Exam 19: Cost-Volume-Profit Analysis: Additional Issues

What is the key factor in determining sales mix if a company has limited resources?

In 2016, 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 2017. If Hagar cuts selling price by 4%, what is Hagar's break-even point in units for 2017?

In 2016, Teller Company sold 3,000 units at $600 each. Variable expenses were $420 per unit, and fixed expenses were $240,000. What was Teller's 2016 net income?

Nancy Sound, president of Crosley Corp., has heard about operating leverage and asks you to explain this term. What is operating leverage? How does a company increase its operating leverage?

Use the following information for questions . Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Swanson incurs $6,660,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. -The break-even point in dollars is

Woolford's CVP income statement included sales of 5,000 units, a selling price of $50, variable expenses of $30 per unit, and net income of $25,000. Fixed expenses are

If Sprinkle Industries has a margin of safety ratio of .60, it could sustain a 60 percent decline in sales before it would be operating at a loss.

Ramirez Corporation sells two types of computer hard drives. The sales mix is 30% (Q-Drive) and 70% (Q-Drive Plus). Q-Drive has variable costs per unit of $90 and a selling price of $150. Q-Drive Plus has variable costs per unit of $105 and a selling price of $195. The weighted-average unit contribution margin for Ramirez is

For Pierce Company, sales is $500,000, variable expenses are $340,000, and fixed expenses are $140,000. Pierce's contribution margin ratio is

Miller Manufacturing's degree of operating leverage is 1.5. Warren Corporation's degree of operating leverage is 3. Warren's earnings would go up (or down) by ________ as much as Miller's with an equal increase (or decrease) in sales.

The ______________ income statement classifies cost as variable or fixed and computes a contribution margin.

Hinge Manufacturing's cost of goods sold is $420,000 variable and $240,000 fixed. The company's selling and administrative expenses are $300,000 variable and $360,000 fixed. If the company's sales is $1,580,000, what is its net income?

Hewitt Co. has 4,000 machine hours available to produce either Product 22 or Product 44. The cost accounting department developed the following unit information for each product: Instructions Management wants to know which product to produce in order to maximize the company's income. Taking into consideration the constraints under which the company operates, prepare a report to show which product should be produced and sold.

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

Kindle, Inc. manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 12.5% of sales. The income statement for the year ending December 31, 2016, is as follow. The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 10% and incur additional fixed costs of $13 million. Instructions (a) Under the current policy of using a network of sales agents, calculate Kindle, Inc.'s break-even point in sales dollars for the year 2016. (b) Calculate the company's break-even point in sales dollars for the year 2016 if it hires its own sales force to replace the network of agents. (c) Calculate the degree of operating leverage at sales of $130 million if (1) Kindle, Inc. uses sales agents, and (2) Kindle, Inc. employs its own sales staff.

If a company has limited machine hours available for production, it is generally more profitable to produce and sell the product with the highest contribution margin per machine hour.

An investment banker is analyzing two companies that specialize in the production and sale of gourmet cappuccino and chai mixes. Roasted Beans Co. uses a labor-intensive approach and Monat Industries uses a mechanized system. Variable costing income statements for the two companies are shown below: The investment banker is interested in acquiring one of these companies. However, she is concerned about the impact that each company's cost structure might have on its profitability. Instructions (a) Calculate each company's degree of operating leverage. (b) Determine the effect on each company's net income if sales decrease by 10% and if sales increase by 15%. Do not prepare income statements.

The following CVP income statements are available for Chantal Corp. and Mantle, Inc. Instructions (a) Compute the degree of operating leverage for each company. (b) Assume that sales revenue decreases by 20%. Prepare a CVP income statement for each company.

Capitol Manufacturing sells 4,000 units of Product A annually, and 6,000 units of Product B annually. The sales mix for Product A is

In 2016, Teller Company sold 3,000 units at $600 each. Variable expenses were $420 per unit, and fixed expenses were $270,000. The same selling price, variable expenses, and fixed expenses are expected for 2017. What is Teller's break-even point in units for 2017?