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Exam 7: Cost-Volume-Profit Analysis

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Question 21

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Mist Company sells two products,blue bowls and green cups.Mist predicts that it will sell 2,500 blue bowls and 1,500 green cups in the next period.The unit contribution margins for blue bowls and green cups are $3.60 and $4.80,respectively.What is the weighted-average unit contribution margin?

A) $ 1.80
B) $16.20
C) $ 0.45
D) $ 4.05

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Question 22

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American Corporation currently sells its products for $200 per unit.Management is contemplating a 20% increase in the selling price for the next year.Variable costs are currently 40% of sales revenue and are not expected to change next year.Fixed expenses are $120,000 per year. If fixed costs increase 10% next year,and the new selling price per unit goes into effect,how many units will need to be sold to breakeven?

A) 413 units
B) 1,100 units
C) 132,000 units
D) 825 units

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Question 23

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If the selling price per unit is $10.00,the variable expense per unit is $5.75,and the breakeven sales in dollars is $465,200,what are total fixed expenses?

Akron Laser Wash sells deluxe car washes for $15 per customer.Variable costs are $9 per wash.Fixed costs are $40,000 per month.What is Akron Laser Wash's contribution margin ratio?

If the contribution margin ratio is 32%,target operating income is $60,000,and the sales revenue needed to achieve the target operating income is $400,000,what are total fixed expenses?

Duncan Enterprises is considering building a new plant in Canada.They predict sales at the new plant to be 50,000 units at $10.00/unit.Below is a listing of estimated expenses: $\begin{array} { | l | c | c | } \hline \text { Category } & \begin{array} { c } \text { Total Annual } \\\text { Expenses }\end{array} & \begin{array} { c } \text { \% of Annual Expense } \\\text { that are Fixed }\end{array} \\\hline \text { Materials } & \$ 50,000 & 10 \% \\\hline \text { Labor } & \$ 90,000 & 20 \% \\\hline \text { Overhead } & \$ 40,000 & 30 \% \\\hline \text { Marketing/Admin } & \$ 20,000 & 50 \% \\\hline\end{array}$ A Canadian firm was contracted to sell the product and will receive a commission of 20% of the sales price.No U.S.home office expenses will be allocated to the new facility. How much does the Canadian contractor expect to make in commissions?

Hartville Kitchens has a monthly target operating income of $18,000.Variable expenses are 25% of sales and monthly fixed expenses are $12,000.What is the monthly margin of safety in dollars if the business achieves its operating income goal?

Which of the following statements is TRUE if both fixed expenses and the sale price per unit increase while variable costs per unit are unchanged?

The higher the operating leverage factor,the:

Which of the following statements is TRUE if the variable cost per unit increases while the sale price per unit and total fixed costs remain constant?

By multiplying the operating leverage factor by the anticipated percentage change in volume,one can find the anticipated change:

CVP stands for Cost-Volume-Profit.

The following selected data relates to Lazarus Corporation: $\begin{array} { | l | r | } \hline \text { Tatal fixed costs } & \$ 22,000 \\\hline \text { Sale price per unit } & \$ 25 \\\hline \text { Variable costs per urit } & \$ 18 \\\hline\end{array}$ -If sales revenue per unit increases to $27 and 8,000 units are sold,what is the contribution margin?

The Burr Mystery Dinner Theater sells tickets for dinner and a show for $50 each.The cost of providing dinner is $30 per ticket,and the fixed cost of operating the theater is $100,000 per month.The company can accommodate 15,000 patrons each month.What is the contribution margin ratio?

Busson Company management has budgeted the following amounts for its next fiscal year: $\begin{array} { | l | r | } \hline \text { Total fixed expenses } & \$ 58,300 \\\hline \text { Sale price per unit } & \$ 50 \\\hline \text { Variable expenses per unit } & \$ 30 \\\hline\end{array}$ If Busson Company can reduce fixed expenses by $10,300,how will breakeven sales in units be affected?

The breakeven point represents the minimum number of units a company must sell before it earns a profit.

The contribution margin ratio is the unit contribution margin divided by the sales price per unit.

Reynold Coffee sells three large coffees for every two small ones.A small coffee sells for $4 per cup,with a variable cost of $2 per cup.A large coffee sells for $5 per cup with a variable cost of $3 per cup.What is the weighted-average contribution margin?

If the sale price per unit is $75,the variable expense per unit is $45,and total fixed expenses are $1,155,000,what will the breakeven sales in units be?

The margin of safety is the excess of expected sales over breakeven sales.