Exam 18: Cost Behavior and Cost-Volume-Profit Analysis

Assume that sales are predicted to be $3,750, the expected contribution margin is $1,500, and a net loss of $250 is anticipated. The break-even point in sales dollars is:

Contribution margin ratio is calculated as the ________________ divided by _____________.

Thomas Company has total fixed costs of $360,000 and variable costs of $14 per unit. If the unit sales price is reduced from $24 to $20 and advertising is increased by $10,000, sales will increase from 40,000 to 65,000 units. -What are the contribution margin and net income under the current conditions?

The ______________________ is the sales level at which a company neither earns a profit nor incurs a loss.

A method that estimates cost behavior by connecting the costs linked to the highest and lowest volume levels on a scatter diagram with a straight line is called the:

Macleod Company's product has a contribution margin per unit of $62.50 and a contribution margin ratio of 25%. What is the per unit selling price of the product?

On a typical cost-volume-profit graph, unit sales are shown on the horizontal axis and both dollars of sales and dollars of costs are represented on the vertical axis.

Hess Co. manufactures a product that sells for $12 per unit. Total fixed costs are $96,000 and variable costs are $7 per unit. Hess can buy a newer production machine that will increase total fixed costs by $22,800 but variable costs will be decreased by $0.40 per unit. What effect would the purchase of the new machine have on Hess's break-even point in units?

Briefly describe a CVP chart, including its major components.

A term describing a firm's normal range of operating activities is:

Break-even analysis cannot be applied in a multiproduct situation.

A company's normal operating range, which excludes extremely high and low volumes that are not likely to occur, is called the:

Narrows Co. is considering the production and sale of a new product line with the following sales and cost data: unit sales price $125; unit variable costs $75; and total fixed costs of $140,000. Calculate the break-even point: (a) In units. (b) In dollar sales.

An important assumption in the analysis of a multiproduct situation is that the sales mix is known and remains constant.

A product sells for $200 per unit, and its variable costs per unit are $130. The fixed costs are $420,000. What is the break-even point in dollar sales?

A firm expects to sell 25,000 units of its product at $11 per unit. Pretax income is predicted to be $60,000. If the variable costs per unit are $6, total fixed costs must be:

Total contribution margin in dollars divided by pretax income is the:

A company manufactures and sells spotlights. Each spotlight sells for $145. The variable cost per unit is $98, and the company's total fixed costs are $235,000. Predicted sales are 15,000 units. What is the contribution margin per unit?

During the past year a company had total fixed costs of $70,000. Its product sold for $9 per unit. Variable costs during this time equaled $5 per unit. Next year the company is anticipating a 4% increase in total fixed costs and a $1 per unit decrease in variable costs, but would like to maintain its current selling price per unit. How many units must the company sell next year to earn $1,000,000? (Round answer to complete units.)

A cost that remains constant over a limited range of volume, but increases by a lump sum when volume increases beyond a maximum amount, is a(n):