ACCT ch 5 presentation

Future Corporation has a single product; the product selling price is $100 and variable costs are $60. The company's fixed expenses are $10,000. What is the company's break-even point in sales dollars?

25000 Dollar sales to break-even = Fixed expenses of $10,000 ÷ CM Ratio of 0.40 = $25,000.

Team Corporation has sales of $1 million, fixed expenses of $200,000, and variable expenses of $650,000 for the month of March. What is the contribution margin ratio of the company for the month of March?

35%

target profit in dollar equation

CM Ratio X sales - fixed expenses

change in contribution margin =

CM Ratio x Change in Sales

breakeven dollar equation

CM ratio x Sales - Fixed Expenses

Contribution Margin Ratio computes

Change in contribution margin for change in sales volume

What is usually plotted as a horizontal line on the CVP graph?

Fixed expenses

margin of safety as %

Margin of safety in dollars / total budgeted (or actual) sales in dollars

profit =

Unit Contribution Margin x Q - Fixed Expenses (CM ratio x Sales) - Fixed Expenses

CM Mixed producs=

Weighted average of the Percent for each product X Percent of sales

degree of operating leverage

contribution margin / net operating income

% change in Net operating income

degree of operating leverage X % change in sales

breakeven dollars fomula

fixed expenses / CM ratio

breakeven unit sales formula

fixed expenses / unit cm

breakeven equation

profit = unit cm x Q - fixed expenses

% change in sales

sales 1 - sales 2 / sales 1

target profit in units formula

target profit + fixed expenses / unit CM

target profit in dollar formula

target profit = fixed expenses / CM ratio

target profit in units equation

unit CM x Q - Fixed Expenses

Frank Corporation has a single product. Its selling price is $80 and the variable costs are $30. The company's fixed expenses are $5,000. What is the company's break-even point in unit sales?

100 Units

Winter Corporation's current sales are $500,000. The contribution margin is $300,000 and the net operating income is $100,000. What is the company's degree of operating leverage?

3.00

Contribution Margin Ratio =

Contribution Margin / Sales

Alpha Corporation is currently selling 500 skateboards per month. The unit selling price and variable expenses are $60 and $35 respectively. The fixed expenses amount to $5,000 per month. The company has an opportunity to make a bulk sale of 100 skateboards. This sale will not affect the company's regular sales or total fixed expenses. What unit price should be charged if the company is seeking a profit of $2,000 on the bulk sale?

$55

The current sales of Trent, Inc., are $400,000, with a contribution margin of $200,000. The company's degree of operating leverage is 2. If the company anticipates a 30% increase in sales, what is the percentage change in net operating income for Trent, Inc.?

60%

Base Corporation has sales of $100,000, variable costs of $40,000, and fixed costs of $30,000 currently. The company is expecting a $36,000 increase in sales. What is the change in contribution margin for the company?

$21,600

Contribution Margin =

Sales Revenue - Variable Expenses

What is represented on the X axis of a cost-volume-profit (CVP) graph?

Sales volume

margin of safety in dollars

Total budgeted (or actual) sales - break even sales

margin of safety in units

margin of safety in dollars / selling price

Cartier Corporation currently sells its products for $50 per unit. The company's variable costs are $20 per unit. Fixed expenses amount to a total of $5,000 per month. What is the company's variable cost ratio?

40%

The target profit is zero in break-even analysis

True

computation of the breakeven point

fixed expenses / overall CM ratio

CVP

cost volume profit