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Exam 6: Cost-Volume-Profit Analysis

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Question 21

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Holly Inc.sells a single product for $40.Variable costs include $22 for each unit plus a 10% sales commission.Fixed costs are $105,000 per month. a.What is the contribution margin percentage? b.What is the breakeven sales revenue? c.What sales revenue is needed to achieve a $140,000 per month profit?

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a.35% = ($40 - $22 - 10% × $40)/$40.00
b...

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Question 22

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Degree of operating leverage is calculated as:

A) profit divided by contribution margin.
B) break-even sales divided by profit.
C) profit divided by break-even sales.
D) contribution margin divided by profit.

E) All of the above
F) A) and C)

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Question 23

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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?

The degree of operating leverage can be multiplied by a change in sales to determine the change in profit.

Indigo Corp.has a selling price of $45 and variable costs of $30 per unit.When 10,000 units are sold,profits equaled $25,000.What is the margin of safety?

The margin of safety tells managers:

Skyline Corp.has a selling price of $25 per unit,variable costs of $20 per unit,and fixed costs of $25,000.What sales revenue is needed to break-even?

Fontaine Corp.has a selling price of $15 and variable costs of $10 per unit.When 10,000 units are sold,profits equaled $25,000.What is the margin of safety?

The target sales level equals fixed costs plus variable costs divided by the contribution margin ratio.

Bugle Corp.has sales of $400,000,a variable cost ratio of 40%,and a profit of $40,000.If 10,000 units were sold,what is the contribution margin per unit?

Paint Corp.has sales of $600,000,a contribution margin ratio of 30%,and a profit of $40,000.If 20,000 units were sold,what is the variable cost per unit?

If a firm sells more than one product,the break-even point in units represents:

The formula for target units is:

Nora Inc.sells a single product for $15.Variable costs include $6 for each unit plus a 10% sales commission.Fixed costs are $150,000 per month. a.What is the contribution margin percentage? b.What is the break-even sales revenue? c.What sales revenue is needed to achieve a $100,000 per month profit?

Thunder Corp.has a selling price of $25 per unit,variable costs of $20 per unit,and fixed costs of $35,000.How many units must be sold to break even?

Duncan had revenues of $900,000 in March.Fixed costs in March were $480,000 and profit was $60,000.Answer the following questions: a.What was the contribution margin percentage? b.What monthly sales volume (in dollars)would be needed to break-even? c.What was the margin of safety for March?

Fountain Corp.has a selling price of $15 per unit and variable costs of $10 per unit.When 14,000 units are sold,profits equaled $45,000.What is the margin of safety?

Cost-volume-profit analysis assumes that total costs behave in a ________ fashion.

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

The formula for break-even point in terms of sales dollars is: