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Exam 6: Cost-Volume-Profit Analysis

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Question 51

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Chelsea Company has sales of $400,000,variable costs of $10 per unit,fixed costs of $100,000,and a target profit of $60,000.How many units were sold?

A) 12,000
B) 18,000
C) 24,000
D) 30,000

E) C) and D)
F) B) and C)

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Question 52

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Knoll,Inc.currently sells 15,000 units a month for $50 each,has variable costs of $20 per unit,and fixed costs of $300,000.Knoll is considering increasing the price of its units to $60 per unit.If the price is changed,how many units will Knoll need to sell for profit to remain the same as before the price change?

A) 10,000
B) 11,250
C) 12,000
D) 12,500

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

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Question 53

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Last month Dexter Company had a $15,000 loss on sales of $150,000.Fixed costs are $60,000 a month.How much do sales have to increase for Dexter to break even?

Frontier Corp has fixed costs of $300,000 and profit of $150,000.What is its degree of operating leverage?

The break-even point is

Rollag Corp has a selling price of $30 and variable costs of $20 per unit.When 14,000 units are sold,profits equaled $45,000.What is the margin of safety?

At a level of 20,000 units sold,Gail Corp has sales of $400,000,a contribution margin ratio of 40%,and a profit of $40,000.What is the break-even point in units?

The formula for break-even point in terms of revenue is

The margin of safety is the point where zero profit is earned.The margin of safety is how much sales can drop before zero profit is earned.

The margin of safety is the difference between actual sales and budgeted sales.The margin of safety is the difference between actual or budgeted sales and break-even sales.

Idaho Corp has fixed costs of $20,000 and a contribution margin ratio of 50%.Currently,sales are $75,000.What is Idaho's margin of safety?

Mira Corp has a selling price of $50 per unit,variable costs of $40 per unit,and fixed costs of $90,000.How many units must be sold to break-even?

Last month Carlos Company had a $60,000 profit on sales of $300,000.Fixed costs are $120,000 a month.What sales revenue is needed for Carlos to break even?

Knoll,Inc.currently sells 15,000 units a month for $50 each,has variable costs of $20 per unit,and fixed costs of $300,000.Knoll is considering increasing the price of its units to $60 per unit.This will not affect costs,but demand is expected to drop 20%.Should Knoll increase the cost of its product?

Degree of operating leverage is used to

A company is debating whether to change its cost structure so that fixed costs increase from $300,000 to $400,000,but variable costs decrease from $5 per unit to $4 per unit.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 to 125,000?