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Given the following information, calculate profit: Selling price per unit $150.00 Variable cost per unit $120.00 Fixed costs $1,000 Number of units 100

$2,000 Reason: Profit = (P-V)X - F = ($150 - 120)x100 -$1,000 = $2,000

Given the following information, calculate break-even volume in sales dollars: Selling price per unit $20 Variable cost per unit $12 Fixed costs $1,000

$2,500 Reason: Unit contribution margin = selling price/unit - variable cost/unit = 8 Contribution margin ratio = Unit contribution marginsales price per unitUnit contribution marginsales price per unit = 820820= 0.4 or 40% Break-even volume sales dollar = Fixed costcontribution margin ratioFixed costcontribution margin ratio= (1000/0.4) =$2500

Given the following information, calculate the sales dollars needed to achieve the target profit. Target profit after tax $4,500 Fixed costs $2,000 Contribution margin ratio 40% Tax rate 25%

$20,000 Reason: $2,000 + $4,500/(1 -.25) = $8,000/.40 or $20,000

Given the following information, calculate target volume (in sales dollars): Sales price per unit $30 Variable cost per unit $18 Target profit $8,000 Fixed costs $2,000

$25,000 Reason: Target volume (dollars) = (Fixed costs + Target profit)/Contribution margin ratio or $10,000/($12/$30) = $25,000

A telephone company sells two models of phones; standard and deluxe. History shows that 80% of sales are standard phones and 20% are deluxe phones. Given the following information, calculate the weighted average contribution margin per unit: Standard's contribution margin per unit $20 Deluxe's contribution margin per unit $60

$28 Reason: ($20 x 80%) + ($60 x 20%) = $28

Target volume (sales dollars) =

(Fixed costs + Target profit)/Contribution margin ratio

Target volume (units) =

(Fixed costs + Target profit)/Unit contribution margin

A telephone company sells two models of phones; standard and deluxe. History shows that 70% of sales are standard phones and 30% are deluxe phones. Given the following information, calculate the break-even units for the standard phones: Standard contribution margin per unit $20 Deluxe contribution margin per unit $60 Total Fixed costs $9,600

210 units Reason: $9,600 ÷ (($20 × 70%) + ($60 × 30%)) x 70% = 210 units

Given the following information, calculate break-even volume (in units): Selling price per unit $14 Variable cost per unit $10 Fixed costs $1000

250 units Reason: BE in units = $1000/($14-$10)

A company has a unit contribution margin of $50, fixed costs of $15,000 and a target profit of $20,000 after-tax. If the tax rate is 20% the company must sell____units in order to earn the target profit.

1.20,000/0.8; 2.2500+15000/50=800

Given current sales of $120,000 and a margin of safety of 12%, sales can fall a total of $_____before the company finds itself operating at a loss.

120,000*0.12=14,400

A telephone company sells two models of phones; standard and deluxe. For every 500 standard phones sold, the company sells 200 deluxe phone Calculate the break-even point in packages using the fixed product mix method. Standard contribution per unit $20.00 Deluxe contribution margin per unit $60.00 Total fixed costs $55,000

2.5 packages Reason: Contribution margin = (500 × $20) + (200 × $60) = 22,000. $55,000/22,000 = 2.5 packages

A telephone company sells two models of phones; standard and deluxe. History shows that 70% of sales are standard phones and 30% are deluxe phones. Given the following information, calculate the break-even units for the company: Standard contribution margin per unit $20 Deluxe contribution margin per unit $60 Total Fixed costs $9,600

300 units Reason: $9,600 ÷ (($20 × 70%) + ($60 × 30%)) = 300 units

A company currently spends $52,500 per month on fixed costs and produces a product with a contribution margin per unit of $750. The production process involves an engraving machine that can only finish 50 units per month. The company owns one engraving machine. For each additional 50 units, another machine must be rented at a cost of $7,500 per month. The break-even point per month for this product is

80 ((52500+7500)/750)

Given the following information, calculate margin of safety percentage: Actual sales $100,000 Contribution margin ratio .6 Fixed costs $30,000

50% Reason: ($100,000 - ($30,000/.60))/$100,000

Given the following information, calculate target volume (in units): Sales price per unit $25 Variable cost per unit $15 Target profit $5,000 Fixed costs $1,000

600 units ((5000+1000)/10)

Excel's Goal Seek may be used to perform ______ analysis.

CVP

Break-even volume in sales dollars =

Fixed costs/Contribution margin ratio

Break-even volume in units =

Fixed costs/Unit contribution margin

Companies A and B have the same total revenues and operating profits. Company A has a contribution margin ratio of 30% and Company B has a contribution margin ratio of 40%. Which of the following statements is true?

If sales increase by 10%, Company B will have a higher increase in profits than Company A. Reason: Because Company B has a higher contribution margin ratio, an increase in sales will result in a higher increase in profits than the increase for Company A.

CVP analysis relies on certain___that might limit the applicability of results for decision making.

assumptions

Margin of safety =

Sales volume - Break-even sales volume

On a CVP graph, ______.

TR = TC at breakeven profit = TR - TC

In general, companies with lower fixed costs are better able to survive tough times than companies with higher fixed costs.

True Reason: Companies with lower fixed costs have the ability to be more flexible to changes in market demand.

Cost____distinguishes between fixed and variable costs.

behavior

The volume level at which profits equal zero is called the____point

break even

Cost-volume-profit analysis includes all of the following except ______.

assets

Operating leverage ______.

can vary within an industry is the extent a firm's cost structure is made up of fixed costs impacts how profits increase after breakeven

When compared to the Cost-Volume-Profit graph, the ______ lines are collapsed on the Profit-Volume graph.

cost and revenue

An organization's____is the proportion of fixed and variable costs to total costs.

cost structure

At the break-even point, profit = total expenses.

false Reason: At the break-even point, profit equals zero. Total revenue = total expenses.

Profit = (P - V)X + F

false Reason: Profit = (P-V)X - F

On a CVP graph, the intercept of the total cost line is the___cost for the period.

fixed

The intercept of the profit-volume line equals the loss at zero volume, which equals

fixed cost

A company that is capital intensive has a cost structure with a high proportion of

fixed costs

When doing multi-product break-even analysis, a company defines a package or bundle of products in the typical product mix and then computes break-even when using the___method

fixed product mix

CVP analysis can be performed using Excel's

goal seek

The excess of the projected (or actual) sales over the break-even sales level is called the

margin of safety

Contribution margin divided by operating profit =

operating leverage

The profit equation is ______.

operating profit = total revenues - total costs

(Price - Variable costs) x Units of output - Fixed costs =

profit

The slope of the profit-volume line represents ______.

unit contribution margin

Assumptions that may be considered important limitations of CVP analysis include constant ______.

unit variable costs selling price

Cost behavior classifies costs as to whether they are

variable or fixed

The process where managers understand the relationships between revenues, costs, volume and profit is called cost -

volume profit analysis


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