ACCOUNTING FOR MANAGERS CH11

Calculate contribution margin per unit assuming sales price is $15 per unit and variable cost is $15 per unit.

0

If the contribution margin per unit us $200 and fixed costs total $1000, how many unites must be sold to earn a profit of $1000?

10

The sales price of a product is $20 per unit; the variable cost is $5 per unit; and fixed costs total $1500. how many units must be sold to break even?

100

Assume that a company's magnitude of operating leverage is 8. A 20% increase in revenue will lead to what percentage increase in net income?

160%

If the sales price of a product us $10 per unit; the variable cost is $5 per unit; and fixed costs total $1000, how many units must be sold to earn a profit of $5?

201

If a company has budgeted sales of $10,000 and break-even sales of $5,000, what is margin of safety?

50%

Assume a company has a revenue of $900, variable costs of $600, net income of $50, and fixed costs of $250. What is the magnitude of operating leverage?

6

Assume a company sold 50 units in Year 2 and 80 units in Year 2. What percentage change in units sold from Year 1 to Year 2?

60%

A company that has a margin of safety of 60% can incur a

60% decrease in budgeted sales and still break even

Which of these represents the amount available to cover fixed expenses and, thereafter, to provide company profits?

Contribution margin

Which of the following occur when activity level increases?

Fixed cost per unit decreases AND total fixed cost remains constant

What happens if the activity level changes?

Total fixed cost remains constant AND fixed cost per unit changes

What happens when activity level decreases?

Variable cost per unit remains constant AND total variable cost decreases

Changing the activity base:

can change a variable cost to a fixed cost AND can change a fixed cost to a variable cost

The break-even point is the point where:

contribution margin equals total fixed costs AND profit equals zero

If change in volume does not affect the total cost, the cost is defined as a

fixed cost

Total variable cost__________ proportionately when activity increases.

increases

A cost that has both a fixed and variable component is called a(n) _________ cost.

mixed

The ability of fixed costs to magnify changes in sales to create disproportionate changes in profitability is called ____________ leverage.

operating

Variable costs do not offer ___________ leverage

operating

The range of activity over which a cost is defined as either fixed or variable is called the _____ range.

relevant

The possibility that sacrifices may exceed benefits is called

risk

The amount at which company's sales can fall short and still break even is called the margin of _____________.

safety

Which of the following occur when activity level decreases?

total fixed cost remains constant AND fixed cost per unit increases.

What happens when activity level increases?

total variable cost increases AND variable cost per unit remains constant.

If a change in volume affects the total cost, the cost is defined as a(n) __________ cost

variable

To reduce risk, a company should reduce operating leverage by utilizing a(n) ____________ cost.

variable