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Exam 21: Cost-Volume-Profit Analysis

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Question 91

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Describe what happens to the net income of a company under each of the following assumptions: (a)Sales volume is less than break-even sales.(b)Sales volume is greater than break-even sales.(c)Sales volume is equal to the break-even point.

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(a)If the sales volume is less the break...

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Question 92

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A target income refers to:

A) Income at the break-even point.
B) Income from the most recent period.
C) Income planned for a future period.
D) Income only in a multiproduct environment.
E) Income at the minimum contribution margin.

F) A) and D)
G) A) and C)

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Question 93

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A line on a scatter diagram that is intended to reflect the past relation between cost and volume is the:

There are only two methods to derive an estimated line of cost behavior; the high-low method and the scatter diagram.

A _______________ cost is one that remains unchanged in amount when volume of activity varies from period to period within a relevant range.A ______________ cost is one that changes in proportion to changes in volume of activity.

Narrows Co.is considering the production and sale of a new product line with the following sales and cost data: unit sales price $125; unit variable costs $75; and total fixed costs of $140,000.Calculate the break-even point in units and in dollar sales.

Least-squares regression is a statistical method for deriving an estimated line of cost behavior.

Macleod Company's product has a contribution margin per unit of $62.50 and a contribution margin ratio of 25%.What is the per unit selling price of the product?

Joseph Co.has three products A,B,and C,and its fixed costs are $69,000.The sales mix for its products are 3 units of A,4 units of B,and 1 unit of C.Information about the three products follows: A B C (a) Calculate the company's break-even point in composite units and sales dollars.(b) Calculate the number of units of each individual product to be sold at the break-even point.

Outback Products reports the following information: Total Contribution Margin…………………..$32,000 Total Fixed Costs…………………………….$28,000 Required: (a)Calculate Outback Products' degree of operating leverage (DOL). (b)Outback Products forecasts a 6% increase in sales.What is the expected effect in percent on pretax income?

Baines Brothers manufactures and sells two products,A and Z in the ratio of 4: 2.Product A sells for $75; Z sells for $95.Variable costs for product A are $35; for Z $40.Fixed costs are $418,500.Compute the number of units of Product Z Baines must sell to break even.

Duxbury Co.reports the following data for the current year: Units Sold ………………………………………..1,200 Unit Sales Price ………………………………………..$30 Unit Variable Cost ……………………………………….. $10 Total Fixed Cost……………………………………….. $18,000 Required: (a)Calculate Duxbury's pretax income. (b)Calculate Duxbury's degree of operating leverage.

A cost that changes in proportion to changes in volume of activity is a(n) :

Lee Company manufactures and sells widgets for $2.00 per unit.Its variable cost per unit is $1.70.Lee's total fixed costs are $10,500.How many widgets must Lee Company sell to break even?

The difference between sales price per unit and variable cost per unit is the:

As the level of output activity increases,the variable cost per unit remains constant.

Bristol Company's contribution margin income statement is presented below.Sales for the current period consisted of 7,500 units.Compute the company's break-even point in (a)units,and (b)dollars.Compute the margin of safety in (c)dollars and (d)percent.

A cost that can be separated into fixed and variable components is called a:

A firm produces and sells a product with a contribution margin of $32 per unit.The firm is presently selling 90,000 units and earning $240,000 in after-tax income.Taxes are $80,000 at a 25% tax rate.If the firm desires to increase its after-tax income to $300,000,how many more units must it sell?

The ratio of the sales volume for the various products sold by a company is called the: