chp 3-Managerial Accounting

17. Sales total $200,000 when variable costs total $150,000 and fixed costs total $30,000. The breakeven point in sales dollars is:

$120,000 Sales: 200,000 - Variable Costs: 150,000 Contribution Margin: 50,000 - Fixed Costs 30,000 Operating Income 20,000 CM% = 50,000 ÷ 200,000 = .25 B/E$ = 30,000 ÷ .25 = 120,000

Sherry's Customer Jewlery sells a single product. 700 units were sold resulting in $7,000 of sales revenue, $2,800 of variable costs, and $1,200 of fixed costs. 4. If sales increase by $25,000, operating income will increase by...

$15,000 Contribution Margin of 4,200 ÷ Sales of 7,000 = .60 $25,000 x .60 = $15,000

Holly's Ham Inc. sells ham during the major holiday seasons. During the current year 11,000 hams were sold resulting in $220,000 of sales revenue, $55,000 of variable costs, and $24,000 of fixed costs. 6. Contribution margin per ham is

$15.00

Holly's Ham Inc. sells ham during the major holiday seasons. During the current year 11,000 hams were sold resulting in $220,000 of sales revenue, $55,000 of variable costs, and $24,000 of fixed costs. 7. If sales increase by $40,000, operating income will increase by

$30,000

27. Fixed costs equal $12,000, unit contribution margin equals $20, and the number of units sold equal 1,600. Operating income is...

$32,000

21. Kinetic Company sells it only product for $9 per unit, variable production costs are $3 per unit, and selling and administrative costs are $1.50 per unit. Fixed costs for 10,000 units are $5,000. The contribution margin is...

$4.50 per unit

Kaiser's Kraft Korner sells a single product. 7,000 units were sold resulting in $70,000 of sales revenue, $28,000 of variable costs, and $12,000 of fixed costs. 24. Contribution margin per unit is

$6.00 Sales: 70,000 - VC: 28,000 CM: 42,000 ÷ 7,000 = $6

Sherry's Customer Jewlery sells a single product. 700 units were sold resulting in $7,000 of sales revenue, $2,800 of variable costs, and $1,200 of fixed costs. 3. Contribution margin per unit is...

$6.00 Selling Price: 7,000 - Variable Costs: 2,800 Contribution Margin: 4,200 ÷ 700 Units = $6

June: Selling Price per chair: $150 Variable Cost per chair: $80 Total Fixed Costs: $100,000 10. The company's breakeven point in units (rounded to the nearest whole number) is...

1,429 Chairs B/E = 100,000 ÷ 70 = 1,429

June: Selling Price per chair: $150 Variable Cost per chair: $80 Total Fixed Costs: $100,000 11. If the company wants to achieve a target income of $25,000 for June, they should sell (rounded to the nearest whole units):

1,786 Chairs Target Price = $125,000 ÷ $70 = 1,786

Kaiser's Kraft Korner sells a single product. 7,000 units were sold resulting in $70,000 of sales revenue, $28,000 of variable costs, and $12,000 of fixed costs. 26. The number of units that must be sold to achieve $60,000 of operating income is...

12,000 units Target Price = $12,000 + $60,000 ÷ $6 = 12,000 units

Kaiser's Kraft Korner sells a single product. 7,000 units were sold resulting in $70,000 of sales revenue, $28,000 of variable costs, and $12,000 of fixed costs. 25. Breakeven point in units is...

2,000 units B/E in units = 12,000 ÷ $6 = 2,000 units

Barnett Corporation: Product X: Selling Price: $20 Variable Costs $10 Product Y: Selling Price: $15 Variable Costs: $5 Total Fixed Costs: $50,000 18. What is the breakeven point assuming the sales mix consists of three units of Product X and two units of Product Y?

2,000 units of Y & 3,000 units of X

8. San från has the following data: Selling Price: $40 Variable Manufacturing Cost: $22 Fixed Manufacturing Cost: $150,000 per month Variable Selling & Administrative Costs: $6 Fixed Selling & Administrative Costs: $120,000 per month How many units must San Fran produce and sell in order to breakeven?

22,500 units Selling Price: 40 Variable Costs: 28 Contribution Margin: 12 Breakeven in units = 270,000 ÷ 12 = 22,500

June: Selling Price per chair: $150 Variable Cost per chair: $80 Total Fixed Costs: $100,000 9. The company's contribution margin ratio (rounded to the nearest whole percentage) is...

47% Selling Price per chair: $150 Variable Cost per chair: $80 Contribution Margin: 70 Contribution Margin % = 70 ÷ 150 = .47

22. Sarah Company sells a single product. 8,000 units were sold resulting in $80,000 of sales revenue, $20,000 of variable costs and $10,000 of fixed costs. The contribution margin ratio is...

75.0% 60,000 ÷ 80,000 = .75

30. Which of the following would decrease unit contribution margin the most? A. A 15% decrease in selling price B. A 13% increase in variable costs C. A 13% decrease in variable costs D. A 15% increase in fixed costs

A. A 15% decrease in selling price

20. Which of the following is true about assumptions underlying basic CVP analysis? A. Only selling price is known and constant B. only selling price and variable cost per unit are known and constant C. Only selling price, variable cost per unit, and total fixed costs are known and constant D. Selling price, variable cost per unit, fixed cost per unit, and total fixed costs are known and constant

C. Only selling price, variable cost per unit, and total fixed costs are known and constant

19. Cost-volume-profit analysis assumes all of the following EXCEPT: A. All costs are variable or fixed B. Units manufactured equal units sold C. Total variable costs remain the same over the relevant range D. Total fixed costs remain the same over the relevant range

C. Total variable costs remain the same over the relevant range

The contribution margin come statement...

Can be used to predict future profits at different levels of activity

14. If variable cost per unit increases

Contribution margin decreases and Break-even point increases

23. The selling price per unit less the variable cost per unit is the...

Contribution margin per unit

5. Cost volume profit (CVP) analysis is a key factor in many decisions, including choice of product lines, pricing of products, marketing strategy, and use of productive facilities. A calculation used in CVP analysis is breakeven point. Once the breakeven point has been reached, operating income will increase by the...

Contribution margin per unit for each additional unit sold

29. Which of the following statements about determining the breakeven point is FALSE? A. Operating income is equal to zero. B. Contribution margin - Fixed Costs is equal to zero. C. Revenues equal the total of fixed costs plus variable costs. D. Breakeven revenues equal fixed costs divided by the variable cost per unit.

D. Breakeven revenues equal fixed costs divided by the variable cost per unit.

28. The margin of safety is a key concept of CVP analysis. The margin of safety is the...

Difference between budgeted sales and breakeven sales

16. Breakeven formula is

Fixed Costs ÷ Contribution Margin per unit

13. Selling and administrative costs are generally treated as...

Period Costs

15. The breakeven point is the activity level where

Revenues equal the sum of variable and fixed costs

Contribution margin equals...

Revenues minus Variable Costs

12. The margin of safety is...

The amount by which sales can be decreased before losses occur