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Exam 3: Analysis of Cost, Volume, and Pricing to Increase Profitability

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Question 81

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Consider the following cost-volume-profit graph: The line designated by the letter (B) represents which of the following?

A) Variable cost
B) Break-even
C) Total revenue
D) Total cost

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

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Question 82

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How is weighted average contribution margin calculated, and how can it be used in cost-volume-profit analysis?

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A company that sells t...

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Question 83

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Ruiz Company produces and sells a product that has variable costs of $50 and a selling price of $90. Its current sales total $270,000 per month. Fixed manufacturing costs total $40,000 per month and fixed selling and administrative costs total $35,000 per month. The company is considering a proposal that will increase the selling price by 10%, increase the fixed manufacturing costs by 10%, and increase the fixed selling and administrative costs by $1,500.Required: 1) Compute the company's current break-even point in units.2) Compute the company's current income and margin of safety in dollars.3) Compute the break-even point in units assuming the proposal is accepted.4) Compute the company's income assuming the proposal is accepted and sales total 3,300 units. Should the proposal be accepted?

Assuming a company uses a markup equal to 25% of cost, the cost of a product that sells for $100 is $75.

Bruce Company recently reduced its advertising budget. All other costs and revenues were unchanged. Select the response that indicates the impact of the advertising cuts on the company's break-even point and margin of safety. $\begin{array}{ll}\text { Breakeven Point } & \text { Margin of Safety }\\\text { A) Increase } & \text { Increase } \\\text { B) Decrease } & \text { Decrease } \\\text { C) Increase } & \text { Decrease } \\\text { D) Decrease } & \text { Increase }\end{array}$

Once sales reach the break-even point, each additional unit sold will:

An increase in total fixed costs increases the break-even point.