Exam 6: How Is Cost-Volume-Profit Analysis Used for Decision Making

Exhibit 6-5 Estrada Incorporated produces two different products with the following monthly data. -Refer to Exhibit 6-5.What would be the operating profit if total fixed costs increase 10 percent?

Exhibit 6-3 Howard Company sells mountain bikes for $1,400 per unit representing 40 percent of total sales,and cruising bikes for $1,000 per unit representing 60 percent of total sales.Variable cost per unit is $600 for mountain bikes and $500 for cruising bikes. -Refer to Exhibit 6-3.What is the contribution margin per unit for each product?

Exhibit 6-8 Perry,Inc.produced 15,000 units during the year.Of these,12,000 were sold for $50 each.Other Perry,Inc.data are as follows: -Refer to Exhibit 6-8.Calculate Perry's operating profit assuming the company uses variable costing.

Operating leverage refers to the level of fixed costs within an organization.

Contribution margin per unit is calculated by subtracting variable costs per unit and fixed costs per unit from the selling price per unit.

Smart Products Inc.produces smart phones.The company has no finished goods inventory at the beginning of year 1.The following information pertains to Smart Products Inc.

Exhibit 6-1 Larimer Company has monthly fixed costs totaling $90,000 and variable costs of $5 per unit.Each unit of product is sold for $20. -Refer to Exhibit 6-1.How many units must be sold to earn a monthly profit of $135,000?

Exhibit 6-1 Larimer Company has monthly fixed costs totaling $90,000 and variable costs of $5 per unit.Each unit of product is sold for $20. -Refer to Exhibit 6-1.What is the break-even point in units?

It is important for all profit and non-profit companies to determine their profit desired after accounting for income taxes.

Huston Company has annual fixed costs totaling $3,000,000 and variable costs of $450 per unit.Each unit of product is sold for $850.Assume a tax rate of 30 percent.How many units must be sold to earn an annual profit of $210,000 after taxes?

Using the information below,identify the mathematical equation used to find total profit. S= Selling price per unit; V= Variable cost per unit; F= Total fixed costs;and Q= Quantity of units produced and sold

Designer Jackets,Inc.produces blazers and has the following data available on these products. (1)How many units must be sold to earn a monthly profit of $180,000 after taxes? (2)How many sales dollars are required to earn a monthly profit of $180,000 after taxes?

Exhibit 6-5 Estrada Incorporated produces two different products with the following monthly data. -Refer to Exhibit 6-5.What would be the operating profit if the Charcoal Barbecue sales volume increases 100 units with a corresponding decrease of 100 units in Gas Barbecue sales?

The break-even point in sales dollars is the total sales dollars minus the total contribution margin.

Absorption costing treats all manufacturing costs as period costs.

The local nonprofit youth symphony is planning a concert fundraiser.The organization estimates that 550 tickets can be sold for $16 per person.The fixed costs are $720.The local chamber of commerce office will process ticket orders for a fee of $4 per ticket,to relieve the youth symphony of this responsibility. (1)How many tickets does your organization have to sell to break even? (2)How many tickets does your organization have to sell to earn a profit of $4,320? (3)How much must your organization have in sales dollars to break even (rounded to the nearest cent)? (4)How much must your organization have in sales dollars to earn a profit of $4,320 (rounded to the nearest cent)? (5)What is the organization's margin of safety in units and in sales dollars?

Paco's Bikes sells 120 bicycles each month for $400 per unit.Variable cost per unit is $160 and fixed costs total $4,800 per month.What is the contribution margin ratio?

Absorption costing treats fixed manufacturing overhead costs as product costs.

The contribution margin per unit is the amount each unit sold contributes to covering fixed costs and increasing profit.