Chapter 5 ACCT 2122

If sales increase by $50,000, what will be the net operating income for the company?

$55,000

Team Corporation has sales of $1 million, fixed expenses of $200,000, and variable expenses of $650,000 for the month of March. What is the contribution margin ratio of the company for the month of March?

35%

What is the contribution income statement expressed as an equation?

Profit = (Sales - Variable Expenses) - Fixed Expenses

Another way of stating the CVP equation is:

Profit = (Unit Contribution Margin x Quantity) - Fixed Expenses

On a CVP graph, break-even is where which two lines intersect?

The total expenses and total revenue lines.

What is usually plotted as a horizontal line on the CVP graph?

fixed expenses

What is represented on the X axis of a cost-volume-profit (CVP) graph?

sales volume

Break-even point is the level of sales at which ______.

total revenue equals total costs

Atlas Corporation sells 100 bicycles during a month at a price of $500 per unit. The variable expenses amount to $300 per bicycle. How much does profit increase if it sells one more bicycle?

$200

Base Corporation has sales of $100,000, variable costs of $40,000, and fixed costs of $30,000 currently. The company is expecting a $36,000 increase in sales. What is the change in contribution margin for the company?

$21,600

Future Corporation has a single product; the product selling price is $100 and variable costs are $60. The company's fixed expenses are $10,000. What is the company's break-even point in sales dollars?

$25,000

The current sales of Trent, Inc., are $400,000, with a contribution margin of $200,000. The company's degree of operating leverage is 2. If the company anticipates a 30% increase in sales, what is the percentage change in net operating income for Trent, Inc.?

60%

What are the unit sales required to attain a target profit of $120,000?

$4000

Alpha Corporation is currently selling 500 skateboards per month. The unit selling price and variable expenses are $60 and $35 respectively. The fixed expenses amount to $5,000 per month. The company has an opportunity to make a bulk sale of 100 skateboards. This sale will not affect the company's regular sales or total fixed expenses. What unit price should be charged if the company is seeking a profit of $2,000 on the bulk sale?

$55

Once the break-even point has been reached, net operating income will increase by the amount of the _____ for each additional unit sold.

unit contribution margin

What is Ralph Corporation's margin of safety in dollars?

$1,000,000

Atlas Corporation sells 100 bicycles during a month. The contribution margin per bicycle is $200. The monthly fixed expenses are $8,000. Compute the profit from the sale of 100 bicycles.

$12,000

If unit contribution margin is $5.00, and quantity is 10,000, and fixed expenses are $25,000; what would our profit be?

$25,000

If our break-even is at 1,000 units, and our contribution margin is $20 per unit, what would our profit be if we sold 1,200 units?

$4,000

Winter Corporation's current sales are $500,000. The contribution margin is $300,000 and the net operating income is $100,000. What is the company's degree of operating leverage?

3.00

Which of the following explains contribution margin?

Sales minus variable cost

Which of the following formulas is used to calculate the contribution margin ratio?

(Sales - Variable expenses) ÷ Sales

Frank Corporation has a single product. Its selling price is $80 and the variable costs are $30. The company's fixed expenses are $5,000. What is the company's break-even point in unit sales?

100 units

Cartier Corporation currently sells its products for $50 per unit. The company's variable costs are $20 per unit. Fixed expenses amount to a total of $5,000 per month. What is the company's variable cost ratio?

40%

The target profit is zero in break-even analysis.

True