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Exam 9: Break-Even Point and Cost-Volume-Profit Analysis

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Question 31

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The formula for margin of safety is _____________________________________________.

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Question 32

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With respect to fixed costs, CVP analysis assumes total fixed costs

A) per unit remain constant as volume changes.
B) remain constant from one period to the next.
C) vary directly with volume.
D) remain constant across changes in volume.

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Question 33

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In a CVP graph, the area between the total cost line and the total fixed cost line yields the

The margin of safety is an effective measure of risk for a company.

CVP analysis relies on the assumptions that costs are either strictly fixed or strictly variable. Consistent with these assumptions, as volume decreases total

____ focuses only on factors that change from one course of action to another.

A firm estimates that it will sell 100,000 units of its sole product in the coming period. It projects the sales price at $40 per unit, the CM ratio at 60 percent, and profit at $500,000. What is the firm budgeting for fixed costs in the coming period?

After the break-even point is reached, each dollar of contribution margin is a dollar of after-tax profit.

Palmer Company Below is an income statement for Palmer Company: Refer to Palmer Company. Assuming that the fixed costs are expected to remain at $200,000 for the coming year and the sales price per unit and variable costs per unit are also expected to remain constant, how much profit before taxes will be produced if the company anticipates sales for the coming year rising to 130 percent of the current year's level?

Castle Corporation The following questions are based on the following data pertaining to two types of products manufactured by Castle Corporation: Fixed costs total $300,000 annually. The expected mix in units is 60 percent for Product Y and 40 percent for Product Z. Refer to Castle Corporation. What is Castle's break-even point in sales dollars?

Castle Corporation The following questions are based on the following data pertaining to two types of products manufactured by Castle Corporation: Fixed costs total $300,000 annually. The expected mix in units is 60 percent for Product Y and 40 percent for Product Z. Refer to Castle Corporation. How much is Castle's break-even point sales in units?

CVP analysis is based on concepts from

Teal Company The following information relates to financial projections of Teal Company: Refer to Teal Company. If Teal Company achieves its projections, what will be its degree of operating leverage?

The relationship between a company's variable costs and fixed costs is referred to as its ______________________________.

What are the major assumptions of CVP analysis?

Given the following notation, what is the break-even sales level in units? SP = selling price per unit, FC = total fixed cost, VC = variable cost per unit

Moonbeam Corporation Moonbeam Corporation manufactures and sells two products: A and B. The operating results of the company are as follows: In addition, the company incurred total fixed costs in the amount of $9,000. Refer to Moonbeam Corporation. How many units would the company have needed to sell to produce a profit of $12,000?

Break-even point may be expressed in terms of units or dollars.

Information concerning Simmons Corporation's Product A follows: Assuming that Simmons increased sales of Product A by 25 percent, what should the profit from Product A be?

In CVP analysis, sales and production are assumed to be equal.