Exam 3: Costvolumeprofit Relationships

Variable cost is the ratio of variable rate to sales.

Variable cost per unit equals sales price minus contribution margin.

Sales price minus variable cost per unit equals:

If the variable cost of an item is $4.00, and the sales price is $6.00, the contribution rate for the item is $2.00.

To achieve the greatest possible accuracy when calculating the breakeven point for a given restaurant, one should treat labor as:

Sales equals:

Given sales of $120,000, variable costs of $48,000, and fixed costs of $60,000, profit is:

Given average variable cost of $4.20 and average variable rate of .3, contribution margin is:

Given sales price of $8.00 and variable rate of .4, contribution margin is:

Dollar volume required to break even can be calculated if one knows fixed costs, selling prices, and average number of sales.

Variable rate equals sales price divided by variable cost.

It is possible to determine the number of sales required for an establishment to break even provided one knows fixed costs and:

If product cost is increased while sales price is held constant, higher average variable rate will result.

In smaller restaurants, the cost of labor is often treated as a fixed cost.

Given fixed costs of $95,000, a profit target of $25,000, and a variable rate of .4, the dollar sales volume required to achieve the target profit would be:

Lower food cost percents will necessarily lead to increased profits.

If a restaurant manager succeeds in reducing average variable cost, a higher number of customers will be required for the restaurant to break even, assuming fixed costs remain the same.

A higher average contribution margin per sale requires an increase in the number of sales needed to cover given fixed costs.

VR equals:

Which of the following formulas is incorrect: