FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 4: Costvolumeprofit Analysis

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 61

Multiple Choice

Review LaterAdd Note

Review Later

Break-even point is:

A) fixed costs divided by contribution margin per unit.
B) total costs divided by variable costs per unit.
C) contribution margin per unit divided by revenue per unit.
D) the sum of fixed and variable costs divided by contribution margin per unit.

E) A) and C)
F) A) and B)

Correct Answer

verified

Show Answer

Question 62

True/False

Review LaterAdd Note

Review Later

Companies with a greater proportion of fixed costs have a greater risk of loss than companies with a greater proportion of variable costs.

A) True
B) False

Correct Answer

verified

Show Answer

Question 63

True/False

Review LaterAdd Note

Sensitivity analysis helps to evaluate the risk associated with decisions.

If Johnson's Manufacturing presented a Financial Accounting Income Statement showing operating profit of $18 000,a Contribution Income Statement would show a different operating profit.

Answer the following questions using the information below: Gundagai Company sells several products.Information of average revenue and costs is as follows: $\begin{array}{lr}\text { Selling price per unit } & \$ 28.50 \\\text { Variable costs per unit: } & \\\quad \text { Direct material } & \$ 5.25 \\\text { Direct manufacturing labour } & \$ 1.15 \\\text { Manufacturing overhead } & \$ 0.25 \\\quad \text { Selling costs } & \$ 1.85 \\\text { Annual fixed costs } & \$ 110000\end{array}$ -The number of units that Gundagai must sell annually to make a profit of $90 000 is:

Archie Jackson Inc. ,sells a single product.The company's most recent income statement is given below. $\begin{array} { l r } \text { Sales } & \$ 200000 \\\text { Less variable expenses } & ( 120000 ) \\\text { Contribution margin } & 80000 \\\text { Less fixed expenses } & ( 50000 ) \\\text { Net profit } & \$ 30000\end{array}$ Required: a. Contribution margin ratio is $\quad$ $\quad$$\underline{\quad\quad}$ $\%$ b. Break-even point in total sales dollars is $\quad$ $\quad$$\$$$\underline{\quad\quad}$ c. To achieve $\$ 40000$ in net profit, sales must total $\quad$ $\quad$$\$$$\underline{\quad\quad}$ d. If sales increase by $\$ 50000$ , net profit will increase by $\quad$ $\quad$$\$$$\underline{\quad\quad}$ _____________________________________________________________________________________________ _____________________________________________________________________________________________

In CVP analysis,variable costs include direct variable costs,but do not include indirect variable costs.

Answer the following questions using the information below: Ghan Manufacturing produces a single product that sells for $80.Variable costs per unit equal $32.The company expects total fixed costs to be $72 000 for the next month at the projected sales level of 2000 units.In an attempt to improve performance,management is considering a number of alternative actions.Each situation is to be evaluated separately. -Suppose management believes that a $32 000 increase in the monthly advertising expense will result in a considerable increase in sales.Sales must increase by how much to justify this additional expenditure?

Lauren had been a manager of a major hotel chain for 15 years.Due to a hotel owner's illness,Lauren was offered the opportunity to purchase a hotel near a holiday area she had often visited.After obtaining a lawyer and an accountant to assist her,Lauren did an analysis of the business and evaluated several contingencies relating to various scenarios that might occur based on economic and weather season circumstances.Since the expected monetary value of the various scenarios was much higher than the price of the hotel,she decided to purchase the hotel.She resigned her position,obtained a loan,and purchased the hotel.The following year,there was a severe economic downturn and also a very bad weather season that reduced the number of guests and also caused a resulting mould situation in the hotel building that required expensive repair work.Lauren ran short of cash,became emotionally distraught,and eventually had to sell the hotel at a significant loss.Was it a bad decision for her to purchase the hotel instead of keeping her other managerial position? Explain. _____________________________________________________________________________________________ _____________________________________________________________________________________________

If the contribution margin ratio is 0.40,targeted net profit is $50 000,and fixed costs are $75 000,then sales volume in dollars is:

If selling price per unit is $30,variable costs per unit are $20,total fixed costs are $10 000,the tax rate is 30%,and the company sells 6000 units,net profit after tax is:

Answer the following questions using the information below: Dr Charles Hunter,MD,performs a certain outpatient procedure for $1000.His fixed costs are $20 000,while his variable costs are $500 per procedure.Dr Hunter currently plans to perform 200 procedures this month. -What is the margin of safety assuming 100 procedures are budgeted?

A company with sales of $100 000,variable costs of $70 000,and fixed costs of $50 000 will reach its break-even point if sales are increased by $20 000.

Answer the following questions using the information below: Stephanie's Bridal Shoppe sells wedding dresses.The average selling price of each dress is $1000,variable costs are $400,and fixed costs are $90 000. -What is the Bridal Shoppe's operating profit when 200 dresses are sold?

The break-even point decreases if:

What effect,and why,would a decrease in the tax rate have on a company's break-even point? _____________________________________________________________________________________________ _____________________________________________________________________________________________

'Uncertainty' may be defined as:

A planned increase in advertising would be considered an increase in fixed costs in CVP analysis.

In multiproduct situations when sales mix shifts toward the product with the lowest contribution margin,the break-even quantity will decrease.

Answer the following questions using the information below: Assume the following cost information for Murray River Company: $\begin{array}{lr}\text { Selling price } & \$ 240 \text { per unit } \\\text { Variable costs } & \$ 140 \text { per unit } \\\text { Total fixed costs } & \$ 140000 \\\text { Tax rate } & 40 \%\end{array}$ -What is the number of units that must be sold to earn an after-tax net profit of $42 000?