Exam 3: Analysis of Cost, volume, and Pricing to Increase Profitability

The pricing strategy that begins with the determination of a price at which a product will sell and then focuses on developing a cost structure for the product that will yield a profit is known as:

M and M,Inc.produces a product that has a variable cost of $3.00 per unit.The company's fixed costs are $30,000.The product is sold for $5.00 per unit and the company desires to earn a target profit of $20,000.What is the amount of sales that will be necessary to earn the desired profit?

Rocky Mountain Bottling Company produces a soft drink that is sold for a dollar.At production and sales of 800,000 units,the company pays $600,000 in production costs,half of which are fixed costs.At that volume,general,selling,and administrative costs amount to $250,000,of which $70,000 are fixed costs.What is the amount of contribution margin per unit?

Zeus,Inc.produces a product that has a variable cost of $9.50 per unit.The company's fixed costs are $40,000.The product sells for $12.00 a unit and the company desires to earn a $20,000 profit.What is the volume of sales in units required to achieve the target profit? (Do not round intermediate calculations.)

Martinez Company sells one product that has a sales price of $20 per unit,variable costs of $8 per unit,and total fixed costs of $200,000.what is the contribution margin ratio?

A margin of safety of 30% means that every dollar in revenue generates thirty cents in profit.

At the break-even point:

Contribution margin ratio will remain the same at various levels of sales even if total fixed costs are altered.

Company A makes and sells a single product,unless otherwise indicated.What happens to the break-even point when the variable cost per unit decreases?

Falls Company has a contribution margin of $32 per unit and fixed costs of $500,000,and it desires to earn a profit of $100,000.What is the sales volume in units required to achieve this desired profit?

Select the correct statement regarding break-even point analysis.

Cooper Company sells a product at $50 per unit that has unit variable costs of $20.The company's break-even sales point in sales dollars is $150,000.How much profit will the company make if it sells 4,000 units?

Database software is especially useful for performing cost-volume-profit sensitivity analysis.

Consider the following cost-volume-profit graph: The line designated by the letter (B)represents which of the following?

Which of the following is not an assumption made when performing cost-volume-profit analysis?

Jensen Company has a contribution margin ratio of 45%.This means that its variable costs are 55% of sales.

Phan Company has not reported a profit in five years.This year the company would like to narrow its loss to $7,500.Assuming its selling price is $36.50 per unit and its variable costs per unit are $24,how many units must be sold to achieve its target given that total fixed costs are $60,000? (Do not round intermediate calculations.)

Which of the following statements regarding Company A is incorrect?

What does the margin of safety measure?

How does the cost-volume-profit model accommodate non-linear costs and revenues?