Exam 9: Break-Even Point and Cost-Volume-Profit Analysis

Shelton Company Below is an income statement for Shelton Company: Refer to Shelton Company. Assuming that the fixed costs are expected to remain at $300,000 for the coming year and the sales price per unit and variable costs per unit are also expected to remain constant, how much profit before taxes will be produced if the company anticipates sales for the coming year rising to 125 percent of the current year's level?

Incremental analysis focuses on factors that change from one decision to another.

As projected net income increases the

Dividing total fixed costs by the contribution margin ratio yields break-even point in sales dollars.

Shelton Company Below is an income statement for Shelton Company: Refer to Shelton Company. What is Shelton's degree of operating leverage?

Ford Company The following information relates to financial projections of Ford Company: Refer to Ford Company. How many units would Ford Company need to sell to earn a profit before taxes of $15,000?

Smith Company reported the following results from sales of 5,000 units of Product A for June: Assume that Smith increases the selling price of Product A by 10 percent in July. How many units of Product A would have to be sold in July to generate an operating income of $20,000?

In a CVP graph, the slope of the total revenue line indicates the

Dawson Corporation Dawson Corporation predicts it will produce and sell 40,000 units of its sole product in the current year. At that level of volume, it projects a sales price of $30 per unit, a contribution margin ratio of 40 percent, and fixed costs of $5 per unit. Refer to Dawson Corporation. What would the company's projected profit be if it produced and sold 30,000 units?

Moonbeam Corporation Moonbeam Corporation manufactures and sells two products: A and B. The operating results of the company are as follows: In addition, the company incurred total fixed costs in the amount of $9,000. Refer to Moonbeam Corporation. How many total units would the company have needed to sell to break even?

After the level of volume exceeds the break-even point

Information concerning Clarkson Corporation's Product A follows: Assuming that Clarkson increased sales of Product A by 20 percent, what should the profit from Product A be?

Ideal Company Ideal Company produces and sells a single product. Information on its costs follow: Refer to Ideal Company. In the upcoming year, Ideal Company estimates that it will produce and sell 4,000 units. The variable costs per unit and the total fixed costs are expected to be the same as in the current year. However, it anticipates a sales price of $16 per unit. What is Ideal Company's projected margin of safety for the coming year?

The excess of budgeted or actual sales over sales at break-even point is referred to as ______________________________.

Campbell Manufacturing incurs annual fixed costs of $250,000 in producing and selling a single product. Estimated unit sales are 125,000. An after-tax income of $75,000 is desired by management. The company projects its income tax rate at 40 percent. What is the maximum amount that Campbell can expend for variable costs per unit and still meet its profit objective if the sales price per unit is estimated at $6?

Fixed costs per unit vary inversely with levels of production.

Absorption costing is more useful than variable costing in determining a company's break-even point.

In CVP analysis, linear functions are assumed for

Mark Smith Company Below is an income statement for Mark Smith Company: Refer to Mark Smith Company. What was the company's margin of safety?

Alford, Brooks, and Fitch Companies Below are income statements that apply to three companies: Alford, Brooks, and Fitch: Refer to Alford, Brooks, and Fitch Companies. Within the relevant range, if sales go up by one unit for each firm, which firm will experience the greatest increase in net income?