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?