MA for Exam 3

The Lampost Production Company has $6,000 of fixed expenses. The manager reported that the company's operating income wass $0, and the contribution margin was 40%. What are the company's sales in dollars using the shortcut approach to the contribution margin ratio?

$15,000

Tara's Sewing Service sells designer afgans for $85 each. Unit variable expenses total $50. The breakeven sales in units are 2,500 and budgeted sales in units are 4,300. What is the margin of safety in dollars?

(4,300 - 2,500) × $85 = $153,000

Daphne's Planter Company produces and sells planters. The manager reported $10,500 in fixed expenses, operating income of $0 at the breakeven point, and a contribution margin per unit of $60. What is the company's breakeven point in units using the shortcut approach?

175 units

Violet Industries held an annual meeting and reported a new annual budget of $50,000 in total fixed expenses. The new selling price per unit is $58, and the new variable expense per unit is $30. If the manager can reduce fixed expenses by another $10,000, what is the effect on breakeven sales?

357 decrease in breakeven units

(Sales revenue × contribution margin ratio) - fixed costs represents which of the following?

Operating income

Landstown College changed the budget for the next fiscal year. The new budget includes the following: Total fixed expenses $52,000 Selling price per unit $58 Variable expenses per unit $32 What is the impact on the breakeven sales in units if the new manager reduces fixed expenses by $10,000?

385 decrease in breakeven units

Sam's Appliance Outlet has variable expenses of 40% of sales. The manager reported monthly fixed expenses of $240,000. The monthly target operating income is $80,000. What is the monthly margin of safety in dollars if the manager at Sam's Appliance Outlet achieves the operating income goal?

$133,333

Sandy's Sewing Service has 500 damaged silk remnants that cost $25,000. The damaged silk remnants could be sold as is for $10,000, or repaired for $15,000 and then sold for $55,000. Compute the opportunity cost of selling the damaged silk remnants without the repairs.

$40,000

The manager at TV Land Productions reported total sales revenue of $900,000. The variable expenses were $300,000, and there were $325,000 of total fixed expenses. Calculate the contribution margin ratio and use the contribution margin shortcut formula to predict the breakeven point in dollars.

$487,476

Sam's Auto Repair reported total cost to produce parts of $50,000. The managerial accountant needs a gross profit of $5,500 to meet monthly expenses. What is the cost-plus price?

$55,500

The Beach Sea Shop has variable expenses of 35% of sales. The manager reported monthly fixed expenses of $250,000. The monthly target operating income is $65,000. What is Beach Sea Shop's operating leverage factor at the target level of operating income?

4.85

Terry's Frame & Art Shoppe produces and sells picture frames to clients at $8.00 per picture frame. The variable cost to produce each picture frame is $3.25 per picture frame. The fixed costs are $3,000 per month. What is the firm's contribution margin ratio?

59.37%

How might a change in fixed costs affect the contribution margin?

A change in fixed costs does not affect the contribution margin.

Which of the following statements is TRUE about sensitivity analysis?

A manager uses sensitivity analysis to determine the impact of changes to the sales price and volume.

Which of the following refers to the excess of sales revenue over variable expenses?

contribution margin

________ starts with the product's total costs and adds a desired profit to determine a cost-plus price.

cost-plus pricing

Which of the following is NOT correct about changes in variable and fixed costs?

Lower variable costs decrease the contribution margin and lower the breakeven point.

Avoidable fixed costs ________.

include costs that may be eliminated as a result of discontinuing the product

Relevant information ________.

is expected future data and differs amongst the alternatives

The margin of safety ________.

is the excess of actual or expected sales over breakeven sales

A special order ________.

occurs when a customer requests a one-time order at a reduction in the sales price

The horizontal x-axis on the CVP graph represents ________.

volume of units

________ refers to a company having work performed overseas.

Offshoring

Grandma's Yarn Factory produces and designs two specialty yarn products, green yarn and scarlet yarn. The manager estimates that clients will purchase 3,000 green yarn spools and 1,100 scarlet yarn spools by the end of the next period. The unit contribution margins for green yarn and scarlet yarn are $2.80 and $3.50. What is the weighted-average unit contribution margin?

$2.99

Rachel's Candelabra Shoppe sells candles to clients for $6.00 each. The variable cost to produce each candle is $2.25 per candle. The fixed costs are $2,800 per month. What is the firm's contribution margin per candle?

$3.75

Brandy's Balloon Service currently sells 1,000 balloon bundles per month. The competition in the balloon industry continues to soar within a thirty-mile vicinity of the service location. Variable expenses were $2.00 per balloon and fixed expenses were $5,000. If Brandy changes the price of balloon bundles to $10, how many balloon bundles should she sell to achieve her target operating income of $6,000?

1,375 balloon bundles

Lisa's Custom Print Services produces and sells custom seashore prints. The manager reported $5,400 in fixed expenses, operating income of $0 at the breakeven point, and a contribution margin per unit of $50. What is the firm's breakeven point in units using the shortcut approach?

108 units

The Landscape Company produces and sells large and medium landscaping tiles. The large landscaping tiles sell for $90 per unit with variable costs of $30 per unit. The medium landscaping tiles sell for $60 per unit with variable costs of $30 per unit. The total fixed costs for the company is $42,000. The Landscape Company usually sells three large tiles for every two medium tiles. What is the breakeven point in units?

875 units

MaryJane's Bakery manufactures and sells a variety of baked goods. The selling price per dozen of chocolate glazed donuts is $8.00. The variable costs to produce the chocolate glazed donuts are $3.75, and total fixed costs are $3,800. How many dozen chocolate glazed donuts must the manager sell to break even?

895 dozen

Which of the following is a TRUE concept about what a manager should consider when a customer requests a one-time special order?

Available capacity

________ costs include costs that may be eliminated as a result of discontinuing the product

Avoidable fixed

________ expresses the relationships amongst costs, volume, and organizational profits.

CVP analysis

Which of the following is NOT a characteristic of a price-setter?

Heavy competition Product is more unique Product is branded Pricing approach emphasizes cost-plus pricing

Which of the following is NOT a characteristic of a price-taker?

Less competition Heavy competition Not a brand name Product lacks uniqueness

Mike's Auto Service reported information about the cost associated to sell as is or process further. The managerial accountant expects to earn $200,000 of revenue from selling parts as is. State whether the managerial accountant should "Process Further" or "Do Not Process" based on the Decision Rule.

Process further because the extra revenue from processing further is more than the extra cost of processing further.

________ refers to the result of operating income or loss for each individual product line.

Segment margin income

________ include fixed costs that continue to be incurred even if the product line is discontinued.

Unavoidable fixed costs

Which of the following is NOT an approach to compute the breakeven point?

Zero income approach

The weighted-average contribution margin ________.

can be used for a company that sells more than one product

A segment margin income statement ________.

contains NO allocation of common fixed costs on the statement

The operating leverage ________.

refers to a company's amount of relative fixed and variable costs

The ________ is the combination of products that make up total sales.

sales mix

A(n) ________ cost includes costs that have been incurred in the past and cannot be changed.

sunk

A managerial accountant needs to make a sell or continue to process decision about a product. The managerial accountant should continue manufacturing the product instead of selling the product if ________.

the extra revenue is greater than the extra cost to continue manufacturing a product

A special order should be rejected when ________.

the price of the special order is NOT more than variable costs of the order