Accounting 204-Chapter #6

A company reported $100,000 in sales and $80,000 in variable costs at the breakeven point of 200 units. If the company sells 201 units, net profit will be

$100-For each unit sold above break-even, profit increases by the contribution margin per unit ($100,000 - $80,000) ÷ 200 or $100.

A company sold 20,000 units of its product for $20 each. Variable cost per unit is $11. Fixed expenses total $150,000. The company's contribution margin is ______.

$180,000-20,000 × ($20 - $11) = $180,000

The break-even point is reached when the contribution margin is equal to:

Total fixed expenses

Total contribution margin equals ______.

fixed expenses plus net operating income

Company A has fixed costs of $564,000 and has set a target profit of $800,000. If Company A has a contribution margin ratio of 62%, sales dollars needed to reach the target profit equals

$2,200,000-($564,000 + $800,000) ÷ 0.62 = $2,200,000

A company sold 750 units with a contribution margin of $120 per unit. If the company has a break-even point of 450 units, the net operating income or (loss) is

$36,000-Net operating income = (750 - 450) × $120 = $36,000.

Daisy's Dolls sold 30,000 dolls this year. Each doll sold for $40 and had a variable cost of $19. Fixed expenses were $250,000. Net operating income for the year is

$380,000-30,000 × ($40 - $19) - $250,000 = $380,000

A product has a selling price of $10 per unit, variable expenses 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. Fixed costs total $550,000. If Company A sells 16,000 units, the contribution margin per unit is ______.

$55-Unit contribution margin= $90 -$35 = $55.

Seth's Speakers had actual sales of $1,630,000 If break-even sales equals $935,000, Seth's margin of safety in dollars is

$695,000=($1,630,000 - $935,000 = $695,000)

A company has a target profit of $204,000. The company's fixed costs are $305,000. The contribution margin per unit is $40. The BREAK-EVEN point in unit sales is

$7625-Break-even point = $305,000 ÷ $40 = 7,625

Profit Equals:

(P × Q) - (V × Q) - fixed expenses

Net operating income equals:

(unit sales - unit sales to break even) × unit contribution margin.

Correct order of the contribution margin format income statement.

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

Given sales of $1,452,000, variable expenses of $958,320 and fixed expenses of $354,000, the contribution margin ratio is

34%-($1,452,000 - $958,320) ÷ $1,452,000 = 34%

Gifts Galore had sales revenue of $189,000. Total contribution margin was $100,170 and total fixed expenses were $27,500. The contribution margin ratio was

53%-$100,170 ÷ $189,000

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

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

CVP stands for

Cost Volume Profit

A company's current sales are $300,000 and fixed expenses total $85,000. The contribution margin ratio is 30%. The company has decided to expand production which is expected to increase sales by $70,000 and fixed expenses by $15,000. If these results occur, net operating income will

Increase by $6000-($70,000 × 30%) - $15,000 = $6,000 increase

The variable expense ratio is the ratio of variable expense to

Sales

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

Sales Variable Expenses

Pete's Putters sells each putter for $125. The variable cost is $60 per putter and fixed costs total $400,000. Based on this information ______.

The contribution margin per putter is $65. The sale of 12,000 putters results in a net operating income of $380,000

The contribution margin equals sales minus all ______ expenses.

Variable

Contribution margin:

becomes profit after fixed expenses are covered

When a company sells one unit above the number required to break-even, the company's net operating income will ______.

change from zero to a net operating profit-Variable expenses will still be incurred for each unit above the break-even point. After break-even the contribution margin becomes profit.

A change in profits that occurs due to a change in sales and fixed expenses may be calculated as ______.

cm ratio × change in sales - change in fixed expenses

Contribution Margin Ratio:

contribution margin ÷ sales

According to the CVP analysis model and assuming all else remains the same, profits would be increased by a(n):

decrease in the unit variable cost.

CVP analysis focuses on how profits are affected by ______.

unit variable cost sales volume total fixed costs selling price mix of products sold