Chita Corporation produces and sells a single product.The company's contribution format income statement for January appears below: \[\begin{array} { | l | r | } \hline \text { Sales } ( 5,500 \text { units) } & \$ 297,000 \\ \hline \text { Variable costs } & 165,000 \\ \hline \text { Contribution margin } & 132,000 \\ \hline \text { Fixed costs } & \underline{105,300} \\ \hline \text { Operating protit } & \$ 26,700 \\ \hline \end{array}\] Required: Redo the company's contribution format income statement assuming that the company sells 5,700 units.

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

Lamar has the following data: $\begin{array}{c} \begin{array}{|l|} \hline \text {Selling Price}\\ \text {Variable manufacturing cost}\\ \hline\\ \text {Fixed manutacturing cost.}\\ \hline \text {Variable selling \& administrative}\\ \text {costs}\\ \hline \\ \text {Fixed selling \& administrative costs}\\ \hline \end{array} \begin{array}{l|} \hline\$ 40 \\ \$ 22 \\ \hline \\ \$ 150,000 \\ \hline\\ \$ 6 \\ \hline\\ \$ 120,000 \\ \hline \end{array} \begin{array}{l|} \hline\\ \\ \hline \text {per}\\ \text {month}\\ \hline\\ \\ \hline \text {per}\\ \text {month}\\ \hline \end{array} \end{array}$ If Lamar produces and sells 30,000 units,what is the margin of safety in units?

A) 5,000 units. B) 7,500 units. C) 22,500 units. D) 30,000 units. A) 5,000 units. B) 7,500 units. C) 22,500 units. D) 30,000 units.

You have been provided with the following information: \[\begin{array} { | l | r | } \hline & \text { Total } \\ \hline \text { Sales } & \$ 90,000 \\ \hline \text { Less Variable expenses } &\underline{ 54,000 }\\ \hline \text { Contribution margin } & 36,000 \\ \hline \text { Less fixed expenses } & \underline { 24,000 } \\ \hline \text { Operating profit } & \$ 12,000 \\ \hline \end{array}\]If sales increase by 10%,what level of fixed costs will yield a 20% increase in profits?

A) $14,400. B) $19,200. C) $25,200. D) $26,400. A) $14,400. B) $19,200. C) $25,200. D) $26,400.

Honeysuckle Manufacturing has the following data: \[\begin{array} { | l | r | l | } \hline \text { Selling Price } & \$ 60 & \\ \text { Variable manufacturing cost } & \$ 33 & \\ \hline \text { Fixed manufacturing cost } & \$ 250,000 & \begin{array} { l } \text { per } \\ \text { month } \end{array} \\ \hline \begin{array} { l } \text { Variable selling \& administrative } \\ \text { costs } \end{array} & \$ 9 & \\ \hline \text { Fixed selling \& administrative costs } & \$ 120,000 & \begin{array} { l } \text { per } \\ \text { month } \end{array} \\ \hline \end{array}\]What dollar sales volume does Honeysuckle need to achieve a $50,000 operating profit per month?

A) $1,400,000. B) $7,560,000. C) $933,333. D) $1,233,333. A) $1,400,000. B) $7,560,000. C) $933,333. D) $1,233,333.

You have been provided with the following information: \[\begin{array} { | l | r | r | } \hline&\text { Per Unit } & \text { Total }\\ \hline \text { Sales } & \$ 15 & \$ 45,000 \\ \hline \text { Less variable expenses } & \underline{ 9 }& \underline{27,000} \\ \hline \text { Contribution margin } &6 & 18,000\\ \hline \text { Less fixed expenses } & & \underline{12,000 } \\ \hline \text { Operating profit } & &\$6,000\\ \hline \end{array}\] If sales decrease by 500 units,how much will fixed costs have to be reduced by to maintain the current operating profit of $6,000?

A) $9,000. B) $7,500. C) $6,000. D) $3,000. A) $9,000. B) $7,500. C) $6,000. D) $3,000.

Winters Company sells three products.Sales and contribution margin ratios for the three products follow: \[\begin{array} { | l| c | c | c | } \hline & \text { Product } A & \text { Product B } & \text { Product C } \\ \hline \text { Sales in dollars } & \$ 20,000 & \$ 40,000 & \$ 100,000 \\ \hline \text { Contribution margin ratio } & 45 \% & 40 \% & 15 \% \\ \hline \end{array}\] Given these data,the contribution margin ratio for the company as a whole would be:

A) 25%. B) 75%. C) 33.3%. D) Cannot determine with the information given. A) 25%. B) 75%. C) 33.3%. D) Cannot determine with the information given.

The following information pertains to Tiller Co.: \[\begin{array} { | l | r | } \hline \text { Sales } & \$ 800,000 \\ \hline \text { Variable Costs } & 160,000 \\ \hline \text { Fixed Costs } & 40,000 \\ \hline \end{array}\]What is Tiller's break-even point in sales dollars? (CPA adapted)

A) $200,000. B) $160,000. C) $50,000. D) $40,000. A) $200,000. B) $160,000. C) $50,000. D) $40,000.

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. \[\begin{array} { | l | l | l | } \hline \text { Sales } & & \$ 3,500,000 \\ \hline \text { Cost of sales: } & & \\ \hline \text { Direct Material } & \$ 500,000 & \\ \hline \text { Direct labor } & 250,000 & \\ \hline \text { Variable Overhead } & 275,000 & \\ \hline \text { Fiked Overhead } & \underline { 600,000 } & 1,625,000 \\ \hline \text { Gross Profit } & & \$ 1,876,000 \\ \hline \text { Selling and General \& Admin. Exp. } & & \\ \hline \text { Variable } & 750,000 & \\ \hline \text { Fiked } & 250,000 & 1,000,000 \\ \hline \text { Operating Income } & & \$ 875,000 \\ \hline \end{array}\] For the coming year,the management of Evergreen Corporation anticipates a 5 percent decrease in sales,a 10 percent increase in all variable costs,and a $45,000 increase in fixed costs. The operating profit for next year would be:

A) $477,500. B) $492,500. C) $552,500. D) $831,250. A) $477,500. B) $492,500. C) $552,500. D) $831,250.

If the fixed costs for a product increase and the variable costs (as a percentage of sales dollars)increase,what will be the effect on the contribution margin ratio and the break-even point,respectively? \[\begin{array} { | c | c | c | } \hline & \text { Contribution Margin Ratio } & \text { Break-eren Point } \\ \hline \text { A. } & \text { Decrease } & \text { Increase } \\ \hline \text { B. } & \text { Increase } & \text { Decrease } \\ \hline \text { C. } & \text { Decrease } & \text { Decrease } \\ \hline \text { D. } & \text { Increase } & \text { Increase } \\ \hline \end{array}\]

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

Exam 3: Fundamentals of Cost-Volume-Profit Analysis

Chita Corporation produces and sells a single product.The company's contribution format income statement for January appears below: Sales (5,500 units) \ 297,000 Variable costs 165,000 Contribution margin 132,000 Fixed costs Operating protit \ 26,700 Required: Redo the company's contribution format income statement assuming that the company sells 5,700 units.

(Essay)

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Question 81

Lamar has the following data: Selling Price Variable manufacturing cost Fixed manutacturing cost. Variable selling \& administrative costs Fixed selling \& administrative costs \ 40 \ 22 \ 150,000 \ 6 \ 120,000 per month per month If Lamar produces and sells 30,000 units,what is the margin of safety in units?

(Multiple Choice)

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Question 82

Explain the difference between the break-even point,the margin of safety,and operating leverage.

(Essay)

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Question 83

You have been provided with the following information: Total Sales \ 90,000 Less Variable expenses Contribution margin 36,000 Less fixed expenses Operating profit \ 12,000 If sales increase by 10%,what level of fixed costs will yield a 20% increase in profits?

(Multiple Choice)

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Question 84

Galena Company manufactures and sells adjustable canopies that attach to motor homes and trailers.The market covers both new unit purchases as well as replacement canopies.Galena developed its 2017 business plan based on the assumption that canopies would sell at a price of $400 each.The variable costs for each canopy were projected to be $200,and the annual fixed costs were budgeted at $100,000.The goal for Galena 's after-tax operating profits was $240,000;the company's effective tax rate is 40%.While Galena 's sales usually rise during the second quarter,the May financial statements reported that sales were not meeting expectations.For the first five months of 2017,only 350 units had been sold at the established price,with variable costs as planned.It was clear that the 2017 after-tax operating profit goal would not be reached unless some corrective actions were taken.Galena 's president assigned a management committee to analyze the situation and develop several alternative courses of action.The following mutually exclusive alternatives were presented to the president: (1)Reduce the sales price by $40.The sales department predicts that with the significantly reduced price,2,700 units can be sold during the remainder of 2017.Total fixed and variable unit costs will stay as budgeted.(2)Lower variable costs per unit by $25 through the use of less expensive materials and lightly modified manufacturing techniques.The sales price will also be reduced by $30.These changes will yield sales of 2,200 for the remainder of 2017.(3)Cut fixed costs by $10,000 and lower the sales price by 5%.Variable costs per unit will be unchanged.Sales of 2,000 units can be expected for the remainder of 2017.Required: (a)If no changes are made to the selling price or cost structure,determine the number of units that Galena must sell in order to break even.(b)If nochanges are made to the selling price or cost structure,determine the number of units that Galena must sell in order to achieve its after-tax operating profit objective.(c)Determine which one of the alternatives Galena should select to achieve its after-tax operating profit objective.Be sure to support your selection with appropriate computations.

(Essay)

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Question 85

A company's break-even point will not be changed by:

(Multiple Choice)

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Question 86

Artis Sales has two store locations.Store A has fixed costs of $125,000 per month and a variable cost ratio of 60%.Store B has fixed costs of $200,000 per month and a variable cost ratio of 30%.What is the break-even sales volume for Store A?

(Multiple Choice)

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Question 87

Honeysuckle Manufacturing has the following data: Selling Price \ 60 Variable manufacturing cost \ 33 Fixed manufacturing cost \ 250,000 per month Variable selling \& administrative costs \ 9 Fixed selling \& administrative costs \ 120,000 per month What dollar sales volume does Honeysuckle need to achieve a $50,000 operating profit per month?

(Multiple Choice)

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Question 88

You have been provided with the following information: Per Unit Total Sales \ 15 \ 45,000 Less variable expenses Contribution margin 6 18,000 Less fixed expenses Operating profit \6 ,000 If sales decrease by 500 units,how much will fixed costs have to be reduced by to maintain the current operating profit of $6,000?

(Multiple Choice)

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Question 89

With regard to the CVP graph,which of the following statements is not correct?

(Multiple Choice)

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Question 90

Why and how do managers simplify analyses for achieving a given level of profit with two products or services?

(Essay)

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Question 91

Winters Company sells three products.Sales and contribution margin ratios for the three products follow: Product A Product B Product C Sales in dollars \ 20,000 \ 40,000 \ 100,000 Contribution margin ratio 45\% 40\% 15\% Given these data,the contribution margin ratio for the company as a whole would be:

(Multiple Choice)

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Question 92

The following information pertains to Tiller Co.: Sales \ 800,000 Variable Costs 160,000 Fixed Costs 40,000 What is Tiller's break-even point in sales dollars? (CPA adapted)

(Multiple Choice)

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Question 93

Alden Corporation produces and sells a single product.Data concerning that product appear below: Per Uni Percent of Sales Selling price \ 190 100\% Variable costs Contribution margin \ 152 80\% Fixed costs are $110,000 per month.The company is currently selling 1,000 units per month. Required: Management is considering using a new component that would increase the variable cost per unit by $56.Since the new component would improve the company's product,the marketing manager predicts that monthly sales would increase by 500 units.What should be the overall effect on the company's monthly operating profit of this change if fixed costs are unaffected?

(Essay)

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Question 94

The average selling price is $.60 per unit,the average variable cost is $.36 per unit,and the total fixed costs are $1,500.If operating profits of $900 are desired,a sales volume of 2,500 units is necessary.

(True/False)

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Question 95

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 For the coming year,the management of Evergreen Corporation anticipates a 5 percent decrease in sales,a 10 percent increase in all variable costs,and a $45,000 increase in fixed costs. The operating profit for next year would be:

(Multiple Choice)

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Question 96

If the fixed costs for a product increase and the variable costs (as a percentage of sales dollars)increase,what will be the effect on the contribution margin ratio and the break-even point,respectively? Contribution Margin Ratio Break-eren Point A. Decrease Increase B. Increase Decrease C. Decrease Decrease D. Increase Increase

(Multiple Choice)

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Question 97

Market Sales had $1,200,000 in sales last month.The variable cost ratio was 60% and operating profits were $80,000.What is Market's margin of safety in sales dollars?

(Multiple Choice)

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Question 98

A company's break-even point will not be increased by:

(Multiple Choice)

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Question 99

Microsoft Excel is ideally suited for analyzing alternative CVP scenarios using its "What-If Analysis" function.

(True/False)

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Question 100

Explain the difference between the break-even point,the margin of safety,and operating leverage.

You have been provided with the following information: Total Sales \ 90,000 Less Variable expenses Contribution margin 36,000 Less fixed expenses Operating profit \ 12,000 If sales increase by 10%,what level of fixed costs will yield a 20% increase in profits?

A company's break-even point will not be changed by:

Artis Sales has two store locations.Store A has fixed costs of $125,000 per month and a variable cost ratio of 60%.Store B has fixed costs of $200,000 per month and a variable cost ratio of 30%.What is the break-even sales volume for Store A?

With regard to the CVP graph,which of the following statements is not correct?

Why and how do managers simplify analyses for achieving a given level of profit with two products or services?

The following information pertains to Tiller Co.: Sales \ 800,000 Variable Costs 160,000 Fixed Costs 40,000 What is Tiller's break-even point in sales dollars? (CPA adapted)

The average selling price is $.60 per unit,the average variable cost is $.36 per unit,and the total fixed costs are $1,500.If operating profits of $900 are desired,a sales volume of 2,500 units is necessary.

Market Sales had $1,200,000 in sales last month.The variable cost ratio was 60% and operating profits were $80,000.What is Market's margin of safety in sales dollars?

A company's break-even point will not be increased by:

Microsoft Excel is ideally suited for analyzing alternative CVP scenarios using its "What-If Analysis" function.

Cost Accounting: Information for Decision Making

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

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Activity-Based Costing

Fundamentals of Cost Management

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Fundamentals of Management Control Systems

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Additional Topics in Variance Analysis

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