Chapter 6
Select all that apply Contribution margin equals sales minus ______.
variable manufacturing costs variable selling and administrative costs
Select all that apply CVP analysis can be useful in deciding ______.
what marketing strategy to use which products to offer what cost structure to implement what price to charge for goods or services which services to offer
The goal of break-even analysis is to find the level of sales where profit is equal to ______.
zero
The contribution margin stated as a percentage of sales dollars is the ______.
contribution margin ratio
According to the assumptions of CVP, ______ will not change as the volume of a product increases or decreases.
price
Steel, Inc. has a margin of safety in dollars of $559,740. If actual sales were $2,946,000, Steel's margin of safety percentage is %. (Enter your answer as a whole number.)
Blank 1: 19
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
Select all that apply Which of the following are assumptions of cost volume profit analysis?
-All costs can be classified as either fixed or variable. -In multi-product companies, the sales mix is constant. -Production volume is equal to sales volume.
Jump-It Corporation has a margin of safety of $272,000. The company sold 100,000 units this year. If the company sells each unit for $17, the margin of safety percentage is ______.
16% Reason: $272,000 ÷ (100,000 × $17) = 16%.
The extent to which a company uses fixed costs (as opposed to variable costs) in its operations is called ___ ___. (Enter only one word per blank.)
Blank 1: cost Blank 2: structure
When constructing a CVP graph, the place where the total ___ cost line intercepts the y-axis represents total costs. (Enter only one word per blank.)
Blank 1: fixed
The excess of the budgeted (or actual) sales dollars over break-even sales is called the ___ of ____. (Enter only one word per blank).
Blank 1: margin Blank 2: safety
Decisions about whether to use fixed or variable costs to run a business affects a company's ___ leverage. (Enter only one word per blank.)
Blank 1: operating
How much contribution margin is generated per dollar of sales revenue is the contribution margin ___ . (Enter only one word per blank.)
Blank 1: ratio
When constructing a CVP graph, the of the ___ line represents variable cost per unit. (Enter only one word per blank)
Blank 1: slope
Methods that can be used to model the relationship between revenues, costs, profit and volume include the ___ contribution margin method and the contribution ___ ___ method. (Enter only one word per blank.)
Blank 1: unit Blank 2: margin Blank 3: ratio
Which of the following is NOT a method used for basic CVP analysis?
Break-even analysis
Which tool can be used to easily calculate the change in profit resulting from a change in sales price, sales volume, variable costs, or fixed costs?
CVP analysis
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
Decisions about whether to use fixed or variable costs to run a business impact a company's ______.
operating leverage
Contribution margin equals sales minus ______.
all variable costs
Solving for the sales level needed to achieve a profit of zero is ______ analysis.
break-even
Margin of safety in dollars is ______.
budgeted (or actual) sales minus break-even sales
Select all that apply CVP ______.
can be used to make many different decisions can be used for "what-if" analysis allows managers to see how changing one variable can impact another
When constructing a CVP graph, the vertical axis represents ______.
dollars
