Exam 9: Break-Even Point and Cost-Volume-Profit Analysis

Broncho Lids Corporation manufactures a western-style hat that sells for $10 per unit.This is its sole product and it has projected the break-even point at 50,000 units in the coming period.If fixed costs are projected at $100,000,what is the projected contribution margin ratio?

Tisdale Company reported the following results from sales of 5,000 units of Product A for June: Sales                                                                         $\$ 200,000$ Variable costs                                                         (120,000) Fixed costs                                                            $\underline{(60,000)}$ Operating income                                                  $\underline{\$20,000}$ Assume that Tisdale increases the selling price of Product A by 10 percent in July.How many units of Product A would have to be sold in July to generate an operating income of $20,000?

Surfside Corporation Surfside Corporation manufactures and sells two products: A and B.The operating results of the company are as follows:                                               $\text {\underline{ Product A } }$ $\text {\underline{ Procluct B} }$ Sales in units 2,000 3,000 Sales price per unit \ 10 \ 5 Variable costs per unit 7 3 In addition,the company incurred total fixed costs in the amount of $9,000.

After the level of volume exceeds the break-even point

When computing profit on an after-tax basis,it is necessary to divide the pretax profit by the effective tax rate.

The Jordan Company makes three products.The cost data for these three products is as follows:                              $\text {\underline{ Product A} }$   $\text {\underline{ Product B} }$   $\text {\underline{ Product C} }$ Selling price \ 10 \ 20 \4 0 Wariable cocte 7 12 16 Total annual fixed costs are $840,000. The firm's experience has been that about 20 percent of dollar sales come from product A, 60 percent from B, and 20 percent from C. Required: a. Compute break-even in sales dollars. b. Determine the number of units to be sold at the break-even point.

With respect to fixed costs,CVP analysis assumes total fixed costs

Given the following notation,what is the break-even sales level in units? SP = selling price per unit,FC = total fixed cost,VC = variable cost per unit

Burns Corporation Information relating to the current operations of Burns Corporation follows: Sales                                                                         $\$ 120,000$ Variable costs                                                          $\underline{(36,000)}$ Contribution margin                                                  $84,000 Fixed costs                                                            $\underline{(70,000)}$ Profit before taxes                                                  $\underline{\$14,000}$ Refer to Burns Corporation.Compute Burns's degree of operating leverage.

Parker Company Below is an income statement for Parker Company: Sales                                                                         $\$ 400,000$ Variable costs                                                          $\underline{(125,000)}$ Contribution margin                                                  $275,000 Fixed costs                                                            $\underline{(200,000)}$ Profit before taxes                                                  $\underline{\$75,000}$ Refer to Parker Company.What is Parker's degree of operating leverage?

Blue Mountain Company manufactures a single product.In the prior year,the company had sales of $90,000,variable costs of $50,000,and fixed costs of $30,000.Blue Mountain expects its cost structure and sales price per unit to remain the same in the current year,however total sales are expected to increase by 20 percent.If the current year projections are realized,net income should exceed the prior year's net income by:

Cost-volume-profit relationships that are curvilinear may be analyzed linearly by considering only

The margin of safety is a key concept of CVP analysis.The margin of safety is the

Parker Company Below is an income statement for Parker Company: Sales                                                                         $\$ 400,000$ Variable costs                                                          $\underline{(125,000)}$ Contribution margin                                                  $275,000 Fixed costs                                                            $\underline{(200,000)}$ Profit before taxes                                                  $\underline{\$75,000}$ Refer to Parker Company.Based on the cost and revenue structure on the income statement,what was Parker's break-even point in dollars?

What important information is conveyed by the margin of safety calculation in CVP analysis?

Daybreak Corporation Daybreak Corporation manufactures and sells two products: A and B.The operating results of the company are as follows:                                               $\text {\underline{ Product A } }$ $\text {\underline{ Procluct B} }$ Sales in units 3,000 4,000 Sales price per unit \ 12 \ 7 Variable costs per unit 6 4 In addition,the company incurred total fixed costs in the amount of $10,000.

Real Products Company Real Products Company produces and sells a single product.Information on its costs follow: Variable costs: SG\&A \ 2 per unit Prochuction \ 4 per unit Fixed costs: SG\&A \ 12,000 per year Prochuction \ 15,000 per year Refer to Real Products Company.In the upcoming year,Real Products Company estimates that it will produce and sell 4,000 units.The variable costs per unit and the total fixed costs are expected to be the same as in the current year.However,it anticipates a sales price of $16 per unit.What is Real Products Company's projected margin of safety for the coming year?

Daybreak Corporation Daybreak Corporation manufactures and sells two products: A and B.The operating results of the company are as follows:                                               $\text {\underline{ Product A } }$ $\text {\underline{ Procluct B} }$ Sales in units 3,000 4,000 Sales price per unit \ 12 \ 7 Variable costs per unit 6 4 In addition,the company incurred total fixed costs in the amount of $10,000.

Austin,Brown,and Freeman Companies Below are income statements that apply to three companies: Austin,Brown,and Freeman:

	Austin Co.	Brown Co.	Freeman Co.
Sales	$100	$100	$100
Variable costs	(10)	(20)	(30)
Contribution margin	$ 90	$ 80	$ 70
Fixed costs	(30)	(20)	(10)
Profit before taxes	$ 60	$ 60	$ 60

Refer to Austin,Brown,and Freeman Companies.Within the relevant range,if sales go up by one unit for each firm,which firm will experience the greatest increase in net income?

Austin,Brown,and Freeman Companies Below are income statements that apply to three companies: Austin,Brown,and Freeman:

	Austin Co.	Brown Co.	Freeman Co.
Sales	$100	$100	$100
Variable costs	(10)	(20)	(30)
Contribution margin	$ 90	$ 80	$ 70
Fixed costs	(30)	(20)	(10)
Profit before taxes	$ 60	$ 60	$ 60

Refer to Austin,Brown,and Freeman Companies.Within the relevant range,if sales go up by $1 for each firm,which firm will experience the greatest increase in profit?