ch 11 sb

The sales price of a product is $20 per unit; the variable cost is $5 per unit; and fixed costs total $1,500. A total of _______units must be sold to break even.

100

If the contribution margin per unit is $5, variable costs are $7.50 per unit and fixed costs total $5,000, a total of

1000

If the contribution margin per unit is $5, variable costs are $7.50 per unit and fixed costs total $5,000, a total of _______units must be sold to break even.

1000

If the contribution margin per unit is $100 and fixed costs total $1,000, how many units must be sold to earn a profit of $10,000?

110 Reason: ($1,000 + $10,000) ÷ $100 = 110 units

As activity level increases, fixed cost per unit ______

decreases

As activity level decreases, total fixed cost ______.

does not change

Fixed and variable costs always remain fixed or variable at all ranges of activity.

false

When the activity level changes, ______.

fixed cost per unit changes total fixed cost remains constant

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

relevant range

The activity base is used to determine ______.

whether a cost is defined as fixed or variable

At the breakeven point, profit equals

zero

Changing the activity base ______.

can change either fixed or variable cost behavior

The amount available after all variable expenses are deducted is ______.

contribution margin

The contribution margin represents the amount available to ______.

cover fixed expenses and, thereafter, to provide company profits

If the contribution margin per unit is $200 and fixed costs total $1,000, how many units must be sold to break even?

$1,000/$200=5 units

If the contribution margin per unit is $200 and fixed costs total $1,000, how many units must be sold to earn a profit of $1,000?

($1,000 + $1,000) ÷ $200 = 10 units

Assume a company sold 30 units in Year 1 and 120 units in Year 2. The percentage change in units sold from Year 1 to Year 2 is ______.

(120 - 30) ÷ 30 = 300%

Assume a company sold 50 units in Year 1 and 80 units in Year 2. The percentage change in units sold from Year 1 to Year 2 is ______.

(80 - 50) ÷ 50 = 60%

A company has a maintenance contract with a fixed fee of $1,200 per month plus $75 per hour for each maintenance hour used. In a month where 20 maintenance hours are used, the total maintenance cost is $

2,700

If the sales price of a product is $10 per unit; the variable cost is $5 per unit; and fixed costs total $1,000, the company will earn a profit of $5 if _____units are sold.

201

A item with a sales price of $15 per unit and variable cost of $11 per unit has a contribution margin of $____per unit.

4

Given contribution margin of $500, net income of $100, and fixed costs of $400, the magnitude of operating leverage is

5

Given an operating leverage of 4, a 15% increase in revenue will result in a ___________% increase in profitability.

60

A company that has a margin of safety of 40% can incur a 40% ______.

decrease in budgeted sales and still break even

The sales price of a product is $100 per unit; the variable cost is $20 per unit; and fixed costs total $800. How many units must be sold to break even?

N = $800 ÷ $80 or 10 units

If the sales price of a product is $10 per unit; the variable cost is $5 per unit; and fixed costs total $1,000, how many units must be sold to earn a profit of $2,000?

N=$3,000 ÷ $5 or 600 units

Given contribution margin of $1,300, net income of $100, and fixed costs of $1,200, the magnitude of operating leverage is ______.

Reason: $1,300 ÷ $100 = 13

A company pays their sales staff a salary of $6,000 a month plus a 5% commission on sales. If sales for the month equals $12,000, the total cost of the sales staff for the month is ______.

Reason: $6,000 + $12,000 × 5% = $6,600

If a company has budgeted sales of $10,000 and break-even sales of $4,000, the margin of safety is ______.

Reason: ($10,000 - $4,000) ÷ $10,000 = 60%

Assume that a company's magnitude of operating leverage is 2. A 10% increase in revenue will lead to a ______ increase in profitability.

Reason: 1% × 10 = 10%

The sales price of a product is $20.00 per unit; the variable cost is $7.50 per unit; and fixed costs total $10,000. How many units must be sold to break even?

Reason: ($20.00N - $7.50N) - $10,000 = $0 N = $10,000 ÷ $12.50 or 800 units

If a product has a unit contribution margin of $12, a sales price of $20 and total fixed costs of $1,000, its variable cost per unit must be $______.

Reason: 8 Contribution Margin per unit = Sales Price per unit - Variable cost per unit.

The margin of safety is the amount ______.

at which a company's sales can fall short and still break even

The point at which contribution margin equals total fixed cost is called the ______.

break-even

The amount at which a company's sales can fall short and still break even is called the ______.

margin of safety

A cost that has both a fixed and variable component is called a ______ cost.

mixed

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

mixed

The larger the margin of safety, the ______.

more likely the company will report a profit

Subtracting fixed costs from contribution margin equals ______.

net income