Exam 3: Fundamentals of Cost-Volume-Profit Analysis

Honeysuckle Manufacturing has the following data: Selling Price \ 60 Variable manufacturing cost \ 33 Fixed manufacturing cost \ 250,000 per month Variable selling \& administrative costs \ 9 Fixed selling \& administrative costs \ 120,000 per month - If Honeysuckle has actual monthly sales of $1,500,000 and desires an operating profit of $50,000 per month, what is the margin of safety in sales dollars?

Which of the following would not cause the break-even point to change?

If both the variable cost per unit and the selling price per unit increase, the new contribution margin ratio in relation to the old contribution margin ratio will be:

Eastwick produces and sells three products. Last month's results are as follows: P1 P2 P3 Revenues \1 00,000 \2 00,000 \2 00,000 Variable costs 40,000 140,000 80,000 - Fixed costs total $200,000. What is Eastwick's margin of safety? (Assume the current product mix.)

If Q equals the level of output, P is the selling price per unit, V is the variable cost per unit, and F is the fixed cost, then the break-even point in units is:

Operating leverage refers to the extent to which an organization's cost structure is made up of:

Blizzard Corporation's contribution margin ratio is 74% and its fixed monthly costs are $43,000. Assume that the company's sales for October are expected to be $102,000. Required: Estimate the company's operating profit for October, assuming that the fixed monthly costs do not change.

Which of the following changes to a company's contribution income statement will always lower the break-even point (either in units or in dollars)?

The amount by which a company's sales can decline before losses are incurred is called the:

The average selling price is $0.60 per unit, the average variable cost is $0.36 per unit, and the total fixed costs are $1,500. If operating profits of $900 are desired, a sales volume of 2,500 units is necessary.

At a break-even point of 400 units, variable costs were $400 and fixed costs were $200. What will the 401st unit sold contribute to operating profits before income taxes?

During 2020, Seth Britain Lab supplied hospitals with a comprehensive diagnostic kit for $120. At a volume of 80,000 kits, Seth had fixed costs of $1,000,000 and a profit before income taxes of $200,000. Due to an adverse legal decision, Seth's 2021 liability insurance increased by $1,200,000 over 2020. Assuming the volume and other costs are unchanged, what should the 2021 price be if Seth is to make the same $200,000 profit before income taxes? (CPA adapted)

You have been provided with the following information: Per Unit Total Sales \1 5 \4 5,000 Less variable expenses 9 27,000 Contribution margin 6 18,000 Less fixed expenses 12,000 Operating profit \6 ,000 If unit sales decrease by 10%, how much will fixed costs have to be reduced by to maintain the current operating profit?

You have been provided with the following information regarding the Closure Manufacturing Company: Sales price \5 0 Variable manufacturing cost per unit 24 Variable marketing cost per unit 12 Fixed manufacturing costs 6 Fixed administrative costs 3 This information is based on forecasted sales of 33,000 units. Required: (a) What is the expected operating profit for the upcoming year? (b) What is the break-even point in dollars? (c) How much in sales dollars is required to generate an operating profit of $275,000?

Garrison Inc. produces and sells a single product whose contribution margin ratio is 66%. The company's monthly fixed cost is $667,920 and the company's monthly target profit is $72,600. Required: Determine the dollar sales to attain the company's target profit.

Opal Company manufactures a single product that it sells for $90 per unit and has a contribution margin ratio of 35%. The company's fixed costs are $46,800. If Opal desires a monthly target operating profit equal to 15% of sales, sales will have to be (rounded):

Folsom Inc., which produces and sells a single product, has provided the following contribution format income statement for August: Sales (4,600 units) \ 105,800 Variable costs 41,400 Contribution margin 64,400 Fixed costs 46,000 Operating profit \ 18,400 Required: Redo the company's contribution format income statement assuming that the company sells 4,500 units.

You have been provided with the following information regarding the Fremont Manufacturing Company: Sales price \5 0 Variable manufacturing cost per unit 24 Variable marketing cost per unit 6 Fixed manufacturing costs 360,000 Fixed administrative costs 80,000 This information is based on forecasted sales of 33,000 units. Required: (a) What is the expected operating profit for the upcoming year? (b) What is the break-even point in dollars? (c) How much in sales dollars is required to generate an operating profit of $275,000?

Market Sales had $1,200,000 in sales last month. The variable cost ratio was 60% and operating profits were $80,000. -What is Market's break-even sales volume?

The margin of safety percentage is computed as: