CHAPTER 5-Smart Book Questions
Company A has a contribution margin ratio of 35%. For each dollar in sales, contribution margin will increase by?
$0.35
A company reports the following for sales volume of 200 units: $100,000 in sales and $80,000 in variable costs. If the break-even point is 200 units and the company sells 201 units, net profit will be?
$100
The break-even point is the level of sales at which the profit equals?
0
Vivan's Violins has sales of $326,000, contribution margin of $184,000, and fixed costs total $85,000. Vivan's Violins net operating income is?
99,000
Once the break-even point has been reached, the sale of an additional unit will lead to an increase in contribution margin that is _____ the increase in net operating income?
equal to
A company has reached its break-even point when the contribution margin_____ fixed expenses.
equals
To simplify CVP calculations, which of the following is assumed to remain constant?
selling price
Cakes by Jacki has $144,000 of fixed costs per year. The contribution margin ratio is 59%. The sales dollars to break-even rounded to the nearest dollar equals?
$244,068
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?
$5,000
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
Company A has sales of $500,000, variable costs of $350,000, and fixed costs of $150,000. Company A has what?
- a contribution margin equal to fixed costs -reached the break-even point
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 what happenes?
- the sale of 12,000 putters results in net operating income of $380,000 -the contribution margin per putter is $65
Terry's Trees has reached its break-even point and has calculated its contribution margin ratio to be 70%. For each $1 increase in sales what happenes?
- total contribution margin will increase by $.70 -net operating income will increase by $.70
At the break-even point what happens?
- total revenue equals total cost -net operating income is 0
When making a decision using incremental analysis consider the?
-change in cost resulting specifically from the decision -change in sales dollars resulting specifically from the decision
Which of the following are assumptions of cost-volume-profit analysis?
-in multi product companies, the sales mix is constant -costs are linear and can be accurately divided into variable and fixed elements
Which of the following is needed to calculate profit?
-unit contribution margin -unit sales -total fixed costs
Given sales price of $100, variable costs of $70 and a break-even point of 500 units, net operating profit for sale of 501 units will be what?
30
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
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
After reaching the break-even point, a company's net operating income will increase by the _____ _____ per unit for each additional unit sold.
contribution margin
An income statement constructed under the _____ approach allows users to easily judge the impact on profits of changes in selling price, cost or volume.
contribution margin
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.
incremental
The amount by which sales can drop before losses are incurred is the ________.
margin of safety
Which of the following statements is correct?
the higher the margin of safety, the lower the risk of incurring a loss
The break-even point is reached when the contribution margin is equal to?
total fixed expenses
