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Exam 6: Cost-Volume-Profit Analysis

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Question 21

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Target units equals fixed costs plus target profit divided by the unit contribution margin.This is the formula for target units.

A) True
B) False

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Question 22

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Dancer Corp has a selling price of $20 per unit,and variable costs of $10 per unit.When 12,000 units are sold,profits equaled $35,000.How many units must be sold to break-even?

A) 32,300
B) 20,400
C) 24,366
D) 8,500

E) A) and B)
F) None of the above

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Question 23

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The margin of safety tells managers

On a CVP graph,the break-even point is the point at which the contribution margin line crosses the total cost line.The break-even point is the point at which the total revenue line crosses the total cost line.

Last month Angus Company had a $30,000 loss on sales of $250,000.Fixed costs are $60,000 a month.What sales revenue is needed for Angus to break even?

Harvest Corp has a contribution margin ratio of 30%,fixed costs of $45,000,and a profit of $60,000.What are total sales?

Jerome Corp has fixed costs of $500,000 and a contribution margin ratio of 40%.Currently,sales are $3,000,000.What is Jerome's margin of safety?

Break-even units can be found by dividing fixed costs by unit contribution margin.At break-even point,contribution margin just covers fixed costs,so dividing fixed costs by unit contribution margin yields the number of units needed.

Fern,Inc.has fixed costs of $400,000 and a contribution margin ratio of 30%.How much sales revenue must be earned for a profit of $80,000?

Managers can use cost-volume-profit analysis to evaluate changes in cost structure.CVP analysis is useful in evaluating changes in price and cost structure.

A company is debating whether to change its cost structure so that variable costs increase from $4 per unit to $5 per unit but fixed costs decrease from $400,000 to $300,000.If it were to implement the change at its current production level of 100,000,profit would not change.What would happen to the company's profit if the change were implemented and production increased?

The margin of safety is the difference between

Last month Lyle Company had a $60,000 profit on sales of $300,000.Fixed costs are $120,000 a month.How much do sales have to increase for Lyle to earn a $100,000 profit?

Allen,Inc,has a contribution margin of 40% and fixed costs of $250,000.What is the break-even point?

Irwin Corp has fixed costs of $20,000 and a contribution margin ratio of 40%.Currently,margin of safety is $35,000.What are Irwin's current sales?

Frontier Corp sells units for $50,has unit variable costs of $20,and fixed costs of $300,000.If Frontier sells 15,000 units,what is its degree of operating leverage?

Louise Corp has a contribution margin ratio of 35%,fixed costs of $60,000,and a profit of $45,000.What are total sales?

Cost-volume-profit analysis assumes that all costs can be accurately described as either fixed or variable.Cost-volume-profit analysis assumes that costs can be classified or broken down as fixed or variable.

Belle Corp has a selling price of $50 per unit,variable costs of $40 per unit,and fixed costs of $100,000.What sales revenue is needed to break-even?

Last month Peggy Company had a $30,000 profit on sales of $250,000.Fixed costs are $60,000 a month.What sales revenue is needed for Peggy to break even?