Test 3 AC

The vertical distance between the total revenue line and the total expense line on a CVP graph represents the total _______. A.) Profit or loss B.) units sold C.) Gross Margin D.) Contribution Margin

Profit or Loss

Ceramic creations sells pots for $25. The variable cost per pot is $12 and 15,000 pots must be sold to break-even. If ceramic creations sells 25,000 pots, net operating income will be _______. A.) $0 B.) $250,000 C.) $130,000 D.) $325,000

$130,000

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 _________. A.) 47% B.) 68% C.) 53% D.) 38%

C.) 53%

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

Zero

The term "cost structure" refers to the relative proportion of ______ and _________ , Correct Unavailable costs in an organization.

fixed, variable

Solving for the sales level needed to attain a target profit of $______ is the same process as solving for the sales level needed to break-even

$0

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 $250,000by year-end, net operating income will increase by _____. A.) $137,500 B.) $250,000 C.) $112,500

$137,500

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 ______. A.) $130,000 B.) $150,000 C.) $180,000 D.) $30,000

$180,000

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 ___________. A.) $1,520,000 B.) $380,000 C.) $630,000 D.) $ (249,979)

$380,000

Profit equals________. A.) (P X Q) + (V X Q)-Fixed expenses B.) (P X Q) - (V X Q)- Fixed expenses C.) (P X Q)- (V X Q) + Fixed expenses D.) (P-V-Fixed expenses) x Q

(P X Q) - (V X Q)- Fixed expenses

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 $______.

26,980

The cutting edge sells ice skates. Total sales are $845,000 , total variable expenses are $302,000. The variable expense ratio is ______. A.) 100% B.) 29% C.) 35% D.) 81%

29%

Given sales of $1,452,000 variable expenses of $958,320 and fixed expenses of $354,000, the contribution margin ratio is _______. A.) 66% B.)90% C.) 24% D.)34%

34%

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 ________%

45%

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 _____. A.) 7,625 B.) 12,725 C.) 5,100

7,625

Company A produces and sells 10,000 units of its product for $10 per unit. Variable costs are $4 per unit and fixed costs total $30,000. A move to a larger facility would increase rent expense by $8,000, and allow the company to meet its demand for an additional 1,000 units. If the move is made, profits will _______. A.) decrease by $2,000 B.) Increase by $6,000 C.) Decrease by $8,000 D.) Increase by $10,000

A

At the break-point ________. A.) Total revenue equals total cost B.) Net operating income is zero C.) The company is earning a profit D.) The company is experiencing a loss

A & B

Terry's Trees reached its break-even point and has a contribution margin ratio 70%. For each $1 increase in sales________. A.) Net operating income will increase by $.70 B.) Total contribution margin will increase by $.70 C.) Net operating income will increase by $.30 D.) Total contribution margin will increase by $.30

A & B

Company A has sales of $500,000, variable costs of $350,000, and fixed costs of $150,000. Company A has _______. A.) Contribution margin equal to fixed costs B.) Earned a net operating profit C.) Incurred a net operating loss D.) Reached the break-even point

A & D

Company A has a contribution margin ratio of 35%. For each dollar in sales, contribution margin will increase by _________. A.) $.65 B.) $.35

B

Company A sells its product for $10 per unit. If company A has variable expenses of $5 per unit and fixed expenses of $200,000, the break-even point in units and dollar is ______. A.) 50,000 units and $500,000 B.) 40,000 units and $400,000 C.) 13,333 units and $133,330 D.) 20,000 units and $200,000

B

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 ________. A.) Lowering variable cost per unit to $45 would result in a contribution margin $70 per unit B.) The contribution margin per putter is $65 C.) The sale of 12,000 putters results in net operating income of $380,000 D.) Pete's Putters is unable to make a profit

B&C

The single point where the total revenue line crosses the total expense line on the CVP graph indicates _______. A.) Profit is greater than zero B.) The break-even point C.) Profit equals zero D.) Profit is less than zero

B&C

When making a decision using incremental analysis consider the _______. A.) Old income statement in comparison to the new income statement B.) Change in cost resulting specifically from the decision C.) Change in sales dollars resulting specifically from decision D.) Volume that would occur regardless of the decision

B&C

A productive asset________. A.) will be used up within 1 year from the balance sheet date B.) is used to produce goods or services that will be sold to customers C.) is the same as stockholders' equity D.) is part of inventory

B.) is used to produce goods or services that will be sold to customers

Contribution margin ________. A.) Becomes profit after fixed expenses are covered B.) Is first used to cover variable expenses C.) Equals sales minus fixed expenses D.) Is not affected by changes in activity

Becomes profit after fixed expenses are covered

Solving for the sales level needed to achieve a profit of zero is the same process as solving for the sales level needed to ______. A.) have sales equal fixed costs B.) reach a profit level of 100% of sales C.) break-even

Break-even

When a company sells one unit above the number required to break-even, company's net operating income will _______. A.) Increase or decrease depending on total fixed cost B.) Increase by the sales price of the extra until sold C.) Decrease by the contribution margin D.) Change from zero to a net operating profit

Change from zero to a net operating profit

To calculate profit, multiply the _______ per unit by sales volume and subtract total fixed cost. -Variable cost -Sales price -Gross margin -Contribution margin

Contribution margin

According to the CVP analysis model and assuming all else remains the same, profits would be increased by a(n) _____. A.) Change in sales mix B.) Decrease in unit selling price C.) Decrease in the unit variable cost D.) Increase in total fixed cost

Decrease in the unit variable cost

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. - Greater than -Less than -Equal to

Equal to

Bulin corporation pays its salesperson on a flat salary of $5,750 per month and is considering paying $30 per unit instead. Current unit sales are 250 per month, but Bulin 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. A.) decrease by $7,500 B.) Increase by $7,000 C.) increase by $1,250 D.) decrease $5,500

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 charge is implemented, net operating income will _____ A.) increase by $1,000 B.) decrease by $7,000 C.)decrease by $1,000 D.) Increase by $7,000

Increase by $7,000

To prepare a CVP graph lines, must be drawn representing total revenue, ______. A.) Total variable expenses, and total fixed expense B.) Break-even point, and profit C.) Total expense, and profit D.) Total expense, and total fixed expense

Total expense, and total fixed expense

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

True

The contribution margin is equal to sales minus______________. A.) Net operating income B.)both variable expenses and fixed expenses C.) Fixed expenses D.) Variable expenses

Variable expenses

Which of the following items are found above the contribution margin on a contribution margin format income statement? - Variable expenses -Sales -Net operating income -Fixed expenses

Variable expenses & sales

Variable expenses / sales is the calculation for the ________ _______ ratio.

Variable, Expense/Cost

Profit = (selling price per unit X quantity sold ) - (__________ expense per unit X quantity sold) -_____________ expenses.

Variable, fixed

CVP Analysis allows companies to easily identify the change in profit due to changes in _____. A.) Volume B.) Costs C.) Location D.) Selling Price E.) Management

Volume, Costs, selling price

When constructing a CVP graph, the vertical axis represents ___________. A.) Variable costs B.) Fixed costs D.) Dollars E.) Unit Volume

d.) Dollars

Assuming sales price remains constant, an increase in the variable cost per unit will ________ the contribution margin per unit. A.) decrease B.) increase C.) Have no impact on

decrease

When the analysis of a change in profits only considers the costs and revenues that will change as the result of the decision, the decision is being made using profit _______ analysis

incremental

The equation used to calculate the variable expense ratio using total values is total variable expenses divided by total A.) fixed expenses B.) contribution margin C.) net income D.) sales

sales

Variable expense / sales is the calculation for the ________ ________ ratio.

variable expense

Variable Expense Ratio

variable expenses/sales

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 ______.

$1,800,000

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

$30

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 $__________.

$5,000

Company A's product sells for $90 and has a variable cost of $35 per unit. Fixed cost total $550,000. If company A sells 16,000 units, the contribution margin per unit is ________. A.) $55 B.) $10,000 C.) $20.63 D.) $880,000

$55

Vivian's Violins has sales of $326,000, contribution margin of $184,000 and fixed cost total $85,000. Vivian's Violins net operating income is ________. A.) $99,000 B.) $57,000 C.) $241,000

$99,000

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 _____. A.) Increase by $44,000 B.) Increase by $132,000 C.) Decrease by $16,000 D.) Decrease by $104,000

decrease by $16,00d

The variable expense ratio is the ratio of variable expense to__________. A.)Fixed expense B.) net operating income C.) the contribution margin D.) sales

sales

Contribution margin ratio is equal to _________ ________ divided by _________.

Contribution, margin, sales

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 $__________.

168,000

A company's break-even point is 17,000 units. If the contribution margin is $22 per unit and 26,000 units are sold, net operating profit will be ____. A.) $198,000 B.) $0 C.) $374,000 D.) 572,000

$198,000

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 ______.

$40,000

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 increase sales by 70 units per month. If the new material increases variable increases variable cots by $4 per unit, the impact on net income would be a _______. A.) $2,730 increase B.) $450 increase C.) $2,450 increase D.) $2,280 decrease

$450 increase

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? A.) 3,600 B.) 6,400 C.) 2,800 D.) 1,960

2,800

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 ______. A.) 21,645 B.) 14,688 C.) 7,730 D.) 6,958

21,645

A company's selling p[rice 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 ______. A.) 5,787 B.) 8,400 C.) 5,162 D.) 18,600

8400

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? A.) Return on investment B.) CVP Analysis C.) Variable expense ratio D.) Fixed Cost Analysis

CVP Analysis

The calculation of contribution margin (CM) ratio is ______ A.) Contribution margin / sales B.) Net operating income / total contribution margin C.) Contribution margin / Total expenses D.) Variable expenses / contribution margin

Contribution margin / sales

CVP is an acronym for _______-____________-_____________. (not minuses)

Cost Volume Profit

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

Fixed, Profit or income

A company is currently selling 10,000 units of product for $40 per unit. The unit contribution margin is $27. The company believes that spending $50,000 on advertising will increase sales by 750 units per month and increase the selling price to $45 per unit. If this change is implemented, profits will _________. A.) decrease by $29,750 B.) Increase by $3,750 C.) increase by $74,000 D.) Increase by $24,000

Increase by $24,000

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 ______. A.)Increase by $6,000 B.) decrease $15,000 C.) increase by $21,000 D.) Decrease by $47,000

Increase by $6,000

Using the contribution margin ratio, the impact on net income for a change in sales dollars is _________. A.) change in sales dollars X contribution margin ratio B.) Change in sales dollars per unit - contribution margin ratio C.) Variable expense per unit-contribution margin ratio D.) Change in total contribution margin X contribution margin ratio

change in sales dollars X contribution margin ratio