Managerial Accounting 5

The measure of how a percentage change in sales affects profits at any given level of sales is the:

Degree of operating leverage

When constructing a CVP graph, the vertical axis represents:

Dollars

The contribution margin equals sales minus all _________ expenses:

Variable

Variable expenses ÷ Sales is the calculation for the:

Variable expense ratio

Profit = (selling price per unit × quantity sold)- (___ expense per unit * quantity sold)- _________ expenses:

Variable, fixed

The term "cost structure" refers to the relative proportion of __________ and __________ costs in an organization:

Variable, fixed

CVP analysis allows companies to easily identify the change in profit due to changes in:

Volume, costs, and selling price

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

Zero

Contribution margin:

becomes profit after fixed expenses are covered.

Company A has a contribution margin ratio of 35%. For each dollar in sales, contribution margin will increase by:

$0.35

A company sold 20,000 units of its product for $20 each. Variable cost per unit is $11. Fixed expenses total $150,000. The company's contribution margin is ______:

$180,000

Spice sells paprika for $9.00 per bottle. Variable cost is $2.43 per bottle and Spice's annual fixed costs are $825,000. The variable expense ratio for paprika is:

$2.43/9 = 27%

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:

$380,000

A product has a selling price of $10 per unit, variable expenses of $6 per unit and total fixed costs of $35,000. If 10,000 units are sold, net operating income will be:

$5000

Vivian's Violins has sales of $326,000, contribution margin of $184,000 and fixed costs total $85,000. Vivian's Violins net operating income is:

$99,000

JVL Enterprises has set a target profit of $126,000. The company sells a single product for $50 per unit. Variable costs are $15 per unit and fixed costs total $98,000. How many units does JVL have to sell to BREAK-EVEN?:

2,800. $98,000/(50-15)

The Cutting Edge sells ice skates. Total sales are $845,000, total variable expenses are $245,050 and total fixed expenses are $302,000. The variable expense ratio is:

29%

Blissful Blankets' target profit is $520,000. Each blanket has a contribution margin of $21. Fixed costs are $320,000. The number of blankets that must be sold to:achieve the target profit is:

40,000, (520k + 320k)/21 = 40k

A company has a target profit of $204,000. The company's fixed costs are $305,000. The contribution margin per unit is $40. The BREAK-EVEN point in unit sales is:

7625, $305,000/4

A company's selling price is $90 per unit, variable cost per unit is $28 and total fixed expenses are $320,000. The number of unit sales needed to earn a target profit of $200,800 is :

8,400. (320,000 +200,800)/(90-28)

The calculation of contribution margin (CM) ratio is:

Contribution margin/ sales

The degree of operating leverage =:

Contribution margin/net operating income

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.

Cost structure refers to the relative portion of product and period costs in an organization:

False

True or false, Without knowing the future, it is best to have a cost structure with high variable costs.:

False

True or false: The margin of safety is the excess of break-even sales dollars over budgeted (or actual) sales dollars.:

False

True or false: Without knowing the future, it is best to have a cost structure with high variable costs:

False

Total contribution margin =

Fixed expenses + NOI

Contribution margin is first used to cover __________ expenses. Once the break-even point has been reached contribution margin becomes ________:

Fixed, profit

A measure of how sensitive net operating income is to a given percentage change in sales dollars is known as operating:

Leverage

The amount by which sales can drop before losses are incurred is the:

Margin of safety

Operating leverage is a measure of how sensitive Blank______ is to a given percentage change in sales dollars.:

Net operating income

At the break-even point ______:

Net operating income is zero, total revenue = total cost

Elle's Elephant Shop sells giant stuffed elephants for $55 each. Each elephant has variable costs of $10 and total fixed costs are $700. If Ellie sells 35 elephants this month, ______:

Profits = $875 Total Variable Costs= $350 Total Sales = $1925

The contribution margin as a percentage of sales is referred to as the contribution margin or CM

Ratio

The variable expense ratio is the ratio of variable expense to:

Sales

The relative proportions in which a company's products are sold is referred to as:

Sales mix

The term used for the relative proportion in which a company's products are sold is:

Sales mix

Which of the following items are found above the contribution margin on a contribution margin format income statement?:

Sales, Variable Expenses

Terry's Trees has reached its break-even point and has a contribution margin ratio of 70%. For each $1 increase in sales:

Total contribution margin will increase by $0.70, net operating income will increase by $0.70

To prepare a CVP graph, lines must be drawn representing total revenue:

Total expense and total fixed expense

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.