Exam 6: Cost-Volume-Profit Analysis: Additional Issues

In 2019, Hagar Corp. sold 3,000 units at $500 each. Variable expenses were $350 per unit, and fixed expenses were $780,000. The same variable expenses per unit and fixed expenses are expected for 2020. If Hagar cuts selling price by 4%, what is Hagar's break-even point in units for 2020?

Management may be tempted to overproduce when using

Operating leverage refers to the extent to which a company's net income reacts to a given change in fixed costs.

Warner Manufacturing reported sales of $2,000,000 last year (100,000 units at $20 each), when the break-even point was 80,000 units. Warner's margin of safety ratio is

When production exceeds sales,

Net income under absorption costing is gross profit less

Cost-volume-profit analysis is the study of the effects of

In 2019, Raleigh sold 1,000 units at $500 each, and earned net income of $40,000. Variable expenses were $300 per unit, and fixed expenses were $160,000. The same selling price is expected for 2020. Raleigh's variable cost per unit will rise by 10% in 2020 due to increasing material costs, so they are tentatively planning to cut fixed costs by $10,000. How many units must Raleigh sell in 2020 to maintain the same income level as 2019?

Only direct materials, direct labor, and variable manufacturing overhead costs are considered product costs when using

When a company has limited resources to manufacture products, it should manufacture those products which have the highest unit contribution margin.

Sales mix is not important to managers when different products have substantially different contribution margins.

Use the following information for questions. Roosevelt Corporation has a weighted-average unit contribution margin of $30 for its two products, Standard and Supreme. Expected sales for Roosevelt are 40,000 Standard and 60,000 Supreme. Fixed expenses are $1,800,000. -How many Standards would Roosevelt sell at the break-even point?

A shift from high-margin sales to low-margin sales

Reducing reliance on human workers and instead investing heavily in computers and online technology will

When a company is in its early stages of operation, its primary goal is to generate a target net income.

The weighted-average contribution margin of all the products is computed when determining the break-even sales for a multi-product firm.

Use the following information for questions Nielson Corp. sells its product for $6,600 per unit. Variable costs per unit are: manufacturing, $3,600, and selling and administrative, $75. Fixed costs are: $18,000 manufacturing overhead, and $24,000 selling and administrative. There was no beginning inventory at 1/1/15. Production was 20 units per year in 2018-2020. Sales were 20 units in 2018, 16 units in 2019, and 24 units in 2020. -For the three years 2018-2020,

Selling and administrative costs are period costs under both absorption and variable costing.

Outsourcing production will

When a company has limited resources, management must decide which products to make and sell in order to maximize net income.