Managerial Accounting, 4e (Whitecotton) Chapter 6 testbank

Fern, Inc. has fixed costs of $400,000 and a contribution margin ratio of 30%. How much sales revenue must be earned for a profit of $80,000?

$1,600,000

Jerome Corp. has fixed costs of $500,000 and a contribution margin ratio of 40%. Currently, sales are $3,000,000. What is Jerome's margin of safety?

$1,750,000

Skyline Corp. has a selling price of $25 per unit, variable costs of $20 per unit, and fixed costs of $25,000. What sales revenue is needed to break-even?

$125,000

Keith Corp. has sales of $200,000, a contribution margin ratio of 35%, and a profit of $40,000. If 10,000 units were sold, what is the variable cost per unit?

$13.00

Payton Corp. has sales of $200,000, a contribution margin ratio of 35%, and a target profit of $40,000. If 10,000 units were sold, what are total variable costs?

$130,000

Fountain Corp. has a selling price of $15 per unit and variable costs of $10 per unit. When 14,000 units are sold, profits equaled $45,000. What is the margin of safety?

$135,000

Rollag Corp. has a selling price of $30 and variable costs of $20 per unit. When 14,000 units are sold, profits equaled $45,000. What is the margin of safety?

$135,000

Last month Peggy Company had a $30,000 profit on sales of $250,000. Fixed costs are $60,000 a month. What sales revenue is needed for Peggy to break even?

$166,667

Leather Company sold 20,000 units, had variable costs of $12 per unit, fixed costs of $100,000, and profits of $60,000. What is the selling price per unit?

$20

Last month Carlos Company had a $60,000 profit on sales of $300,000. Fixed costs are $120,000 a month. What sales revenue is needed for Carlos to break even?

$200,000

Paint Corp. has sales of $600,000, a contribution margin ratio of 30%, and a profit of $40,000. If 20,000 units were sold, what is the variable cost per unit?

$21.00

Bugle Corp. has sales of $400,000, a variable cost ratio of 40%, and a profit of $40,000. If 10,000 units were sold, what is the contribution margin per unit?

$24.00

Dragon, Inc. has actual sales of $400,000 and a margin of safety of $150,000. What is Dragon's break-even point in sales?

$250,000

Dexter Corp. has fixed costs of $500,000 and a contribution margin ratio of 25%. Currently, margin of safety is $1,000,000. What are Dexter's current sales?

$3,000,000

Louise Corp. has a contribution margin ratio of 35%, fixed costs of $60,000, and a profit of $45,000. What are total sales?

$300,000

Quail, Inc., has a contribution margin of 40% and fixed costs of $130,000. What is the break- even point in sales dollars?

$325,000

Idaho Corp. has fixed costs of $20,000 and a contribution margin ratio of 50%. Currently, sales are $75,000. What is Idaho's margin of safety?

$35,000

Harvest Corp. has a contribution margin ratio of 30%, fixed costs of $45,000, and a profit of $60,000. What are total sales?

$350,000

Last month Dexter Company had a $15,000 loss on sales of $150,000. Fixed costs are $60,000 a month. By how much do sales have to increase for Dexter to break even?

$50,000

Belle Corp. has a selling price of $50 per unit, variable costs of $40 per unit, and fixed costs of $100,000. What sales revenue is needed to break-even?

$500,000

Last month Angus Company had a $30,000 loss on sales of $250,000. Fixed costs are $60,000 a month. What sales revenue is needed for Angus to break even?

$500,000

Munoz Inc. has a contribution margin ratio of 30% and fixed costs of $90,000. What sales revenue is needed to generate a $60,000 profit?

$500,000

Ironwood Inc. has a variable cost ratio of 60% and fixed costs of $90,000. What sales revenue is needed to generate a $120,000 profit?

$525,000

Pecan, Inc., has a contribution margin of 50% and fixed costs of $220,000. What sales revenue is needed to attain a $60,000 profit?

$560,000

Last month Stagecoach Company had a $60,000 loss on sales of $300,000. Fixed costs are $120,000 a month. What sales revenue is needed for Stagecoach to break even?

$600,000

Allen, Inc., has a contribution margin of 40% and fixed costs of $250,000. What is the break- even point in sales dollars?

$625,000

Last month Lyle Company had a $60,000 profit on sales of $300,000. Fixed costs are $120,000 a month. How much do sales have to increase for Lyle to earn a $100,000 profit?

$66,667

Martol, Inc. has fixed costs of $200,000 and a contribution margin ratio of 40%. How much sales revenue must be earned for a profit of $80,000?

$700,000

Fontaine Corp. has a selling price of $15 and variable costs of $10 per unit. When 10,000 units are sold, profits equaled $25,000. What is the margin of safety?

$75,000

Indigo Corp. has a selling price of $45 and variable costs of $30 per unit. When 10,000 units are sold, profits equaled $25,000. What is the margin of safety?

$75,000

Last month Empire Company had a $30,000 profit on sales of $250,000. Fixed costs are $60,000 a month. By how much would sales be able to decrease for Empire to still break even?

$83,333

Irwin Corp. has fixed costs of $20,000 and a contribution margin ratio of 40%. Currently, margin of safety is $35,000. What are Irwin's current sales?

$85,000

Elk Corp. has sales of $300,000, a contribution margin ratio of 40%, and a target profit of $30,000. If 20,000 units were sold, what is the variable cost per unit?

$9.00

The formula for target sales is:

(Total fixed costs + Target profit)/Contribution margin ratio

The formula for target units is:

(Total fixed costs + Target profit)/Unit contribution margin

The profit equation is:

(Unit price × Q) - (Unit variable costs × Q) - Total fixed costs = Profit

Knoll, Inc. currently sells 15,000 units a month for $50 each, has variable costs of $20 per unit, and fixed costs of $300,000. Knoll is considering increasing the price of its units to $60 per unit. If the price is changed, how many units will Knoll need to sell for profit to remain the same as before the price change?

11,250

Nancy Company has sales of $100,000, variable costs of $5 per unit, fixed costs of $25,000, and a profit of $15,000. How many units were sold?

12,000

Plymouth Corp. sells units for $100 each. Variable costs are $75 per unit, and fixed costs are $200,000. If Plymouth leases a new machine, fixed costs will increase by $60,000 a year, but production will be more efficient, saving $5 per unit. At what level of production will Plymouth be indifferent between leasing and not leasing the new machine?

12,000

Maggie Corp. has a selling price of $20 per unit, variable costs of $10 per unit, and fixed costs of $140,000. How many units must be sold to break even?

14,000

Merlot, Inc. has fixed costs of $200,000, sales price of $50, and variable cost of $30 per unit. How many units must be sold to earn profit of $80,000?

14,000

At a level of 20,000 units sold, Gail Corp. has sales of $400,000, a contribution margin ratio of 40%, and a profit of $40,000. What is the break-even point in units?

15,000

At a sales level of 20,000 units, Pony Corp. has sales of $400,000, a variable cost ratio of 60%, and a profit of $40,000. What is the break-even point in units?

15,000

Vesper Company has sales of $200,000, variable costs of $8 per unit, fixed costs of $50,000, and a profit of $30,000. How many units were sold?

15,000

Chelsea Company has sales of $400,000, variable costs of $10 per unit, fixed costs of $100,000, and a target profit of $60,000. How many units were sold?

24,000

Megan, Inc. has fixed costs of $400,000, sales price of $40, and variable cost of $30 per unit. How many units must be sold to earn profit of $80,000?

48,000

Jasper Corp. has a selling price of $30, and variable costs of $20 per unit. When 12,000 units are sold, profits equaled $70,000. How many units must be sold to break-even?

5,000

Virgil Corp. has a selling price of $30 per unit, and variable costs of $20 per unit. When 12,000 units are sold, profits equaled $55,000. How many units must be sold to break-even?

6,500

Mustang Corp. has a selling price of $15, variable costs of $10 per unit, and fixed costs of $35,000. How many units must be sold to break-even?

7,000

Thunder Corp. has a selling price of $25 per unit, variable costs of $20 per unit, and fixed costs of $35,000. How many units must be sold to break even?

7,000

Dancer Corp. has a selling price of $20 per unit, and variable costs of $10 per unit. When 12,000 units are sold, profits equaled $35,000. How many units must be sold to break-even?

8,500

Mira Corp. has a selling price of $50 per unit, variable costs of $40 per unit, and fixed costs of $90,000. How many units must be sold to break-even?

9,000

All else being equal, what happens to the unit contribution margin and the contribution margin ratio if the sales price per unit increases?

Both unit contribution margin and contribution margin ratio increase

Which of the following statements is not correct about cost-volume-profit analysis?

CVP analysis works best when all variables are changed concurrently.

Which of the following is not a key assumption of cost-volume-profit?

Costs must be fixed.

Which of the following statements is not correct about the methods managers use to model the relationship between revenues, costs, profit, and volume?

Each method yields a different final answer to be used in analysis.

A company is debating whether to change its cost structure so that variable costs increase from $4 per unit to $5 per unit but fixed costs decrease from $400,000 to $300,000. If it were to implement the change at its current production level of 100,000 , profit would not change. What would happen to the company's profit if the change were implemented and production increased?

It will decrease.

A company is debating whether to change its cost structure so that fixed costs increase from $300,000 to $400,000, but variable costs decrease from $5 per unit to $4 per unit. If it were to implement the change at its current production level of 100,000 units, profit would not change. What would happen to the company's profit if the change were implemented and production increased to 125,000 units?

It will increase.

Cost-volume-profit analysis assumes that total costs behave in a ________ fashion.

Linear

What component of the profit equation should be set equal to zero to find the breakeven point?

Profit

Which of the following statements is correct about the break-even point?

The break-even point quantifies the number of units that must be sold to cover total costs with zero profit.

The formula for break-even point in terms of sales dollars is:

Total fixed costs/Contribution margin ratio

The formula for break-even point in terms of units is:

Total fixed costs/Unit contribution margin

Knoll, Inc. currently sells 15,000 units a month for $50 each, has variable costs of $20 per unit, and fixed costs of $300,000. Knoll is considering increasing the price of its units to $60 per unit. This will not affect costs, but demand is expected to drop 20%. Should Knoll increase the price of its product?

Yes; profit will increase $30,000

The margin of safety is the difference between:

actual sales and break-even sales.

Cost structure refers to:

how a company uses variable versus fixed costs to perform operations.

The margin of safety tells managers:

how much sales could drop before the firm no longer earns profits.

If production volume does not equal sales volume:

the conclusions we draw from a CVP analysis will not be as sound as they would be if we assumed production equaled sales.

The break-even point is:

the point where zero profit is earned.

Profit is indicated on a cost-volume-profit graph by:

the vertical difference between the revenue line and the cost line.

At the break-even point, the margin of safety will be:

zero.

The break-even point is the point at which profit equals:

zero.