ACCT 292 Chapter 6: Concept Videos

Which of the following methods do managers use to estimate the fixed and variable components of mixed costs by analyzing past records of cost and activity data?

least-squares regression

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

operating leverage

Contribution margin equals ________.

sales minus variable cost

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

Taylor Company has current sales of 1,000 units, at a selling price of $190 per unit, variable costs per unit of $76, and fixed expenses of $96,000. The company believes sales will increase by 300 units, if the company introduces sales commissions as an incentive for the sales staff. The change will decrease the selling price to $175 per unit, increase variable cost per unit to $100, and decrease fixed expenses by $20,000. What is the net operating income after the changes?

$21,500

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%

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%

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%

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

Unit volume

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

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

total revenue equals total costs

Using the high-low method, what is the variable cost?

$0.30

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

$1 million

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

4,000 units

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

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

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

Which of the scattergraph plots above suggests a mixed cost relationship between direct labor-hours and manufacturing overhead?

(b)

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

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

Walton Corporation is currently selling 104 units of its product. The company is deciding the price that it should charge for a bulk order of 40 units. The variable cost per unit is $200. This order will not involve any additional fixed costs and the company's current sales will not be affected. The company targets a profit of $4,000 on the bulk order. What selling price per unit should the company quote for the bulk order?

300

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

Break-even point, loss area, and profit area

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 profit graph is based on the following linear equation:

Profit = Unit CM x Q - Fixed Expenses.