Exam 22: Cost-Volume-Profit

The following monthly data are available for Kratzberg, Inc. which produces only one product which it sells for $18 each. Its unit variable costs are $8, and its total fixed expenses are $15,000. Actual sales for the month of May totaled 2,000 units. Instructions Compute the margin of safety in units and dollars for the company for May.

For two years, Richard Elkins has been the manager of the production department of a company manufacturing toys made of plastic-coated cardboard. One of the toys is a paper doll, whose "clothes" are made of acetate, and stay on the doll with static electricity. The company's sales were mainly to large educational institutions until last year, when the dolls were sold for the first time to a large discount retailer. The dolls were sold out immediately, and enough orders were received to keep the department at full capacity for the immediate future. The fixed costs for the department are $50,000, with $1 per unit variable costs. A paper doll and one set of clothes sell for $3. The maximum volume is 80,000 units. With the increased volume, Mr. Elkins is considering two options to improve profitability. One would reduce variable costs to $0.75, and the other would reduce fixed costs to $35,000. Required: Given the fact that sales are increasing, make a short (one paragraph) recommendation to Mr. Elkins about which option he should choose. Support your recommendation with a calculation showing him how profitability will change with each option.

The amount by which actual or expected sales exceeds break-even sales is referred to as

Winrow Company sells radios for $50 per unit. The fixed costs are $315,000 and the variable costs are 60% of the selling price. As a result of new automated equipment, it is anticipated that fixed costs will increase by $75,000 and variable costs will be 50% of the selling price. The new break-even point in units is:

Two costs at Simpson, Inc. appear below for specific months of operation. Which type of costs are these?

Richert Company's activity for the first three months of 2010 are as follows: Using the high-low method, how much is the cost per machine hour?

CNC Company has the following information available for September 2010. Instructions (a) Prepare a CVP income statement that shows both total and per unit amounts. (b) Compute NIU's breakeven in units.

Casey Company has fixed costs of $1,500,000 and variable costs are 40% of sales. What are the required sales if Casey Company desires net income of $150,000?

In 2010, Runge Company had a break-even point of $800,000 based on a selling price of $10 per unit and fixed costs of $240,000. In 2011, the selling price and variable costs per unit did not change, but the break-even point increased to $900,000. Instructions (a) Compute the variable cost per unit and the contribution margin ratio for 2010. (b) Using the contribution margin ratio, compute the increase in fixed costs for 2011.

In Henderson Company, 50,000 units are produced and 40,000 units are sold. Variable manufacturing costs per unit are $6 and fixed manufacturing costs are $120,000. the cost of the ending finished goods inventory under each costing approach is:

Determine the missing amounts.

A _________________ cost remains constant per unit at every level of activity.

A CVP income statement shows contribution margin instead of gross profit.

Which of the following would be the least controllable fixed costs?

If graphed, fixed costs that behave in a curvilinear fashion resemble a(n)

A cost-volume-profit graph shows the amount of net income or loss at each level of sales.

The increased use of automation and less use of the work force in companies has caused a trend towards an increase in

At the break-even point of 2,500 units, variable costs are $55,000, and fixed costs are $32,000. How much is the selling price per unit?

Danny's Fish Camp has sales of $1,500,000 for the first quarter of 2010. In making the sales, the company incurred the following costs and expenses. Instructions Calculate net income under CVP for 2010.

Under variable costing, fixed manufacturing costs are