Exam 3: Fundamentals of Cost-Volume-Profit Analysis

The total contribution margin is the unit contribution margin multiplied by the number of units minus the fixed component of the total costs (TC).The total contribution margin is the unit contribution margin multiplied by the number of units.

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

Sanfran has the following data: How many units must Sanfran produce and sell in order to break even?

Gaudy Inc.produces and sells a single product.The company has provided its contribution format income statement for May. If the company sells 4,300 units,its operating profit should be closest to:

East 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?

An increase in an organization's fixed costs will result in a lower margin of safety,assuming all other costs and sales remain unchanged.This is due to an upward shift in the fixed and total cost curves relative to the revenue curve,driving the break-even point out;thereby,reducing the difference (margin of safety)between break-even and the point of actual performance.

Street Company's fixed costs total $150,000,its variable cost ratio is 60% and its variable costs are $4.50 per unit.Based on this information,the break-even point in units is:

Break-even analysis assumes that over the relevant range: (CPA adapted)

All other things the same,which of the following would be true of the contribution margin and variable costs of a company with high fixed costs and low variable costs as compared to a company with low fixed costs and high variable costs?

Misa 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. The break-even point (rounded to the nearest dollar)for Misa Corporation for the current year is:

At the break-even point,the total contribution margin equals total: (CPA adapted)

The break-even point for an organization with a low operating leverage will be relatively higher than the break-even point for an organization with a high operating leverage.A low operating leverage has lower fixed costs and higher variable costs;therefore,the break-even point will be lower.

During 2012,Thor Lab supplied hospitals with a comprehensive diagnostic kit for $120.At a volume of 80,000 kits,Thor had fixed costs of $1,000,000 and a profit before income taxes of $200,000.Due to an adverse legal decision,Thor's 2013 liability insurance increased by $1,200,000 over 2012.Assuming the volume and other costs are unchanged,what should the 2013 price be if Thor is to make the same $200,000 profit before income taxes? (CPA adapted)

RedTail Manufacturing has the following data: What dollar sales volume does RedTail need to achieve a $50,000 operating profit per month?

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

Which of the following would not cause the break-even point to change?

Darth Company sells three products.Sales and contribution margin ratios for the three products follow: Given these data,the contribution margin ratio for the company as a whole would be:

Break-even analysis assumes that:

Rothe Company manufactures and sells 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 Rothe desires a monthly target operating profit equal to 15% of sales,sales will have to be (rounded):

If Q equals the level of output,P is the selling price per unit,V is the variable cost per unit,and F is the fixed cost,then the break-even point in units is: