Exhibit 6-5 Estrada Incorporated produces two different products with the following monthly data. $\begin{array}{llcc} &\text { Charcoal } & \text { Gas } & \text { Total } \\ &\text { Barbecues } & \text { Barbecues } &\\ \text { Selling price per unit } & \$ 150 & \$ 600 & \\ \text { Variable cost per unit } & \$ 60 & \$ 360 & \\ \text { Expected unit sales } & 1,400 & 600 & 2,000 \\ \text { Sales mix } & 70 \% & 30 \% & 100 \% \\ \text { Fixed costs } & & & \$ 180,000 \end{array}$ -Refer to Exhibit 6-5.What would be the operating profit if total fixed costs increase 10 percent?

A) $72,000 B) $99,000 C) $108,000 D) $81,000 E) None of the answer choices is correct. A) $72,000 B) $99,000 C) $108,000 D) $81,000 E) None of the answer choices is correct.

Exhibit 6-4 Sanchez Company produces two different remote control products with the following monthly data for the most recent month: $\begin{array}{lccc} & \text { Plane } & \text { Boat } & \text { Total } \\ \text { Selling price per unit } & \$ 300 & \$ 100 & \\ \text { Variable cost per unit } & \$ 240 & \$ 60 & \\ \text { Expected unit sales } & 28,000 & 7,000 & 35,000 \\ \text { Sales mix } & 80 \% & 20 \% & 100 \% \\ \text { Fixed costs } & & & \$ 1,400,000 \end{array}$ -Refer to Exhibit 6-4.If the sales mix shifts to 50 percent planes and 50 percent boats,what happens to the weighted average contribution margin per unit?

A) It decreases. B) It increases. C) It is not affected. D) There is not enough information to answer this question. A) It decreases. B) It increases. C) It is not affected. D) There is not enough information to answer this question.

Exhibit 6-5 Estrada Incorporated produces two different products with the following monthly data. $\begin{array}{llcc} &\text { Charcoal } & \text { Gas } & \text { Total } \\ &\text { Barbecues } & \text { Barbecues } &\\ \text { Selling price per unit } & \$ 150 & \$ 600 & \\ \text { Variable cost per unit } & \$ 60 & \$ 360 & \\ \text { Expected unit sales } & 1,400 & 600 & 2,000 \\ \text { Sales mix } & 70 \% & 30 \% & 100 \% \\ \text { Fixed costs } & & & \$ 180,000 \end{array}$ -Refer to Exhibit 6-5.What would be the operating profit if the Charcoal Barbecue sales price decreases 20 percent?

A) $132,000 B) $50,400 C) $18,000 D) $48,000 E) None of the answer choices is correct. A) $132,000 B) $50,400 C) $18,000 D) $48,000 E) None of the answer choices is correct.

Exhibit 6-4 Sanchez Company produces two different remote control products with the following monthly data for the most recent month: $\begin{array}{lccc} & \text { Plane } & \text { Boat } & \text { Total } \\ \text { Selling price per unit } & \$ 300 & \$ 100 & \\ \text { Variable cost per unit } & \$ 240 & \$ 60 & \\ \text { Expected unit sales } & 28,000 & 7,000 & 35,000 \\ \text { Sales mix } & 80 \% & 20 \% & 100 \% \\ \text { Fixed costs } & & & \$ 1,400,000 \end{array}$ -Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales. How many units in total must be sold to earn a monthly profit of $504,000?

A) 43,273 B) 19,040 C) 38,080 D) 34,000 E) None of the answer choices is correct. A) 43,273 B) 19,040 C) 38,080 D) 34,000 E) None of the answer choices is correct.

Exhibit 6-5 Estrada Incorporated produces two different products with the following monthly data. $\begin{array}{llcc} &\text { Charcoal } & \text { Gas } & \text { Total } \\ &\text { Barbecues } & \text { Barbecues } &\\ \text { Selling price per unit } & \$ 150 & \$ 600 & \\ \text { Variable cost per unit } & \$ 60 & \$ 360 & \\ \text { Expected unit sales } & 1,400 & 600 & 2,000 \\ \text { Sales mix } & 70 \% & 30 \% & 100 \% \\ \text { Fixed costs } & & & \$ 180,000 \end{array}$ -Refer to Exhibit 6-5.What is the operating profit?

A) $90,000 B) $570,000 C) $270,000 D) $255,000 E) None of the answer choices is correct. A) $90,000 B) $570,000 C) $270,000 D) $255,000 E) None of the answer choices is correct.

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

Exhibit 6-6 Sauer Company sells folding chairs for $40.00 per unit.Variable cost is $15.00 per unit.Each chair requires 4 direct labor hours and 2 machine hours to produce. -Refer to Exhibit 6-6.Which of the following is the correct contribution margin per direct labor hour?

(Multiple Choice)

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Question 41

A company makes four products.If it sells everything it produces and is only constrained by finding enough skilled labor,then its goal should be to maximize the contribution margin per labor-hour.

(True/False)

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Question 42

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.Assume that Larimer Company expects to sell 11,000 units of product this coming month.What is the margin of safety in units?

(Multiple Choice)

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Question 43

Which of the following companies would most likely have a high operating leverage?

(Multiple Choice)

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Question 44

Exhibit 6-5 Estrada Incorporated produces two different products with the following monthly data. Charcoal Gas Total Barbecues Barbecues Selling price per unit \ 150 \ 600 Variable cost per unit \ 60 \ 360 Expected unit sales 1,400 600 2,000 Sales mix 70\% 30\% 100\% Fixed costs \ 180,000 -Refer to Exhibit 6-5.What would be the operating profit if total fixed costs increase 10 percent?

(Multiple Choice)

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Question 45

Exhibit 6-2 Victor Company makes a single product.The company has monthly fixed costs totaling $200,000 and variable costs of $20 per unit.Each unit of product is sold for $35.Brevard expects to sell 25,000 units each month. -Refer to Exhibit 6-2.What is the monthly operating profit?

(Multiple Choice)

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Question 46

Exhibit 6-4 Sanchez Company produces two different remote control products with the following monthly data for the most recent month: Plane Boat Total Selling price per unit \ 300 \ 100 Variable cost per unit \ 240 \ 60 Expected unit sales 28,000 7,000 35,000 Sales mix 80\% 20\% 100\% Fixed costs \ 1,400,000 -Refer to Exhibit 6-4.If the sales mix shifts to 50 percent planes and 50 percent boats,what happens to the weighted average contribution margin per unit?

(Multiple Choice)

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Question 47

The break-even point is the number of units or sales dollars that must be sold to achieve zero profit.

(True/False)

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Question 48

Exhibit 6-5 Estrada Incorporated produces two different products with the following monthly data. Charcoal Gas Total Barbecues Barbecues Selling price per unit \ 150 \ 600 Variable cost per unit \ 60 \ 360 Expected unit sales 1,400 600 2,000 Sales mix 70\% 30\% 100\% Fixed costs \ 180,000 -Refer to Exhibit 6-5.What would be the operating profit if the Charcoal Barbecue sales price decreases 20 percent?

(Multiple Choice)

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Question 49

Sensitivity analysis is also called "what-if analysis."

(True/False)

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Question 50

Exhibit 6-4 Sanchez Company produces two different remote control products with the following monthly data for the most recent month: Plane Boat Total Selling price per unit \ 300 \ 100 Variable cost per unit \ 240 \ 60 Expected unit sales 28,000 7,000 35,000 Sales mix 80\% 20\% 100\% Fixed costs \ 1,400,000 -Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales. How many units in total must be sold to earn a monthly profit of $504,000?

(Multiple Choice)

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Question 51

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?

(Multiple Choice)

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Question 52

Exhibit 6-5 Estrada Incorporated produces two different products with the following monthly data. Charcoal Gas Total Barbecues Barbecues Selling price per unit \ 150 \ 600 Variable cost per unit \ 60 \ 360 Expected unit sales 1,400 600 2,000 Sales mix 70\% 30\% 100\% Fixed costs \ 180,000 -Refer to Exhibit 6-5.What is the operating profit?

(Multiple Choice)

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Question 53

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?

(Multiple Choice)

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Question 54

Which of the following companies would be most likely to use the break-even point expressed in units?

(Multiple Choice)

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Question 55

When a company that produces multiple products faces a constraint in areas such as labor hours or machine hours,managers often prefer to maximize the contribution margin per unit of constraint.

(True/False)

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Question 56

The weighted average contribution margin ratio is calculated by taking total contribution margin divided by total sales.

(True/False)

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Question 57

All of the following are assumptions required to perform break-even and target profit calculations except:

(Multiple Choice)

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Question 58

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?

(Multiple Choice)

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Question 59

Firms with high operating leverage tend to make more from increasing sales than similar firms with low operating leverage.

(True/False)

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Question 60

Exhibit 6-6 Sauer Company sells folding chairs for $40.00 per unit.Variable cost is $15.00 per unit.Each chair requires 4 direct labor hours and 2 machine hours to produce. -Refer to Exhibit 6-6.Which of the following is the correct contribution margin per direct labor hour?

A company makes four products.If it sells everything it produces and is only constrained by finding enough skilled labor,then its goal should be to maximize the contribution margin per labor-hour.

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.Assume that Larimer Company expects to sell 11,000 units of product this coming month.What is the margin of safety in units?

Which of the following companies would most likely have a high operating leverage?

Exhibit 6-2 Victor Company makes a single product.The company has monthly fixed costs totaling $200,000 and variable costs of $20 per unit.Each unit of product is sold for $35.Brevard expects to sell 25,000 units each month. -Refer to Exhibit 6-2.What is the monthly operating profit?

The break-even point is the number of units or sales dollars that must be sold to achieve zero profit.

Sensitivity analysis is also called "what-if analysis."

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?

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?

Which of the following companies would be most likely to use the break-even point expressed in units?

When a company that produces multiple products faces a constraint in areas such as labor hours or machine hours,managers often prefer to maximize the contribution margin per unit of constraint.

The weighted average contribution margin ratio is calculated by taking total contribution margin divided by total sales.

All of the following are assumptions required to perform break-even and target profit calculations except:

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?

Firms with high operating leverage tend to make more from increasing sales than similar firms with low operating leverage.

What Is Managerial Accounting

How Is Job Costing Used to Track Production Costs

How Does an Organization Use Activity-Based Costing to Allocate Overhead Costs

How Is Process Costing Used to Track Production Costs

How Do Organizations Identify Cost Behavior Patterns

How Are Relevant Revenues and Costs Used to Make Decisions

How Is Capital Budgeting Used to Make Decisions

How Are Operating Budgets Created

How Do Managers Evaluate Performance Using Cost Variance Analysis

How Do Managers Evaluate Performance in Decentralized Organizations

How Is the Statement of Cash Flows Prepared and Used

How Do Managers Use Financial and Nonfinancial Performance Measures

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