Chapter 6 - Managerial Accounting

Lakukan tugas rumah & ujian kamu dengan baik sekarang menggunakan Quizwiz!

When preparing a CVP graph, the slope of the total cost line represents ______.

variable cost per unit

CVP analysis can help answer the question of _____.

how net income can be increased

The weighted average unit contribution margin is the average unit contribution margin of multiple products weighted according to ______.

percentage of units sold

According to the assumptions of CVP, ______ will not change as the volume of a product increases or decreases.

price

A company sells two products. Product A sells for $10.00 per unit and Product B sells for $8.00 per unit. Variable costs are $3.00 for Product A and $2.50 for Product B. If the sales mix is 70% Product A and 30% Product B, the weighted average contribution margin is ______.

$6.55 ; Reason: $7.00 × 70% + $5.50 × 30% = $6.55

Seth's Speakers had actual sales of $1,630,000. If break-even sales equals $935,000, Seth's margin of safety in dollars is ______.

$695,000 ; Reason: $1,630,000 - $935,000 = $695,000

The amount that each unit sold contributes to fixed costs and profit is ______.

unit contribution margin

Sweet Dreams sells 15,000 pillows per year for $25 per unit. Variable cost per unit is $14. Sweet Dreams wants to improve customer satisfaction by using higher quality direct materials which will increase the variable cost per unit to $19. Fixed costs per year total $90,000. If sales increase by 5,000 units per year, what price will Sweet Dreams have to charge to earn the same profit it is earning now ($75,000 per year)?

$27.25 ; Reason: Costs + Target Profit: ($19 × 20,000 + $90,000 + $75,000) = $545,000 ÷ 20,000 units = $27.25

Jacki's Jewels sells 10,000 necklace & earring sets per year. Fixed costs are $80,000 and variable costs are $20 per set. Jacki is planning to increase the quality of the stones, which will increase variable costs by $8 per set and increase sales by 25%. If Jacki increases the quality of the stones, what price will she need to charge to attain her target profit of $60,000 per year?

$39.20 ; Reason: Costs + Target Profit = ($28 x 12,500 + $80,000 + $60,000) = $490,000 ÷ 12,500 sales in units or $39.20 per set.

The break-even point can be affected by ______

- product mix - sales mix - total fixed costs

In the profit equation, total ______ is a function of the number of units sold (Q).

- sales revenue - variable costs

Contribution margin equals sales minus ______.

- variable manufacturing costs - variable selling and administrative costs

CVP analysis can be useful in deciding ______.

- which services to offer - what price to charge for goods or services - what cost structure to implement - which products to offer - what marketing strategy to use

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?

2,800; Reason: $98,000 ÷ ($50 - $15) = 2,800

Given sales of $110,000, a contribution margin of $75,000 and net operating income of $30,000, operating leverage is ______.

2.5 ; Reason: $75,000 ÷ $30,000 = 2.5

Desks by Daisy sells a student desk for $100 per unit. The variable cost per desk is $40 and Daisy's fixed costs of producing the desks equals $15,000 per month. Daisy needs to sell ______ desks per month in order to break-even.

250

Given net operating income of $50,000, contribution margin of $150,000 and sales of $300,000, the degree of operating leverage of _______.

3

A company sells 15,000 units of product per month. The sales price per unit is $5.00, variable costs are $2.80 per unit and and total fixed costs equal $3,000. The contribution margin ratio is ______.

44% ; Reason: ($5.00 - $2.80) ÷ $5.00 = 44%

Given sales of 10,000 units per month, sales price per unit of $4.00, variable costs of $1.80 per unit and and total fixed costs of $5,000, the contribution margin ratio is _______%.

55

Given fixed costs of $30,000, variable costs of $2.00 per unit, and a contribution margin of $5.00 unit, ______ units have to be sold in order to break even.

6,000

A company sells two products. Product A sales total $28,000 and Product B sales total $12,000. Total contribution margin is $18,000 for Product A and $9,000 for Product B. The weighted average contribution margin ratio is ______%.

67.5

Tess's Tidbits sells three different snack packs. The weighted average contribution margin is $15.00 and total fixed costs are $20,000 per month. Of her total sales, 40% are for the deluxe snack pack, 35% are standard snack packs and 25% are mini snack packs. In order to earn the target profit of $10,000 per month, Tess needs to sell ______ deluxe snack packs each month.

800

Which of the following is NOT a method used for basic CVP analysis?

Break-even analysis

The weighted-average _____ _____ _____ is based on the relative percentage of total sales revenue in dollars, not units.

Contribution margin ratio

Degree of operating leverage equals ______.

Contribution margin ÷ Net operating income

The extent to which a company uses fixed costs (as opposed to variable costs) in its operations is called ______ ______.

Cost structure

When a company increases the selling price of a product with no change in variable cost per unit or total fixed costs, the break-even point for that product will ______.

Decrease

The break-even point is reached when total revenue is ______ total costs.

Equal to

True or false: CVP analysis is only used for break-even and target profit analysis.

False

True or false: Cost structure refers to how a company uses product and period costs in an organization.

False

True or false: The margin of safety is the excess of break-even sales dollars over budgeted (or actual) sales dollars.

False

True or false: The terms operating leverage and financial leverage refer to the same concept.

False

How much contribution margin is generated per dollar of sales revenue is the contribution margin ________.

Ratio

When multiple products are sold, the break-even point depends on the _____ mix.

Sales

When constructing a CVP graph, the ______ of the line represents variable cost per unit.

Slope

An extension of break-even analysis that allows managers to determine units or sales needed to achieve an earning's goal is called _____ ______ analysis.

Target profit

The equation for the profit equation method is ______.

Total Sales Revenue - Total Variable Costs - Total Fixed Costs = Profit

Methods that can be used to model the relationship between revenues, costs, profit and volume include the ______ contribution margin method and the contribution ______ ____ method.

Unit ; margin ratio

The break-even point is the level of sales at which the profit equals ______.

Zero

The goal of break-even analysis is to find the level of sales where profit is equal to ______.

Zero

Contribution margin equals sales minus ______.

all variable costs

The difference between break-even analysis and target profit analysis is the ______.

amount that profit is set to

If a company raises the price of a product with no change in costs, the unit contribution margin and contribution margin ratio will ______.

both increase

Solving for the sales level needed to achieve a profit of zero is ______ analysis.

break-even

The contribution margin stated as a percentage of sales dollars is the ______.

contribution margin ratio

Decisions about whether to use fixed or variable costs to run a business impact a company's ______.

operating leverage

A company sells a product for $80 per unit and has a contribution margin ratio of 45%. Fixed costs total $180,000. Sales dollar to break even equals ___.

$400,000 ; Reason: $180,000 ÷ 45% = $400,000

Given budgeted sales of $982,000, break-even sales of $932,200, and fixed expenses of $429,000, the budgeted margin of safety in dollars is ______.

$49,800 ; Reason: $982,000 - $932,200 = $49,800.

Which of the following are assumptions of cost volume profit analysis?

- In multi-product companies, the sales mix is constant. - All costs can be classified as either fixed or variable. - Production volume is equal to sales volume.

CVP ______.

- allows managers to see how changing one variable can impact another - can be used for "what-if" analysis - can be used to make many different decisions

Multi-product target profit analysis ______.

- is calculated the same way as single product analysis - depends upon the sales mix

The weighted average unit contribution margin ______.

- is used instead of the single product contribution margin in multi-product break-even analysis - is based on the relative percentage of each unit sold - assumes that the percentage of each product sold is constant

Given total fixed costs of $35,000 and a contribution margin ratio of 40%, $______ of revenue must be earned to break even.

87,500 ; $35,000/40%= $87,500

Larson's Ltd. sells its product for $12.00 per unit. The contribution margin per unit is $8.00 and fixed costs are $75,000. Larson has to sell to ______ units to break even.

9,375; Reason: $75,000 ÷ $8.00 = 9,375 units

The amount each unit sold contributes towards fixed costs and profit is the unit _____ ______.

Contribution margin

To calculate the degree of operating leverage, divide ______ ______ by net operating income.

Contribution margin

Decisions about the use of debt versus equity affects a company's ______ ______.

Financial leverage

The excess of the budgeted (or actual) sales dollars over break-even sales is called the ______ of ______.

Margin ; safety

Decisions about whether to use fixed or variable costs to run a business affects a company's ______ leverage.

Operating


Set pelajaran terkait

Wine Appreciation 1 - Winemaking

View Set

Salesforce Platform Developer II - Salesforce Fundamentals

View Set

Mastering Biology Chapter 17 & 18

View Set

anatomy and physiology 1: chapter 13

View Set

EXAM 1 - ATI (Fund.) (10) - Chapter 13 Questions [Home Safety]

View Set

PNU 133 Honan PrepU Health Promotion

View Set

L 8, Sec 1H: Production, Economic Resources and Resource Allocation

View Set

AP Psychology: Unit 4 Review Part 2

View Set