CH 5

Given sales of $100,000 a contribution margin of $40,000, and fixed expenses of $50,000, the result is a Blank______.

$10,000 net operating loss

Ceramic Creations sells pots for $25. The variable cost per pot is $12 and 15,000 pots must be sold to break-even. If Ceramic Creations sells 25,000 pots, net operating income will be:

$130,000= (25000-15000) x (25-12)

Given a sales price of $100, variable costs of $70 and a break-even point of 500 units, net operating profit for sale of 501 units will be $____

$30

Company A's product sells for $90 and has a variable cost of $35 per unit. Fixed costs total $550,000. If Company A sells 16,000 units, the contribution margin per unit is ______.

$55=1,440,000-560,000=880000/16000

Net operating income equals:

(unit sales - unit sales to break even) × unit contribution margin.

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

-Costs are linear and can be accurately divided into variable and fixed elements. -In multi product companies, the sales mix is constant

A company with a high ratio of fixed costs:

-is more likely to experience greater profits when sales are up than a company with mostly variable costs. -is more likely to experience a loss when sales are down than a company with mostly variable costs.

Daisy's Dolls sold 30,000 dolls this year. Each doll sold for $40 and had a variable cost of $19. Fixed expenses were $250,000. Net operating income for the year is Blank______.

380,000: Profit=(Sales-Variable Cost)-Fixed Cost

CVP is the acronym for

Cost-Volume-Profit

True or false: CVP analysis investigates company personnel policies, business values, and performance measures for a specific company

False

To simplify CVP calculations, it is assumed that Blank______ will remain constant.

Selling Price

Contribution margin:

becomes profit after fixed expenses are covered.

When a company sells one unit above the number required to break-even, the company's net operating income will ______.

change from zero to a net operating profit

According to the CVP analysis model and assuming all else remains the same, profits would be increased by a(n):

decrease in the unit variable cost.

CVP analysis focuses on how profits are affected by ______.

mix of products sold total fixed costs selling price unit variable cost sales volume

The contribution margin income statement allows users to easily judge the impact of a change in ______ on profit.

selling price cost volume

The break-even point is reached when the contribution margin is equal to:

total fixed expenses.

When preparing a CVP graph, the horizontal axis represents:

unit volume

The contribution margin equals sales minus all Blank______ expenses.

variable