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Exam 18: Cost Behavior and Cost-Volume-Profit Analysis

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Question 81

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Describe what happens to the net income of a company under each of the following assumptions: (a)Units sold are less than break-even units.(b)Units sold are greater than break-even units.(c)Units sold are equal to the break-even units.

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(a)If the units sold are less than the b...

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Question 82

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Examining strategies that impact several estimates in the CVP analysis is known as ________.

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sensitivit...

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Question 83

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A company has a goal of earning $128,000 in pre-tax income.The contribution margin ratio is 30%.What dollar amount of sales must be achieved to reach the goal if fixed costs are $64,000?

The contribution margin ratio:

A company has total fixed costs of $360,000.Its product sells for $40 per unit and variable costs amount to $25 per unit.What is the break-even point in dollar sales?

Kent Co.manufactures a product that sells for $50.00 and has variable costs of $24.00 per unit.Fixed costs are $260,000.Kent can buy a new production machine that will increase fixed costs by $11,400 per year,but will decrease variable costs by $3.50 per unit.Compute the revised break-even point in units if the new machine is purchased.

Contribution margin per unit is the amount by which a product's unit selling price exceeds its variable cost per unit.

Dodge Industries incurs the following costs during the current year: Sales for the year were $80,000 and Dodge determined that only the direct production costs and factory supplies are to be classified as variable costs; all other costs are classified as fixed costs.Dodge sold 400 units. (a)Calculate the unit contribution margin and the contribution margin ratio for Dodge Industries. (b)Dodge Industries is considering plans that would increase the contribution margin ratio for next year.Should it pursue these plans? Explain.

Glover Headgear produces specialty logo baseball caps for a variety of customers.Selected cost data for Glover follows: direct materials cost $17,000; depreciation on factory equipment,$21,000; direct labor,$16,000; factory lease,$24,000.If Glover sells 6,100 caps at an average price of $12 for each cap,what is the company's contribution margin in total dollars?

A firm sells two different products,A and B.For each unit of B sold,the firm sells two units of A.Total fixed costs $1,260,000.Additional selling prices and cost information for both products follow: Required: (a)Calculate the contribution margin per composite unit. (b)Calculate the break-even point in units of each individual product. (c)If pretax income before taxes of $294,000 is desired,how many units of A and B must be sold?

Kent Co.manufactures a product that sells for $50.00.Fixed costs are $260,000 and variable costs are $24.00 per unit.Kent can buy a new production machine that will increase fixed costs by $11,400 per year,but will decrease variable costs by $3.50 per unit.What effect would the purchase of the new machine have on Kent's break-even point in units?

As production volume activity increases,variable cost per unit remains constant.

A product is sold for $45 and has variable costs of $33 per unit.The total fixed costs for the firm are $180,600.If the firm desires to earn a pretax income of $77,400,how many units must be sold?

A manufacturer reports the following information below for its first three years in operation. -Income for year 3 using absorption costing is:

Isaacson Co.has total fixed costs of $240,000 and a contribution margin ratio of 40%.If rent expense increases by $5,000,how much will total sales revenue have to increase to cover this increase in costs?

The margin of safety is the amount that sales can drop before the company incurs a loss.

A scatter diagram is useful for identifying extreme data points or outliers.

The least-squares regression method is:

Total fixed costs change in proportion to changes in volume of activity.

Locus Company has total fixed costs of $112,000.Its product sells for $35 per unit and variable costs amount to $25 per unit.Next year Locus Company wishes to earn a pretax income that equals 10% of fixed costs.How many units must be sold to achieve this target income level?