Module Six

Sniffles, Inc. produces facial tissues. The company's contribution margin ratio is 77%. Fixed expenses are $240,000. To achieve a target profit of $930,000, Sniffles' sales rounded to the nearest dollar.

$1,520,000

Candle Central has $1,440 of total variable expense for a sales level of 600 units and $2,160 of total variable expense for a sales level of 900 units. If candle central sells 500 units:

-the variable cost per unit is $2.40 -total variable cost is $1,200

Place the following items in the correct order in which they appear on the contribution margin format income statement

1.Sales 2.Variable Expenses 3.Contribution margin 4.Fixed Expenses 5.Net Operating Income

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:

130,000

Company A sold 200,000 units. Selling price is $7 per unit, contribution margin is $4 per unit, and the fixed expenses total 632,000. Company A's profit (loss) is:

168,000

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 __%

19

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:

21,645

Cakes by Jacki has $144,000 of fixed costs per year. The contribution margin ratio is 59%. The sales dollars to break-even rounded to the nearest dollar equals

244,068

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?

2800

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 dollars is:

40,000 units and $400,000

Plush & Cushy 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 Plush & Cushy's chairs are ___%

45

A product has a selling price of $10 per unit, variable expense of $6 per unit and total fixed costs of $35,000. If 10,000 units are sold, net operating income will be $____

5000

Company A's product sells for $90 and has a variable cost of $35 per unit. Fixes costs total $550,000. If Company A sells 16,000 units, the contribution margin per unit is

55

A company's selling price is $90 per unit, variable costs 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

8400

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:

99,000

Terry's Trees has reached its break-even point and has calculated its contribution margin ratio to be 70%. For each $1 increase in sales:

Net operating income will increase by $0.70 Total contribution margin will increase by $0.70

Elle's Elephant Shop sells giant stuffed elephants for $55 each. EAch elephant has variable costs of $10 and total fixed costs are $700. If Elle ells 35 elephants this month.

Profits = $875 Total Sales = $1,925 Total Variable Costs = $350

At the break-even point:

Total revenue equals total cost net operating income is zero

Solving for the sales level needed to achieve a profit of zero is the same process as solving for the sales level needed to:

break-even

When making a decision using incremental analysis consider the:

change in cost resulting specifically from the decision. change in sales dollars resulting specifically from the decision

After reaching the break-even point, a company's net operating income will increase by the ____ ____ per unit for each additional unit sold

contribution margin

to calculate the degree of operating leverage, divide ___ ___ by net operating income.

contribution margin

Contribution margin ratio is equal to ____ ____ divided by ____

contribution margin;sales

CVP is the acronym for

cost-volume-profit

Which of the following are assumptions of cost-volume-profit analysis?

costs are linear and can be accurately divided into variable and fixed elements in multi product companies, the sales mix is constant

Sweet Dreams sells pillows for $25 each. Variable costs are $15 per pillow. The company is considering improving the quality of materials which will increase variable costs to $19. the company currently sells 1,200 pillows per month and expects that the improved materials would increase sales to 1,500 per month. The impact of this change on total contribution margin would be a(n) ___________ (increase/decrease) of $__________.

decrease; 3000

When constructing a CVP graph, the vertical axis represents:

dollars

a company has reaches its break-even point when the contribution margin ____ fixed expenses

equals

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

fixed;profit

the amount by which sales can drop before losses are incurred is the ___ of ___

margin of safety

Operating leverage is a measure of how sensitive ____ is to a given percentage change in sales dollars

net operating income

The equation used to calculate the variable expense ratio using total values is total variable expenses divides by total:

sales

Which of follow items are found above the contribution margin on a contribution margin format income statement

sales variable expenses

The contribution margin income statement allows users to easily judge the impact of a change in ____on profit

selling price volume cost

CVP analysis focuses on how profits are affected by:

selling prices, sales volume, unit variable costs, total fixed costs, mix of products sold.