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Exam 21: Cost-Volume-Profit Analysis

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Question 71

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What is an important feature that must be remembered when using cost identifying and behavior methods?

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All three methods of estimation (scatter...

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Question 72

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Briefly describe a CVP chart,including its major components.

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The vertical axis of a CVP chart plots t...

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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?

In cost-volume-profit analysis,the unit contribution margin is:

A graphic depiction of the break-even point is known as a cost-volume-profit (CVP)chart.

Hartman Co.has fixed costs of $36,000 and a contribution margin ratio of 24%.If expected sales are $200,000,what is the margin of safety as a percent of sales?

There are at least three different methods to separate costs into fixed and variable.These methods are the _______________,_______________,and _______________ methods.

Camden Corporation sells three products (M,N,and O) in the following mix:3:1:2.Unit price and cost data are: Total fixed costs are $340,000.The break-even point in sales dollars for the current sales mix is (round to the nearest thousand) :

The sales mix of Palm Company is 5 units of A,3 units of B,and 1 unit of C.Per unit sales prices for each product are $30, $40, and $50, respectively.Variable costs per unit are $14, $24, and $34, respectively.Fixed costs are $597,600.What is the break-even point in composite units and in units of A, B, and C?

The Haskins Company manufactures and sells radios.Each radio sells for $23.75 and the variable cost per unit is $16.25.Haskin's total fixed costs are $25,000,and budgeted sales are 8,000 units.What is the contribution margin per unit?

One aid in measuring cost behavior involves creating a display of the data about past costs in graphical form.Such a visual display is called a ______________________.

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

Cost-volume-profit analysis is a precise tool for perfectly predicting the profit consequences of cost changes,price changes,and volume changes.

A company manufactures and sells a product for $120 per unit.The company's fixed costs are $68,760,and its variable costs are $90 per unit.The company's break-even point in dollars is:

The margin of safety can be expressed in units of product,in dollars,or as a percent of sales.

Wilton Company is analyzing two alternative methods of producing its product.The production manager indicates that variable costs can be reduced 40% by installing a machine that automates production,but fixed costs would increase.Alternative 1 shows costs before installing the machine; Alternative 2 shows costs after the machine is installed.(a)Compute the break-even point in units and dollars for both alternatives.(b)Prepare a forecasted income statement for both alternatives assuming that 30,000 units will be sold.The statements should report sales,total variable costs,contribution margin,fixed costs,income before taxes,income taxes,and net income.Below the income statement,compute the degree of operating leverage.Which alternative would you recommend and why?

What is the high-low method? Briefly describe how it is applied.

Mueller Corp.manufactures compact discs that sell for $5.00.Fixed costs are $28,000 and variable costs are $3.60 per unit.Mueller can buy a newer production machine that will increase fixed costs by $8,000 per year,but will decrease variable costs by $0.40 per unit.What effect would the purchase of the new machine have on Mueller's break-even point in units?

A __________ cost is one that includes both fixed and variable cost components; a ______________ cost is one that reflects a step pattern.

The extent,or relative size,of fixed costs in the total cost structure is known as operating leverage.