The following pertains to Upton Co.for the year ending December 31,2016: \[\begin{array} { | l | r | } \hline \text { Budgeted Sales } & \$ 1,000,000 \\ \hline \text { Break-even Sales } & 700,000 \\ \hline \text { Budgeted Contribution Margin } & 600,000 \\ \hline \text { Cashflow Break-even } & 200,000 \\ \hline \end{array}\]Upton's margin of safety is: (CPA adapted)

A) $300,000. B) $400,000. C) $500,000. D) $800,000. A) $300,000. B) $400,000. C) $500,000. D) $800,000. A

Tower Company manufactures and sells a single product with a positive contribution margin.If the selling price and the variable cost per unit both increase 5% and fixed costs do not change,what is the effect on the contribution margin per unit and the contribution margin ratio? \[\begin{array} { | c | c | c | } \hline & \text { Contrbution margin per unit } & \text { Contribution margin ratio } \\ \hline \text { A. } & \text { No change } & \text { No change } \\ \hline \text { B. } & \text { Increase } & \text { Increase } \\ \hline \text { C. } & \text { Increase } & \text { No change } \\ \hline \text { D. } & \text { Increase } & \text { Decrease } \\ \hline \end{array}\]

A) Option A B) Option B C) Option C D) Option D A) Option A B) Option B C) Option C D) Option D

Nation Inc.sells three products.Last month's results are as follows: \[\begin{array} { | l | r | r | r | } \hline & \text { P1 } & \text { P2 } & \text { P3 } \\ \hline \text { Revenues } & \$ 200,000 & \$ 300,000 & \$ 300,000 \\ \hline \text { Variable costs } & 80,000 & 280,000 & 160,000 \\ \hline \end{array}\] Total fixed costs are $100,000 marketing and $125,000 administrative.Required: (a)What was the operating profit last month? (b)What is Nation's break-even sales volume (at the given mix)? (c)What is Nation's margin of safety?

@#IMG-DLM& (a)$800,000 - 520,000 - 225,0

Evergreen Corporation manufactures circuit boards and is in the process of preparing next year's budget.The pro forma income statement for the current year is presented below. \[\begin{array} { | l | l | l | } \hline \text { Sales } & & \$ 3,500,000 \\ \hline \text { Cost of sales: } & & \\ \hline \text { Direct Material } & \$ 500,000 & \\ \hline \text { Direct labor } & 250,000 & \\ \hline \text { Variable Overhead } & 275,000 & \\ \hline \text { Fiked Overhead } & \underline { 600,000 } & 1,625,000 \\ \hline \text { Gross Profit } & & \$ 1,876,000 \\ \hline \text { Selling and General \& Admin. Exp. } & & \\ \hline \text { Variable } & 750,000 & \\ \hline \text { Fiked } & 250,000 & 1,000,000 \\ \hline \text { Operating Income } & & \$ 875,000 \\ \hline \end{array}\] The break-even point (rounded to the nearest dollar)for Evergreen Corporation for the current year is:

A) $2,625,000. B) $1,865,672. C) $1,724,138. D) $2,155,172. A) $2,625,000. B) $1,865,672. C) $1,724,138. D) $2,155,172.

Dartmount Corporation has provided its contribution format income statement for June.The company produces and sells a single product. \[\begin{array} { | l | r | } \hline \text { Sales } ( 2,900 \text { units) } & \$ 269,700 \\ \hline \text { Variable costs } & 107,300 \\ \hline \text { Contribution margin } & 162,400 \\ \hline \text { Fixed costs } & 137,100 \\ \hline \text { Operating protit } & \$ 25,300 \\ \hline \end{array}\] If the company sells 3,100 units,its total contribution margin should be closest to:

A) $27,045. B) $181,000. C) $162,400. D) $173,600. A) $27,045. B) $181,000. C) $162,400. D) $173,600.

Given the following information: \[\begin{array} { | l | r | } \hline \text { Sales } & \$ 5,000 \\ \hline \text { Fixed Expenses } & 2,000 \\ \hline \text { Variable Expenses } & 1,750 \\ \hline \end{array}\] What would expected net income be if the company experienced a 10 percent increase in fixed costs and a 10 percent increase in sales volume?

A) $1,750. B) $1,550. C) $1,250. D) $1,375. A) $1,750. B) $1,550. C) $1,250. D) $1,375.

Evergreen Corporation manufactures circuit boards and is in the process of preparing next year's budget.The pro forma income statement for the current year is presented below.\[\begin{array} { | l | l | l | } \hline \text { Sales } & & \$ 3,500,000 \\ \hline \text { Cost of sales: } & & \\ \hline \text { Direct Material } & \$ 500,000 & \\ \hline \text { Direct labor } & 250,000 & \\ \hline \text { Variable Overhead } & 275,000 & \\ \hline \text { Fiked Overhead } & \underline { 600,000 } & 1,625,000 \\ \hline \text { Gross Profit } & & \$ 1,876,000 \\ \hline \text { Selling and General \& Admin. Exp. } & & \\ \hline \text { Variable } & 750,000 & \\ \hline \text { Fiked } & 250,000 & 1,000,000 \\ \hline \text { Operating Income } & & \$ 875,000 \\ \hline \end{array}\]The contribution margin ratio for the current year is:

A) 53.6%. B) 49.3%. C) 46.4%. D) 25%. A) 53.6%. B) 49.3%. C) 46.4%. D) 25%.

Rudy Corporation produces and sells a single product.Data concerning that product appear below: \[\begin{array} { | l | r | r | } \hline & \text { Per Uni } & \text { Percent of Sales } \\ \hline \text { Selling price } & \$ 150 & 100 \% \\ \hline \text { Variable costs } & \underline{60 }&\underline{ 40 \%} \\ \hline \text { Contribution margin } & \$ 90 & 60 \% \\ \hline \end{array}\] Fixed costs are $355,000 per month.The company is currently selling 5,000 units per month. Required: The marketing manager believes that a $12,000 increase in the monthly advertising budget would result in a 160 unit increase in monthly sales.What should be the overall effect on the company's monthly operating profit of this change?

The answer of Rudy Corporation produces and sells a single...

Exam 3: Fundamentals of Cost-Volume-Profit Analysis

The following pertains to Upton Co.for the year ending December 31,2016: Budgeted Sales \ 1,000,000 Break-even Sales 700,000 Budgeted Contribution Margin 600,000 Cashflow Break-even 200,000 Upton's margin of safety is: (CPA adapted)

Free

(Multiple Choice)

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Question 1

Correct Answer:

Verified

A

Lake Sales had $2,200,000 in sales last month.The contribution margin ratio was 30% and operating profits were $180,000.What sales volume does Lake's need to yield a $240,000 operating profit?

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(Multiple Choice)

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Question 2

Correct Answer:

Verified

C

Lake Sales had $2,200,000 in sales last month.The contribution margin ratio was 30% and operating profits were $180,000.What is Lake's break-even sales volume?

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(Multiple Choice)

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Question 3

Correct Answer:

Verified

C

Tower Company manufactures and sells a single product with a positive contribution margin.If the selling price and the variable cost per unit both increase 5% and fixed costs do not change,what is the effect on the contribution margin per unit and the contribution margin ratio? Contrbution margin per unit Contribution margin ratio A. No change No change B. Increase Increase C. Increase No change D. Increase Decrease

(Multiple Choice)

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Question 4

Nation Inc.sells three products.Last month's results are as follows: P1 P2 P3 Revenues \ 200,000 \ 300,000 \ 300,000 Variable costs 80,000 280,000 160,000 Total fixed costs are $100,000 marketing and $125,000 administrative.Required: (a)What was the operating profit last month? (b)What is Nation's break-even sales volume (at the given mix)? (c)What is Nation's margin of safety?

(Essay)

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Question 5

Evergreen Corporation manufactures circuit boards and is in the process of preparing next year's budget.The pro forma income statement for the current year is presented below. Sales \ 3,500,000 Cost of sales: Direct Material \ 500,000 Direct labor 250,000 Variable Overhead 275,000 Fiked Overhead 1,625,000 Gross Profit \ 1,876,000 Selling and General \& Admin. Exp. Variable 750,000 Fiked 250,000 1,000,000 Operating Income \ 875,000 The break-even point (rounded to the nearest dollar)for Evergreen Corporation for the current year is:

(Multiple Choice)

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Question 6

Bokay Creations has budgeted annual fixed costs of $240,000 and an estimated variable cost ratio of 60%.Required: (a)Compute Bokay's break-even point in sales dollars. (b)Compute Bokay's margin of safety if the company expects to earn revenues of $800,000. (c)Compute Bokay's expected operating profit at the $800,000 revenue.

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Question 7

Dartmount Corporation has provided its contribution format income statement for June.The company produces and sells a single product. Sales (2,900 units) \ 269,700 Variable costs 107,300 Contribution margin 162,400 Fixed costs 137,100 Operating protit \ 25,300 If the company sells 3,100 units,its total contribution margin should be closest to:

(Multiple Choice)

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Question 8

Broken Arrow Inc.produces and sells a single product.Data concerning that product appear below: Per Unit Percent of Sales Selling price \ 190 100\% Variable costs Contribution margin \ 133 70\% Fixed costs are $226,000 per month.The company is currently selling 2,000 units per month.Required: The marketing manager would like to cut the selling price by $12 and increase the advertising budget by $13,000 per month.The marketing manager predicts that these two changes would increase monthly sales by 200 units.What should be the overall effect on the company's monthly operating profit of these changes?

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Question 9

Operating leverage refers to the extent to which an organization's cost structure is made up of:

(Multiple Choice)

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Question 10

Data concerning Fowler Corporation's single product appear below: Per Uni Percent of Sales Selling price \ 210 100\% Variable costs Contribution margin \ 84 40\% Fixed costs are $444,000 per month.The company is currently selling 7,000 units per month.Required: Management is considering using a new component that would increase the unit variable cost by $2.Since the new component would improve the company's product,the marketing manager predicts that monthly sales would increase by 200 units.What should be the overall effect on the company's monthly operating profit of this change if fixed costs are unaffected?

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Question 11

Opal Company manufactures a single product that it sells for $90 per unit and has a contribution margin ratio of 35%.The company's fixed costs are $46,800.If Opal desires a monthly target operating profit equal to 15% of sales,sales will have to be (rounded):

(Multiple Choice)

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Question 12

The Cornish Corporation has budgeted fixed costs of $125,000 and an estimated selling price of $16.50 per unit.The contribution margin ratio is 40% and the company plans to sell 25,000 units in 2017. Required: (a)Compute the break-even point in dollars. (b)Compute the margin of safety for 2017. (c)Compute the expected operating profit for 2017.

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Question 13

A decrease in the margin of safety would be caused by a(n):

(Multiple Choice)

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Question 14

Boxer Inc.expects its sales in June to be $111,000.The company's contribution margin ratio is 65% and its fixed monthly costs are $64,000. Required: Estimate the company's operating profit for June,assuming that the fixed monthly costs do not change.

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Question 15

Given the following information: Sales \ 5,000 Fixed Expenses 2,000 Variable Expenses 1,750 What would expected net income be if the company experienced a 10 percent increase in fixed costs and a 10 percent increase in sales volume?

(Multiple Choice)

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Question 16

Evergreen Corporation manufactures circuit boards and is in the process of preparing next year's budget.The pro forma income statement for the current year is presented below. Sales \ 3,500,000 Cost of sales: Direct Material \ 500,000 Direct labor 250,000 Variable Overhead 275,000 Fiked Overhead 1,625,000 Gross Profit \ 1,876,000 Selling and General \& Admin. Exp. Variable 750,000 Fiked 250,000 1,000,000 Operating Income \ 875,000 The contribution margin ratio for the current year is:

(Multiple Choice)

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Question 17

In multi-product cost-volume-profit (CVP)analysis,the fixed product mix method and the weighted-average contribution margin method yield different break-even points.

(True/False)

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Question 18

Rudy Corporation produces and sells a single product.Data concerning that product appear below: Per Uni Percent of Sales Selling price \ 150 100\% Variable costs Contribution margin \ 90 60\% Fixed costs are $355,000 per month.The company is currently selling 5,000 units per month. Required: The marketing manager believes that a $12,000 increase in the monthly advertising budget would result in a 160 unit increase in monthly sales.What should be the overall effect on the company's monthly operating profit of this change?

(Essay)

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Question 19

The following monthly data in contribution format are available for the Feta Company and its only product,Product Gamma: Total Per Unit Sales \ 83,700 \ 279 Variable costs Contribution margin 51,000 \ 170 Fixed costs Operating profit \ 11,000 The company produced and sold 300 units during the month and had no beginning or ending inventories.Required: a.Without resorting to calculations,what is the total contribution margin at the break-even point? b.Management is contemplating the use of plastic gearing rather than metal gearing in Product Gamma.This change would reduce variable costs by $18 per unit.The company's sales manager predicts that this would reduce the overall quality of the product and,thus,would result in a decline in sales to a level of 250 units per month.Should this change be made? c.Assume that Feta Company is currently selling 300 units of Product Gamma per month.Management wants to increase sales and feels this can be done by cutting the selling price by $22 per unit and increasing the advertising budget by $20,000 per month.Management believes that these actions will increase unit sales by 50 percent.Should these changes be made? d.Assume that Feta Company is currently selling 300 units of Product Gamma.Management wants to automate a portion of the production process for Product Gamma.The new equipment would reduce direct labor costs by $20 per unit but would result in a monthly rental cost for the new robotic equipment of $10,000.Management believes that the new equipment will increase the reliability of Product Gamma thus resulting in an increase in monthly sales of 12%.Should these changes be made?

(Essay)

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Question 20

The following pertains to Upton Co.for the year ending December 31,2016: Budgeted Sales \ 1,000,000 Break-even Sales 700,000 Budgeted Contribution Margin 600,000 Cashflow Break-even 200,000 Upton's margin of safety is: (CPA adapted)

Lake Sales had $2,200,000 in sales last month.The contribution margin ratio was 30% and operating profits were $180,000.What sales volume does Lake's need to yield a $240,000 operating profit?

Lake Sales had $2,200,000 in sales last month.The contribution margin ratio was 30% and operating profits were $180,000.What is Lake's break-even sales volume?

Operating leverage refers to the extent to which an organization's cost structure is made up of:

Opal Company manufactures a single product that it sells for $90 per unit and has a contribution margin ratio of 35%.The company's fixed costs are $46,800.If Opal desires a monthly target operating profit equal to 15% of sales,sales will have to be (rounded):

A decrease in the margin of safety would be caused by a(n):

Boxer Inc.expects its sales in June to be $111,000.The company's contribution margin ratio is 65% and its fixed monthly costs are $64,000. Required: Estimate the company's operating profit for June,assuming that the fixed monthly costs do not change.

Given the following information: Sales \ 5,000 Fixed Expenses 2,000 Variable Expenses 1,750 What would expected net income be if the company experienced a 10 percent increase in fixed costs and a 10 percent increase in sales volume?

In multi-product cost-volume-profit (CVP)analysis,the fixed product mix method and the weighted-average contribution margin method yield different break-even points.

Cost Accounting: Information for Decision Making

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Fundamentals of Management Control Systems

Planning and Budgeting

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Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

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