Managerial Accounting Chapter 5 Concept Check

Marjorie's Mugs sold 300 mugs last year for $20 each. Variable costs were $7 per mug and total fixed costs were $1,700. Marjorie's Mugs' profit was ______.

$2,200

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

fixed, profit

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 ______.

$380,000

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 ______.

7625

When preparing a multi-product break-even analysis, the assumption is ordinarily made that the ______ will not change.

Sales mix

To simplify CVP calculations, it is assumed that ______ will remain constant.

Selling Price

The contribution margin income statement allows users to easily judge the impact of a change in ______ on profit.

Selling price Cost Volume

The calculation of contribution margin (CM) ratio is ______.

Contribution margin / Sales

The term used for the relative proportion in which a company's products are sold is ______.

sales mix

Ceramic Creations sells pots for $25. The variable cost per pot is $12 and 15,000 pots must be sold to break-even. If Ceramic Creations sells 25,000 pots, net operating income will be ______.

$130,000

A company has total sales of $1,430,000. Fixed expenses are $657,000 and the contribution margin ratio is 67%. Company profit (loss) is ______.

$301,100

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

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

0 (zero)

If operating leverage is high, a small percentage increase in sales produces a ______________ percentage increase in net operating income than is operating leverage is low.

higher

To convert the margin of safety in dollars to the margin of safety in terms of the number of units sold, divide the margin of safety in dollars by the ______.

sales price per unit

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 ______.

$180,000

Which of the following are assumptions of cost-volume-profit analysis?

-Costs are linear and can be accurately divided into variable and fixed elements. -In multi product companies, the sales mix is constant.

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 ______.

-the sale of 12,000 putters results in net operating income of $380,000 -the contribution margin per putter is $65.

Multiplying unit selling price times the number of units required to break-even is one way to calculate ______.

break-even sales dollars

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

Tommy's Trains is currently selling 55,000 toy trains for $50 per unit. The variable cost per train is $26 and total fixed costs are $110,000. If Tommy sells an additional 5,000 trains, profits will ______.

increase $120,000

The margin of safety percentage is:

margin of safety in dollars divided by total budgeted (or actual) sales in dollars

The amount by which sales can drop before losses are incurred is the ____________ of ___________ .

margin (of) safety

The relative proportions in which a company's products are sold is referred to as ________________ ______________ .

sales mix

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 ______.

8,400

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?

Company B

True or false: CVP analysis investigates company personnel policies, business values, and performance measures for a specific company.

False

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

False

Chrissy's Cupcakes has $832,000 in sales and $265,000 in fixed expenses. Given a contribution margin ratio of 72%, Chrissy's profit (loss) is ______.

Profit = CM ratio × Sales - Fixed expenses = 72% × $832,000 - $265,000 = $334,040.

True or false: The sales mix must be taken into consideration when calculating the break-even point for more than one product due to different selling prices, costs, and contribution margins among the products.

True

Which of the following is needed to calculate profit?

Unit contribution margin, unit sales, and total fixed costs

The contribution margin is equal to sales minus ______.

Variable Expenses

The contribution margin equals sales minus ______.

Variable costs

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

Volume Costs 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

Shonda's Shoes sell for $95 per pair. If Shonda must sell 284 pairs of shoes to break-even, sales dollars needed to break-even equals $____________ .

$26,980

Pretty in Pearls sold 95 necklaces last month. If variable cost per unit is $40 and fixed costs total $3,085, the company's total variable cost was ______.

$3,800

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 ______.

$49,800

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 ___________%.

19%

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?

2,800

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

total fixed expenses

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

leverage

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

leverage

Elle's Elephant Shop sells giant stuffed elephants for $55 each. Each elephant has variable costs of $10 and total fixed costs are $700. If Ellie sells 35 elephants this month, ______.

total variable costs = $350 profits = $875 total sales = $1,925

Margin of safety in dollars is ______.

budgeted (or actual) sales minus break-even sales

A company reported $100,000 in sales and $80,000 in variable costs at the breakeven point of 200 units. If the company sells 201 units, net profit will be ______.

$100

Adam's Sports Store has a contribution margin ratio of 55% and has already passed the break-even point for the year. If Adam's generates additional sales of $250,000 by year-end, net operating income will increase by ______.

$137,500

Company A sold 200,000 units. Selling price is $7 per unit, contribution margin is $4 per unit, and the fixed expenses total $632,000. Company A's profit (loss) is ______.

$168,000

Anne's Antique Store has a contribution margin ratio of 29%. The break-even point has been reached. If the store generates an additional $600,000 of sales for the year, net operating income will increase by ______.

$174,000

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 $_______________ .

$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 fixed costs of $564,000 and a contribution margin of 62%. Sales dollars to break-even rounded to the nearest whole dollar equals ______.

$909,677 because ($564,000 ÷ 0.62 = $909,677)

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 ______.

$99,000

Net operating income equals ______.

(unit sales - unit sales to break even) x unit contribution margin

Candle Central has $1,440 of total variable expense for a sales level of 600 units and $2,160 of total variable expense for a sales level of 900 units. If Candle Central sells 500 units ______.

-total variable cost is $1,200 -the variable cost per unit is $2.40

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 ______.

21,645

Given sales of $1,452,000, variable expenses of $958,320 and fixed expenses of $354,000, the contribution margin ratio is ______.

34%

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 ______.

4,800

Blissful Blankets' target profit is $520,000. Each blanket has a contribution margin of $21. Fixed costs are $320,000. The number of blankets Blissful Blankets need to sell in order to achieve its target profit is ______.

40,000

Company A sells its product for $10 per unit. If Company A has variable expenses of $5 per unit and fixed expenses of $200,000, the break-even point in units and dollars is ______.

40,000 units and $400,000

Citrus Fruits sells oranges for $20 per crate. If the company's margin of safety is $180,000, the margin of safety in units is _______ crates.

9,000

Contribution margin ratio is equal to ______________ ______________ divided by _____________ .

contribution margin, sales

The break-even point calculation is affected by ______.

costs per unit selling price per unit sales mix

According to the CVP analysis model and assuming all else remains the same, profits would be increased by a(n) ______.

decrease in the unit variable cost

Gifts Galore had sales revenue of $189,000. Total contribution margin was $100,170 and total fixed expenses were $27,500. The contribution margin ratio was ______.

53%

Users can easily judge the impact on profits of changes in selling price, cost or volume when using an income statement constructed under the ______ approach.

contribution margin

To calculate the effect on profits of a planned increase in sales, you need the increase in units sold, any change in fixed costs and the ______.

contribution margin per unit