A202 chap 3

Contribution margin decided by sales is the formula for (blank)

contribution margin ratio

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

sale Variable expenses contribution margin fixed expenses net operating income

Which tool can be used to easily calculate the change in profit resulting from a change in sales price, sales volume, variable costs, or fixed costs?

CVP Analysis

To calculate profit, multiply the ______ per unit sales volume and subtract total fixed cost

contribution margin

(Sales-variable expenses)/sales

CM ratio

Company considering changing compensation for sales staff from salaries to commission. FC decrease from 50,000 to 40,000 per month and VC increase by $20/unit. Current CM is $90/unit. President confident total sales increase from 1,000/month to 1,400/month. Calculate change in net operating income if change is made

$18,000 increase

If Ellie sells 35 elephants this month:

-profit = 875 -Total VC=350 -Revenue=1925

CVP analysis focuses on how profits are affected by:

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

Given a CM ratio of 30% and FC of $60,000, the dollar sales to attain a profit of zero equals $

200,000

Paula's Perfumes has target profit of $4000/month. Sells for $15/bottle, VC=$13.50/bottle, FC=$3200/month. The number of bottles sold per month to earn target profit is:

4800

Selling price $90/unit, VC $28/unit, FC= $320,000. The number of unit sales needed to earn profit of $200,800 is:

8400

Adams Inc. currently sells one of its products for $140/unit. VC= $75/unit. FC= $5000. Company has been asked to provide 500 units to charity for reduced price. If Adam's desired profit is $20/unit, quoted price per unit will be $

95

paprika for $9/bottle. $2.43 VC. Incurs annual FC of $825,000. Variable expense ratio for paprika is:

Variable expense ratio= variable expenses/sales 27%

The amount remaining from sales revenue after deducting variable expenses is (blank)

contribution margin

Pillow for $25/each. VC= $15/pillow. Considering improving quality of materials, increase VC to $19/ Currently sells 1200 pillows, expects to increase sales to 1500/month. The impact of this change on total contribution margin would be a(n) (increase/decrease) of $(blank)

decrease $3000

Tasty Tangerine currently selling 50,000 boxes $25/box. VC= $17/box. FC= $260,000. Plan to increase advertising and reduce selling price. Advertising increase FC by $60,000. Reduce price by $2, increase sales by 24,000 boxes. As a result, net operating income would:

decrease by $16,000

A produces and sells 10,000 units for $10/unit. VC= $4/unit FC=$30,000. Move to larger facility increase rent by $8000, allow company to meet demand for additional 1000 units. If move, profits will:

decrease by $2000

When considering changes in costs and revenues, focusing only on the items that will change is called:

incremental analysis