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Exam 3: Cost-Volume-Profit Analysis

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Question 71

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If the selling price per unit and the variable cost per unit both increase by 5%, what is the effect on the contribution margin per unit and on the contribution margin ratio? Contribution margin per unit Contribution margin ratio

A) Increase Increase
B) Increase No effect
C) Decrease No effect
D) Decrease Increase

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Question 72

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The breakeven point for a service organization will decrease if:

A) The variable cost ratio increases
B) The mix of less profitable services increases
C) The contribution margin ratio increases
D) Fixed costs increase

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Question 73

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Data extracted from the accounting information system of TXC Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x. The point where the dashed line intersects the solid line is the:

Assumptions and limitations are irrelevant when using CVP analysis.

The cost function for Liao Company is: TC = $800 + 0.375 × Revenue. If Liao expects after-tax income of $600, and the tax rate is 40%, what is the firm's margin of safety?

In CVP analysis, costs are assumed to be linear; that is, they can be expressed as "TC = F + VxQ" format, where F represents total fixed costs.

EDC Corporation sells a single product for $25 per unit, with variable costs of $10 per unit. Annual fixed costs are $30,000. a)Assuming fixed costs are spread evenly throughout the year, what is EDC's monthly breakeven point in units? b)EDC currently sells 500 units per month. What is its annual profit? c)If EDC increases its selling price by 20% and all other factors (including demand)remain constant, by what percentage will annual profits increase? d)Assume the price remains at $25 per unit and variable costs remain at $10 per unit, but fixed costs increase by 30% annually. Calculate the percentage increase in unit sales required to achieve the same level of annual profit calculated in part (b).

Data extracted from the accounting information system of TXC Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x. The vertical ("y") axis shows:

ZTL Corporation produces three products. Cost, price, and volume data is shown below: Total Fixed costs $2,400 Tax rate 40% Picture Candle CD Holders Holders Holders Normal volume 300 150 200 Price per unit $5 $7 $10 Variable cost per unit 2 3 4 When using units as the measure, what proportion of the sales mix do picture holders represent? Round to the nearest whole percent.

Data extracted from the accounting information system of TXC Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x. Which of the following terms best describes the graph?

Managers should consider which of the following in CVP analysis? I. Assumptions II. Uncertainties III. Biases

ZTL Corporation produces three products. Cost, price, and volume data is shown below: Total Fixed costs $2,400 Tax rate 40% Picture Candle CD Holders Holders Holders Normal volume 300 150 200 Price per unit $5 $7 $10 Variable cost per unit 2 3 4 The weighted average contribution margin ratio, rounded to the nearest whole percent, is:

SDZ Corporation produces and sells a single product. Its selling price is $15 per unit, and the variable cost per unit is $12. Total fixed costs per month are $3,000. a)What is SDZ's contribution margin per unit? b)Calculate the monthly breakeven point in units. c)How many units must SDZ sell for a pre-tax target profit of $10,000 per month?

A limiting assumption in CVP analysis is that:

SXF sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows: Which of the following actions will move Point A to the right on the x axis?

SXF sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows: Which of the following actions will move Point B higher on the y axis?

Nelson Co. incurs $568,000 in fixed costs while producing three products with the following characteristics: Sales Mix Unit Contribution Contribution Product (Units) Margin Margin Ratio T 5 $900 45% Q 3 600 40% R 2 400 35% At the breakeven point, what is the dollar sales volume for Product Q?

ZTL Corporation produces three products. Cost, price, and volume data is shown below: Total Fixed costs $2,400 Tax rate 40% Picture Candle CD Holders Holders Holders Normal volume 300 150 200 Price per unit $5 $7 $10 Variable cost per unit 2 3 4 ZTL's pre-tax profit next period is expected to be:

Data extracted from the accounting information system of TXC Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x. The solid line intersects the y-axis at the:

The contribution margin per unit is calculated as Selling Price per unit minus Variable Cost per unit.