Managerial Accounting Chapter 5 Homework

What is Ralph Corporation's margin of safety in dollars?

$1 million

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 contribution margin ratio?

60%

Once the break-even point has been reached, net operating income will increase by the amount of the _____ for each additional unit sold.

Unit Contribution Margin

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

Unit Volume

Atlas Corporation sells 100 bicycles during a month. The contribution margin per bicycle is $200. The monthly fixed expenses are $8,000. What is the profit from the sale of 100 bicycles?

$12,000

Atlas Corporation sells 100 bicycles during a month at a price of $500 per unit. The variable expenses amount to $300 per bicycle. How much does profit increase if it sells one more bicycle?

$200

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?

$25,000

The current sales of Trent, Incorporated, 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, Incorporated?

60%

Contribution margin equals ________.

sales minus variable cost

Break-even point is the level of sales at which ______.

total revenue equals total costs

What are the unit sales required to attain a target profit of $120,000?

4,000 units

What is the amount of the break-even sales for Grace Food Company?

$1.5 million

What are the sales dollars required to attain a target profit of $120,000?

$400,000

If sales increase by $50,000, what will be the net operating income for the company?

$55,000

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

Calculate the company's break-even point in unit sales.

2,000 units

Calculate the company's break-even point in unit sales.

2,400 units

What is Ralph Corporation's margin of safety in percentage?

20%

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

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%

With regards to interpretation, what are the important areas that appear on a CVP graph?

Break-even point, loss area, and profit area

A shift in the sales mix from high-margin items to low-margin items can cause total profit to ________.

Decrease

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

Fixed Expenses

Taylor Company has current sales of 1,000 units, which generates sales revenue of $190,000, variable costs of $76,000, and fixed expenses of $96,000. The company believes sales will increase by 300 units, if advertising increases by $20,000. What is the change in net operating income after the changes?

Increase of $14,200

The measure of how sensitive net operating income is to a given percentage change in volume sales is called _______.

Operating Leverage

The profit graph is based on the following linear equation:

Profit = Unit CM × Q - Fixed Expenses.

Last month when Holiday Creations, Incorporated, sold 45,000 units, total sales were $180,000, total variable expenses were $142,200, and fixed expenses were $36,800. Required: 1. What is the company's contribution margin (CM) ratio? 2. What is the estimated change in the company's net operating income if it can increase sales volume by 450 units and total sales by $1,800? (Do not round intermediate calculations.)

CMR: 21% Estimated Change in Net Operating Income: $378