Chapter 7
Crazy Coasters Amusement Park sells admission tickets for $ 65.00 per person for one visit. Variable costs are $ 35.00 per visitor and fixed costs are $ 4 comma 000 comma 000 per month. The company's relevant range extends to 240 comma 000 visitors per month. What is Crazy Coaster's projected operating income if 186 comma 000 visitors come to the park during the month?
$1,580,000
The Muffin House produces and sells a variety of muffins. The selling price per dozen is $ 16, variable costs are $ 13 per dozen, and total fixed costs are $ 2 comma 700. What are breakeven sales in dollars?
$14,400
If the selling price per unit is $ 26.00, the variable expense per unit is $ 18.25, and the breakeven sales in dollars is $ 52 comma 000, what are total fixed expenses?
$15,500
Who Done It Mystery Theater sells tickets for dinner and a show for $ 70 each. The cost of providing dinner is $ 30 per ticket and the fixed cost of operating the theater is $ 110 comma 000 per month. The company can accommodate 12 comma 000 patrons each month. What is the contribution margin per patron?
$40
Bottles R Us Bottling Company provides the following information about its single product. Targeted operating income $652,060 Selling price per unit $ 7.40 Variable cost per unit $ 4.20 Total fixed cost $ 182, 080 How many units must be sold to earn the targeted operating income? (Round the final answer up to the nearest unit.)
260,669
Beasley Company currently sells its products for $30 per unit. Management is contemplating a 10% increase in the selling price for the next year. Variable costs are currently 40% of sales revenue and are not expected to change in dollar amount on a per unit basis next year (the company will pay the same amount for variable costs next year). Fixed expenses are $68,250 per year. What is the breakeven point in units at the anticipated selling price per unit next year?
3,250 Units
Electric Jet Skis operates a jet ski rental business. Assume the jet skis rent for $ 45 per 6 hours. The variable costs are $ 30 per 6 hours rental, and its fixed costs are $ 85 comma 000 each month. What is the contribution margin ratio?
33%
Corny and Sweet grows and sells sweet corn at its roadside produce stand. The selling price per dozen is $ 3.50, variable costs are $ 1.00 per dozen, and total fixed costs are $ 1 comma 500. How many dozens of ears of corn must Corny and Sweet sell to breakeven? (Round your final answer to the nearest unit amount.)
600
Alexis Incorporated sells two products, larges and smalls. Larges sell for $ 85 per unit with variable costs of $ 56 per unit. Smalls sell for $ 34 per unit with variable costs of $ 14 per unit. Total fixed costs for the company are $ 17 comma 000. Alexis Incorporated typically sells five larges for every two smalls. What is the breakeven point in total units? (Round the final answer up to the nearest unit.)
644 units
If the fixed costs increase while the sales price per unit and variable costs per unit remain constant, which of the following statements is true? A. The contribution margin stays the same and the breakeven point increases. B. The contribution margin decreases and the breakeven point increases. C. The contribution margin stays the same and the breakeven point decreases. D. The contribution margin increases and the breakeven point decreases.
A
Richland Enterprises has budgeted the following amounts for its next fiscal year: Total fixed expenses $51,000 Selling price per unit $50 Variable expenses per unit $ 40 If Richland Enterprises can reduce fixed expenses by $ 4 comma 950, how will breakeven sales in units be affected? A. Decrease by 495 units B. Decrease by 55 units C. Increase by 55 units D. Increase by 495 units
A
Perry Corporation produces and sells a single product. Data for that product are: Sales price per unit $ 255 Variable cost per unit $ 130 Fixed expenses for the month $ 650 comma 000 Currently selling 9 comma 000 units Upper management is considering using a biodegradable packaging which costs $ 6 more per unit but it produces less waste in the long run. Management plans to increase advertising by $ 14 comma 000 in the first month to advertise this new feature to their packaging. They believe that environmentally friendly people will switch to their product resulting in an increase in sales of 2 comma 000 units per month. What should be the overall effect on the company's monthly operating income in the first month if this change is implemented? A. Increase of $ 198,000 B. Increase of $ 170,000 C. Decrease of $ 170,000 D. Decrease of $ 198,000
B
Managers can quickly forecast the total contribution margin by multiplying the A. projected sales units by the contribution margin ratio. B. projected sales revenue by the unit contribution margin. C. projected sales revenue by the contribution margin ratio. D. projected sales units by the variable cost ratio.
C
All of the following would be considered a company with high operating leverage, except A. theme park. B. hotel. C. golf course. D. retailer.
D
Sales above the breakeven point indicate a ________, whereas sales below the breakeven point indicate a ________. A. loss; loss B. profit; profit C. loss; profit D. profit; loss
D
The higher the operating leverage factor, the A. greater the impact of volume on operating income. B. less the impact of volume on operating income. C. more likely operating income is to stay constant. D. none of the above.
D
True or False All else being equal, a company earns more income by selling low-contribution margin products than by selling an equal number of high-contribution margin products
False
True or False Companies with high operating leverages generally have lower fixed costs than variable costs.
False
True or False The contribution margin per unit is how much profit each unit contributes after fixed costs are considered.
False
True or False CVP analysis helps managers prepare for and respond to economic changes, such as increasing costs and pressure to drop sales price. True
True
True or False The margin of safety is the excess of expected sales over breakeven sales.
True
