5.1 Smartbook

To calculate the break-even point (in unit sales and dollar sales), managers can use the equation method or the ____________ method.

formula

The variable expense ratio equals variable expenses divided by Blank______. Multiple choice question. sales net income contribution margin fixed expenses

sales

Blissful Blankets' target profit is $520,000. Each blanket has a contribution margin of $21. Fixed costs are $320,000. The number of blankets that must be sold to achieve the target profit is Blank______.

40,000

Softie, Inc. produces facial tissues. The company's contribution margin ratio is 77%. Fixed expenses are $240,400. To achieve a target profit of $930,000, Softies' sales must be Blank______. Multiple choice question. $1,170,400 $5,088,695 $1,242,408 $1,520,000 (240,200+930,000)/0.77

$1,520,000

ABC Inc. sells a product for $10 per unit. Variable costs are $4 per unit and total fixed costs equal $40,000. If sales increase from 10,000 units to 14,000 what will be the increase in overall profit? Multiple choice question. $4,000 $44,000 $40,000 $24,000 (10-4)=6x14,000=84,000-40,000-20,000(6x10,000-40,000)=24,000

$24,000

A company's current profit is $25,000 for a product that sells for $100 and has a unit contribution margin of $65. Fixed costs are $40,000. If the company increases sales by 50 units, total profit will increase by $ ___________.

$3,250

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 Blank______. Multiple choice question. $(249,979) $380,000 $1,520,000 $630,000 30,000x(40-19)-250,000

$380,000

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 Blank______. Multiple choice question. $1,520,000 $630,000 $380,000 $(249,979) (sales-variable)-fixed

$380,000

Vivian's Violins has sales of $326,000, contribution margin of $184,000 and fixed costs total $85,000. Vivian's Violins net operating income is Blank______. Multiple choice question. $57,000 $99,000 $241,000 contribution margin - fixed costs

$99,000

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 Blank______. Multiple choice question. $1,200,000 $1,800,000 $760,500 $1,170,000

1,800,000

Jump-It Corporation has a margin of safety of $272,000. The company sold 100,000 units this year. If the company sells each unit for $17, the margin of safety percentage is Blank______. Multiple choice question. 2.72% 14.3% 6.25% 16% 272,000/(100,000x17)

16%

Steel, Inc. has a margin of safety in dollars of $559,740. If actual sales were $2,946,000, Steel's margin of safety percentage is ________ , Correct Unavailable%.

19%

Company A has fixed costs of $564,000 and has set a target profit of $800,000. If Company A has a contribution margin ratio of 62%, sales dollars needed to reach the target profit equals Blank______. Multiple choice question. $3,000,000 $2,200,000 $913,880 $1,364,000

2,200,000

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? Multiple choice question. 3,600 1,960 2,800 6,400

2,800

Spice sells paprika for $9.00 per bottle. Variable cost is $2.43 per bottle and Spice's annual fixed costs are $825,000. The variable expense ratio for paprika is Blank______. Multiple choice question. 100% 27% 54% 73% Variable expense / sales

27%

The Cutting Edge sells ice skates. Total sales are $845,000, total variable expenses are $245,050 and total fixed expenses are $302,000. The variable expense ratio is Blank______. Multiple choice question. 35% 29% 71% 100%

29%

Paula's Perfumes has a target profit of $4,000 per month. Perfume sells for $15.00 per bottle and variable costs are $13.50 per bottle. Fixed costs are $3,200 per month. The number of bottles that must be sold each month to earn the target profit is Blank______. Multiple choice question. 267 534 4,800 7,200 (4,00+3,200)/(15.00-13.50)

4,800

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 Blank______. 305,000/40

5,100

A company's selling price 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 Blank______. Multiple choice question. 5,162 18,600 8,400 5,787 (320,000+200,800)/(90-28)

8,400

CVP analysis focuses on how profits are affected by Blank______. Multiple select question. -mix of products sold -sales volume -break-even point -total fixed costs -selling price -unit variable cost

Selling prices unit variable costs total fixed costs sales volume mix of products sold

The sales volume level at which profits equal zero is the Blank______. Multiple choice question. break-even point contribution margin ratio margin of safety target volume

break even point

Margin of safety in dollars is Blank______. Multiple choice question. -net income minus fixed costs -break-even sales minus budgeted (or actual) sales -net income minus break-even sales -budgeted (or actual) sales minus break-even sales

budget (or actual) sales minus break even sales

Costs are separated into variable and fixed categories when using the _________ approach.

contribution

The degree of operating leverage = Blank______. Multiple choice question. -contribution margin ÷ total sales -contribution margin ÷ net operating income -total sales ÷ net operating income -gross margin ÷ net operating income

contribution margin / net operating income

The degree of operating leverage = Blank______. Multiple choice question. contribution margin ÷ total sales total sales ÷ net operating income gross margin ÷ net operating income contribution margin ÷ net operating income

contribution margin/net operating income

Target profit analysis Blank______. Multiple select question. -is similar to break-even analysis -can only be done using the formula method -estimates sales needed to earn a given profit

is similar to break even analysis estimates sales needed to earn a given profit

A measure of how sensitive net operating income is to a given percentage change in unit sales is known as operating ___________.

leverage

The margin of safety percentage is Blank______. Multiple choice question. total budgeted (or actual) sales in dollars ÷ break-even sales in dollars margin of safety in dollars ÷ total budgeted (or actual) sales in dollars total budgeted (or actual) sales in dollars ÷ margin of safety in dollars margin of safety in dollars ÷ break-even sales in dollars

margin or safety of in dollars/total budgeted (or actual) sales in dollars

Operating leverage is a measure of how sensitive Blank______ is to a given percentage change in unit sales. Multiple choice question. total gross margin net operating income selling price per unit total variable expense

net operating income

CVP analysis allows companies to easily identify the change in profit due to changes in Blank______. Multiple select question. selling price management volume product mix location

selling price volume product mix

Estimating the sales volume required to earn a given amount of net income is known as ________ _________ analysis.

target profit

Which of the following statements is correct? Multiple choice question. The higher the margin of safety, the lower the risk of incurring a loss. The risk of loss is not impacted by the margin of safety. The higher the margin of safety, the higher the risk of incurring a loss.

the higher the margin of safety the lower the risk of incurring a loss

Adams, Inc. has sales of $100,000 with 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 ___________ for Adams, Inc. and ___________ for Baron, Inc.

three two

The contribution margin equals sales minus all Blank______ expenses. Multiple choice question. fixed variable product period

variable

Variable expenses ÷ Sales is the calculation for the _______ __________ ratio.

variable expense