accounting exam 3
Assume the following amounts: Total fixed costs $22,000 Selling price per unit $21 Variable costs per unit $12 If sales revenue per unit increases to $22 and 16,000 units are sold, what is the operating income?
$138,000
________ expresses the relationships amongst costs, volume, and organizational profits
CVP analysis
Which of the following is NOT true regarding the sales mix?
Companies that sell more than one product should NOT consider their sales mix when performing CVP analysis.
Which of the following refers to the excess of sales revenue over variable expenses?
Contribution margin
Step 4 of the CVP graph represents the ________.
breakeven point
The ________ refers to a company's amount of relative fixed and variable costs.
operating leverage
How can a manager forecast operating income?
(sales revenue × contribution margin ratio) - fixed costs
Tom's Taxidermy has a monthly target operating income of $25,000. Variable expenses are 75% of sales, monthly fixed expenses are $15,000. What is Tom's operating leverage factor at the target level of operating income?
1.60
The following information pertains to the Flying Fig Corporation: Total Units for information given 7,000 Fixed Cost per Unit $100 Selling Price per Unit $450 Variable Costs per Unit $150 Target Operating Income $300,000 How many units need to be sold in order to reach the target profit?
3,333 units
Matthew's Fish Fry has a monthly target operating income of $8,300. Variable expenses are 80% of sales and monthly fixed expenses are $800. What is the monthly margin of safety as a percentage of target sales in dollars?
91.21%
How might a change in fixed costs affect the contribution margin?
A change in fixed costs does not affect the contribution margin
Which of the following statements is TRUE about sensitivity analysis?
A manager uses sensitivity analysis to determine the impact of changes to the sales price and volume
Mae Company sells its product for $7 per unit and has variable costs of $3 per unit. Total fixed costs are $72,000. Suppose variable costs increase by 20% due to an increase in the cost of direct materials. What will be the effect on the breakeven point in units?
Increase from 18,000 units to 21,177 units
Which of the following is NOT correct about changes in variable and fixed costs?
Lower variable costs decrease the contribution margin and lower the breakeven point.
Operating leverage factor
Represents how responsive a company's operating income is to changes in volume, The lowest possible factor is 1, where the company has no fixed expenses (contribution margin / operating income), High operating leverage companies have high level of fixed costs
The contribution margin is
Sales revenue minus variable expenses.
Unit contribution margin is
The contribution margin in dollars for a single product
Cost volume profit can be used to calculate the sales dollars or sale units needed to achieve a target profit. Which statement is false?
The only way to calculate the sales revenue needed to achieve a target profit is by using the formula provided in class
Which of the following is NOT an approach to compute the breakeven point?
Zero income approach
The ________ is computed as the total contribution margin divided by total sales.
contribution margin ratio
For a given level of sales, a company's operating leverage is defined as
contribution margin / operating income.
All else being equal, a decrease in a company's fixed expenses will:
decrease the sales needed to break even.
The vertical y-axis on the CVP graph represents ________.
dollars
Breakeven in sales dollars and units can be calculated for multiple product companies. When performing this process the starting point is determining...
the individual contribution margin per unit for each product
Moe's Pizza Shop sells a large pizza for $12.00. Unit variable expenses total $8.00. The breakeven sales in units is 7,000 and budgeted sales in units is 8,000. What is the margin of safety in dollars?
$12,000
The following information pertains to the Flying Fig Corporation: Total Units for information given 7,000 Fixed Cost per Unit $50 Selling Price per Unit $325 Variable Costs per Unit $175 Target Operating Income $200,000 What is the breakeven in sales dollars?
$758,225
