Chapter 6

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 Reason: $1,630,000 - $935,000 = $695,000

Select all that apply Which of the following are assumptions of cost volume profit analysis?

-All costs can be classified as either fixed or variable. -In multi-product companies, the sales mix is constant. -Production volume is equal to sales volume.

Jump-It Corporation has a margin of safety of $272,000. The company sold 100,000 units this year. If the company sells each unit for $17, the margin of safety percentage is ______.

16% Reason: $272,000 ÷ (100,000 × $17) = 16%.

Steel, Inc. has a margin of safety in dollars of $559,740. If actual sales were $2,946,000, Steel's margin of safety percentage is %. (Enter your answer as a whole number.)

Blank 1: 19

The extent to which a company uses fixed costs (as opposed to variable costs) in its operations is called ___ ___. (Enter only one word per blank.)

Blank 1: cost Blank 2: structure

When constructing a CVP graph, the place where the total ___ cost line intercepts the y-axis represents total costs. (Enter only one word per blank.)

Blank 1: fixed

The excess of the budgeted (or actual) sales dollars over break-even sales is called the ___ of ____. (Enter only one word per blank).

Blank 1: margin Blank 2: safety

Decisions about whether to use fixed or variable costs to run a business affects a company's ___ leverage. (Enter only one word per blank.)

Blank 1: operating

How much contribution margin is generated per dollar of sales revenue is the contribution margin ___ . (Enter only one word per blank.)

Blank 1: ratio

When constructing a CVP graph, the of the ___ line represents variable cost per unit. (Enter only one word per blank)

Blank 1: slope

Methods that can be used to model the relationship between revenues, costs, profit and volume include the ___ contribution margin method and the contribution ___ ___ method. (Enter only one word per blank.)

Blank 1: unit Blank 2: margin Blank 3: ratio

Which of the following is NOT a method used for basic CVP analysis?

Break-even analysis

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

True or false: CVP analysis is only used for break-even and target profit analysis.

False

True or false: Cost structure refers to how a company uses product and period costs in an organization.

False

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

False

Contribution margin equals sales minus ______.

all variable costs

Solving for the sales level needed to achieve a profit of zero is ______ analysis.

break-even

Margin of safety in dollars is ______.

budgeted (or actual) sales minus break-even sales

Select all that apply CVP ______.

can be used to make many different decisions can be used for "what-if" analysis allows managers to see how changing one variable can impact another

The contribution margin stated as a percentage of sales dollars is the ______.

contribution margin ratio

When constructing a CVP graph, the vertical axis represents ______.

dollars

Decisions about whether to use fixed or variable costs to run a business impact a company's ______.

operating leverage

According to the assumptions of CVP, ______ will not change as the volume of a product increases or decreases.

price

Select all that apply Contribution margin equals sales minus ______.

variable manufacturing costs variable selling and administrative costs

Select all that apply CVP analysis can be useful in deciding ______.

what marketing strategy to use which products to offer what cost structure to implement what price to charge for goods or services which services to offer

The goal of break-even analysis is to find the level of sales where profit is equal to ______.

zero