Accounting

false

True or false: The margin of safety is the excess of break-even sales dollars over budgeted (or actual) sales dollars.

$5,000

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 $

3,2

Adams, Inc. has sales of $100,000 with a contribution margin of $60,000 and net income of $20,000. Baron, Inc. has sales of $110,000 with a contribution margin of $44,000 and net income of $22,000. Thus, the degree of operating leverage is ____ For Adams, Inc. and _____ for Baron, Inc.

$380,000

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

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

When making a decision using incremental analysis consider the Blank______.

The higher the margin of safety, the lower the risk of incurring a loss.

Which of the following statements is correct?

false

Cost structure refers to the relative portion of product and period costs in an organization.

Company B

A 15% increase in sales resulted in a 40% increase in net income for Company A and a 60% increase in net income for Company B. Based on this, which company has the greater operating leverage?

$99,000

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

2,800

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?

equal to

Once the break-even point is reached, the sale of an additional unit increases contribution margin by an amount that is ______ the increase in net operating income.

net operating income

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

$180,000

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 ______.

$49,800

Budgeted sales are $982,000, break-even sales are $932,200, and fixed expenses are $429,000. The company's budgeted margin of safety in dollars is

product mix volume selling price

CVP analysis allows companies to easily identify the change in profit due to changes in

volume, selling price, product mix

CVP analysis allows companies to easily identify the change in profit due to changes in

decrease by $2,000

Company A produces and sells 10,000 units of its product for $10 per unit. Variable costs are $4 per unit and fixed costs total $30,000. A move to a larger facility would increase rent expense by $8,000, and allow the company to meet its demand for an additional 1,000 units. If the move is made, profits will

fixed, profit

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

becomes profit after fixed expenses are covered.

Contribution margin:

higher

If operating leverage is high, a small percentage increase in sales produces a _____ (higher/lower) percentage increase in net operating income than if operating leverage is low.

21,645

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

net operating income will increase by $0.70 total contribution margin will increase by $0.70

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

degree of operating leverage

The measure of how a percentage change in sales affects profits at any given level of sales is the

variable, fixed

The term "cost structure" refers to the relative proportion of ______ and _____ costs in an organization.

true

True or false: Without knowing the future, it is not obvious which cost structure is better: a structure with higher fixed costs and lower variable costs or a structure with lower fixed costs and higher variable costs.

variable, expense

Variable expenses ÷ Sales is the calculation for the ____ ___.

increase by $7,750

A company currently has sales of $700,000 and a contribution margin ratio of 45%. As a result of increasing advertising expense by $8,000, the company expects to increase sales to $735,000. If this is done and these results occur, net operating income will

7,625

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 ______.

$450 increase

A company sells 500 sleds per month for $80. Variable costs are $41 per unit and fixed expenses are $3,500 per month. The company thinks that using a new material would increase sales by 70 units per month. If the new material increases variable costs by $4 per unit, the impact on contribution margin would be a

is more likely to experience greater profits when sales are up than a company with mostly variable costs. is more likely to experience a loss when sales are down than a company with mostly variable costs.

A company with a high ratio of fixed costs:

$198,000

A company's break-even point is 17,000 units. If the contribution margin is $22 per unit and 26,000 units are sold, net operating profit will be ______.

8,400

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

leverage

A measure of how sensitive net operating income is to a given percentage change in sales dollars is known as operating __

Adams has a higher degree of operating leverage than Baron. Baron's net income grows twice as fast as its sales.

Adams, Inc. has sales of $100,000 with a contribution margin of $60,000 and net income of $20,000. Baron, Inc. has sales of $110,000 with a contribution margin of $44,000 and net income of $22,000. Which of the following statements are correct?

40,000

Blissful Blankets' target profit is $520,000. Each blanket has a contribution margin of $21. Fixed costs are $320,000. The number of blankets that must be sold to achieve the target profit is

$0.35

Company A has a contribution margin ratio of 35%. For each dollar in sales, contribution margin will increase by

4,800

Paula's Perfumes has a target profit of $4,000 per month. Perfume sells for $15.00 per bottle and variable costs are $13.50 per bottle. Fixed costs are $3,200 per month. The number of bottles that must be sold each month to earn the target profit is

$695,000

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

total fixed expenses.

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

zero

The break-even point is the level of sales at which the profit equals

contribution margin ÷ sales

The calculation of contribution margin (CM) ratio is

ratio

The contribution margin as a percentage of sales is referred to as the contribution margin or CM _____

variable

The contribution margin equals sales minus all Blank______ expenses

contribution margin ÷ net operating income

The degree of operating leverage =

contribution margin

To calculate the degree of operating leverage, divide _______ by net income.

sales

The variable expense ratio equals variable expenses divided by

$36,000

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

decrease

Assuming sales price remains constant, an increase in the variable cost per unit will ______ the contribution margin per unit.

fixed expenses plus net operating income

Total contribution margin equals ______.

incremental

When the analysis of a change in profits only considers the costs and revenues that will change as the result of the decision, the decision is being made using ____ analysis

contribution margin

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

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

CVP analysis focuses on how profits are affected by