
degree of operating leverage * percentage change in sales
CVP analysis allows companies to easily identify the change in profit due to changes in ______
product mix, volume, and selling price