Exam 6: Financial Modeling for Short-Term Decision Making

When sales dollars are used as the measure of volume in the cost-volume-profit equation,the focus is on solving for total revenue required to break even or a target profit rather than total units.Break-Even Point in Sales Dollars equals which of the following?

The following equation is used for determining cost-volume-profit relationships by firms Total Cost = (Unit-Level Cost ´ Number of Units) + (Batch-Level Cost ´ Batch Cost Driver Activity) + (Product-Level Cost ´ Product Cost Driver Activity) + (Customer-Level Cost ´ Customer Cost Driver Activity) + (Facility-Level Cost ´ Facility-Cost Driver Activity)

Manufacturers using computer-integrated manufacturing systems have a large investment in plant and equipment.This results in which of the following cost structures?

A company's selling price is $12 per unit,variable cost is $3 per unit,and fixed costs are $25,000.What is the break-even point in sales dollars?

Discuss why cost-volume-profit analysis could be useful to managers.

Shenandoah Company Shenandoah Company is considering the introduction of a new product with the following price and cost characteristics The company expects to sell 2,000 units for the year. Refer to Shenandoah Company.How many units must be sold to make an operating profit of $15,000?

Identify the underlying assumptions of cost-volume-profit analysis.

Sun Devil,Inc. Sun Devil,Inc.is considering the introduction of a new product with the following price and cost characteristics It expects to sell 70,000 units for the year. Refer to Sun Devil,Inc;if 7,000 units are sold,what operating profit is expected?

Shenandoah Company Shenandoah Company is considering the introduction of a new product with the following price and cost characteristics The company expects to sell 2,000 units for the year. Refer to Shenandoah Company.If 2,000 units are sold,what operating profit is expected?

Cost-volume-profit analysis includes some inherent,simplifying assumptions.Which of the following is not one of these assumptions?

If a company's sales price per unit is $100,variable costs per unit are $60,and fixed costs for the year are $600,000.How many units must the company sell to break even?

Which of the following represents the margin of safetyin units?

TopSail Company TopSail Company produces one type of machine with the following costs and revenues for the year Refer to the TopSail Company.Calculate the variable cost per unit.

What is the formula for the Break-Even Point in Units?

Which of the following statements is the correct calculation for the margin of safety in dollars?

The extent to which an organization's cost structure is made up of fixed costs is called its

Multiple-product profit analysis.Miguel's Supreme Tacos produces two types of soft tacos,chicken and steak,with the following characteristics: The total fixed costs for the company are $200,000. Required: a.What is the anticipated level of profits for the expected sales volumes? b.Assuming that the product mix would be 40 percent chicken and 60 percent steak at the break-even point,compute the break-even volume. c.If the product sales mix were to change to four chicken tacos for each steak taco,what would be the new break-even volume?

What effect would a decrease in wage rates (applicable to direct,strictly variable,labor)have on the break-even point and the contribution margin? Break-even Point Contribution Margin

What enables analysts to test the interaction of economic variables in a variety of settings?

Break-even and target profits;volume defined in sales dollars.The manager of Jose's Food Court Express estimates operating costs for the year will total $300,000 for fixed costs. Required: a.Find the break-even point in sales dollars with a contribution margin ratio of 40 percent. b.Find the break-even point in sales dollars with a contribution margin ratio of 25 percent. c.Find the sales dollars required with a contribution margin ratio of 40 percent to generate a profit of $100,000. (Jose's Food Court Express;break-even and target profits;volume defined in sales dollars. )