A306 Chapter 2

Given sales of $100,000 a contribution margin of $40,000, and fixed expenses of $50,000, the result is a Blank______.

$10,000 net operating loss

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 Blank______.

$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 Blank______.

$137,500

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 Blank______.

$334,040

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 Blank______.

$380000

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 Blank______.

$7,625

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 Blank______.

168,000

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?

2800

Given a 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 $

30

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 Blank______.

301,100

A product has a selling price of $10 per unit, variable expenses of $6 per unit and total fixed costs of $35,000. If the current net loss is $3,000, selling one additional unit will decrease the loss by $

4

Blissful Blankets' target profit is $520,000. Each blanket has a contribution margin of $21. Fixed costs are $320,000. The number of blankets that must be sold to achieve the target profit is Blank______.

40,000

If a company has a variable expense ratio of 35%, its CM ratio must be

65%

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 Blank______.

8,400 units

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 Blank______.

99,000

Cost structure refers to the relative portion of product and period costs in an organization.

False

If a company with $40,000 of fixed expenses is operating at a loss, each additional unit sold will decrease that loss by the selling price per unit.

False

A company's current sales are $300,000 and fixed expenses total $85,000. The contribution margin ratio is 30%. The company has decided to expand production which is expected to increase sales by $70,000 and fixed expenses by $15,000. If these results occur, net operating income will Blank______.

Increase by $6,000

A company currently has sales of $700,000 and a contribution margin ratio of 45%. As a result of increasing advertising expense by $8,000, the company expects to increase sales to $735,000. If this is done and these results occur, net operating income will Blank______.

Increase by $7,750

If the total contribution margin is less than the total fixed expenses, a Blank______ occurs.

Net Loss

The contribution margin as a percentage of sales is referred to as the contribution margin or CM

Ratio

The variable expense ratio is the ratio of variable expense to Blank______.

Sales

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

Sales Mix

Which of the following is needed to calculate profit?

Unit contribution margin, unit sales, and total fixed costs

The contribution margin equals sales minus all Blank______ expenses.

Variable

Contribution Margin:

becomes profit after fixed expenses are covered.

When compared to a company with higher fixed costs and lower variable costs, a company with lower fixed costs and higher variable costs, has Blank______.

better protection from loss in bad years greater profit stability lower net income in good years

Using the contribution margin ratio, the impact on net income for a change in sales dollars is Blank______.

change in sales dollars × contribution margin ratio

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

contribution margin

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

contribution margin ÷ sales

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

costs. selling price. volume.

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.

The term "cost structure" refers to the relative proportion of _________ and ________ costs in an organization

fixed and variable

A company with a high ratio of fixed costs:

is more likely to experience a loss when sales are down than a company with mostly variable costs. is more likely to experience greater profits when sales are up than a company with mostly variable costs.

The amount by which sales can drop before losses are incurred is the __________ of ________

margin of safety

At the break-even point Blank______.

net operating income is zero total revenue equals total cost

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

sales mix

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

selling price cost volume

Which of the following statements is correct? the higher the margin of safety, the lower the risk of incurring a loss. The higher the margin of safety, the higher the risk of incurring a loss. The risk of loss is not impacted by the margin of safety.

the higher the margin of safety, the lower the risk of incurring a loss.

CM ratio is equal to 1 - ______ ______ ratio.

variable expense

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

Total Fixed Expenses