Chapter 21 – Cost-Volume-Profit Analysis | Test Bank 24th Ed

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Fundamental Accounting Principles, 24e (Wild)

Chapter 21 Cost-Volume-Profit Analysis

1) Total variable costs change in proportion to changes in volume of activity.

2) Total fixed costs change in proportion to changes in volume of activity.

3) Variable costs per unit increase proportionately with increases in volume of activity.

4) Fixed costs per unit decrease proportionately with increases in volume of activity.

5) While the total amount of variable cost changes with the level of production, variable cost per unit remains constant as volume changes.

6) While the total amount of fixed cost changes with the level of production, fixed cost per unit remains constant as volume changes.

7) While the total amount of fixed cost remains constant with the level of production, fixed cost per unit changes as volume changes.

8) Dividing a mixed cost into its separate fixed and variable cost components cannot be done in cost-volume-profit analysis.

9) As production volume increases, fixed cost per unit of output remains constant.

10) As production volume activity increases, variable cost per unit remains constant.

11) A step-wise variable cost can be separated into a fixed component and a variable component.

12) Curvilinear costs increase as volume of activity increases, but at a nonconstant rate.

13) The relevant range of operations includes extremely high and low levels of production that are unlikely to occur.

14) The relevant range of operations is a range of volume neither close to zero nor at maximum capacity.

15) Cost-volume-profit analysis requires management to classify all costs as either fixed or variable with respect to production or sales volume within the relevant range of operations.

16) Cost-volume-profit analysis is a predictive tool for identifying the impact of future cost changes, price changes, and volume of activity changes.

17) Cost-volume-profit analysis is used to predict future costs to be incurred, volumes of activity, sales to be made, and profit to be earned.

18) Cost-volume-profit analysis can be used to compute expected income from predicted sales and cost levels.

19) The margin of safety is the amount that sales can drop before the company incurs a loss.

20) The dollar amount of sales needed to achieve a target income is computed by dividing the sum of fixed costs plus the target pretax income by the contribution margin ratio.

21) The margin of safety can be expressed in dollars or as a percent of sales.

22) The method most likely to produce the most precise line of cost behavior and require the least amount of judgment is the scatter diagram.

23) Contribution margin per unit is the amount by which a product's unit selling price exceeds its variable cost per unit.

24) The contribution margin ratio is the percent of each sales dollar that remains after deducting the unit variable cost.

25) The extent, or relative size, of fixed costs in the total cost structure is known as operating leverage.

26) Degree of operating leverage (DOL) is defined as total contribution margin in dollars divided by pretax income.

27) Least-squares regression is a statistical method for identifying cost behavior.

28) The high-low method of deriving an estimated cost line uses all the data points available.

29) The high-low method can be used to estimate the cost equation using just two points.

30) A visual line fit to points in a scatter diagram may be used to identify the approximate relation between past cost and unit data.

31) There are only two methods to derive an estimated line of cost behavior; the high-low method and the scatter diagram.

32) Scatter diagrams plot volume (units) on the vertical axis and cost on the horizontal axis.

33) Scatter diagrams plot volume (units) on the horizontal axis and cost on the vertical axis.

34) To determine the slope of the variable cost from a scatter diagram, divide the change in units by the change in cost.

35) A scatter diagram is useful for identifying extreme data points or outliers.

36) The high-low method is used to derive the variable cost per unit and total fixed costs using just the highest and lowest volume levels.

37) A break-even point can be calculated either in units or in dollars of sales.

38) Cost-volume-profit analysis is used to determine the number of units that must be sold to break even..

39) The break-even point is the sales level at which a company neither earns a profit nor incurs a loss.

40) The contribution margin per unit is the price at which a unit must be sold in order for the company to break even.

41) To calculate the break-even point in units, one must know unit fixed cost, unit variable cost, and sales price.

42) The contribution margin ratio is the percent by which the margin of safety exceeds the break-even point.

43) An important assumption in multiproduct CVP analysis is a constant sales mix.

44) A graphic depiction of the break-even point is known as a cost-volume-profit (CVP) chart.

45) A cost-volume-profit (CVP) chart is a graph that plots number of units produced on the horizontal axis and dollars of costs and sales on the vertical axis.

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

47) Cost-volume-profit analysis cannot be used when a firm produces and sells more than one product.

48) The proportion of sales volumes for various products in a multiproduct company is known as the composite mix.

49) The proportion of sales volumes for various products in a multiproduct company is known as the sales mix.

50) An important assumption in multiproduct CVP analysis is a changing sales mix.

51) The variable costing method is required for external financial reporting.

52) The absorption costing method is required for external financial reporting.

53) Under variable costing, only costs that change in total with changes in production levels are included in product costs.

54) Under variable costing, fixed overhead costs are excluded from product costs.

55) Under absorption costing, fixed overhead costs are excluded from product costs.

56) Managers can use variable costing information for internal decision making, but they must use absorption costing for external reporting purposes.

57) A cost that remains unchanged in total despite variations in volume of activity within a relevant range is a:

A) Fixed cost.

B) Curvilinear cost.

C) Variable cost.

D) Step-wise variable cost.

E) Standard cost.

58) A cost that changes in total in proportion to changes in volume of activity is a(n):

A) Differential cost.

B) Fixed cost.

C) Incremental cost.

D) Variable cost.

E) Product cost.

59) A cost that changes as volume changes, but at a nonconstant rate, is called a:

A) Variable cost.

B) Curvilinear cost.

C) Step-wise variable cost.

D) Fixed cost.

E) Differential cost.

60) A cost with a flat cost line within a relevant range that shifts to another level when volume significantly changes is a(n):

A) Step-wise cost.

B) Fixed cost.

C) Curvilinear cost.

D) Incremental cost.

E) Flat line cost.

61) A cost that includes both fixed and variable cost components is called a:

A) Mixed cost.

B) Step-variable cost.

C) Composite cost.

D) Curvilinear cost.

E) Differential cost.

62) Curvilinear costs always increase:

A) With decreases in volume.

B) In constant proportion to changes in production levels.

C) When management performs break-even analysis.

D) When volume increases, but at a nonconstant rate.

E) On a per unit basis when volume of activity goes down.

63) Which one of the following statements is not true?

A) Total fixed costs remain the same regardless of volume within the relevant range.

B) Total variable costs change with volume.

C) Total variable costs decrease as the volume increases.

D) Fixed costs per unit increase as the volume decreases.

E) Variable costs per unit remain the same regardless of the volume.

64) An important tool in predicting the volume of activity, the costs to be incurred, the sales to be made, and the profit to be earned is:

A) Target income analysis.

B) Cost-volume-profit analysis.

C) Least-squares regression analysis.

D) Variance analysis.

E) Process costing.

65) Select cost information for Seacrest Enterprises is as follows:

Based on this information:

A) Both direct materials and rent expense are variable costs.

B) Utilities expense is a mixed cost and rent expense is a variable cost.

C) Utilities expense is a mixed cost and rent expense is a fixed cost.

D) Direct materials is a fixed cost and utilities expense is a mixed cost.

E) Both direct materials and utilities expense are mixed costs.

66) Select cost information for Klondike Corporation is as follows:

Based on this information:

A) Both direct materials and rent expense are variable costs.

B) Direct materials is a fixed cost and rent expense is a variable cost.

C) Both direct materials and rent expense are fixed costs.

D) Direct materials is a variable cost and rent expense is a fixed cost.

E) Both direct materials and rent expense are mixed costs.

67) Which of the following costs are most likely to be classified as variable?

A) Factory rent

B) Manager salaries

C) Insurance

D) Direct materials

E) Straight-line depreciation

68) Which of the following costs are most likely to be classified as fixed?

A) Shipping costs

B) Sales commissions

C) Direct labor

D) Direct materials

E) Property taxes

69) A company's normal operating range, which excludes extremely high or low operating levels that are not likely to occur, is called the:

A) Margin of safety.

B) Contribution range.

C) Break-even point.

D) Relevant range.

E) High-low point.

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

A) Relevant range of operations.

B) Break-even level of operations.

C) Margin of safety of operations.

D) Relevant operating analysis.

E) High-low level of operations.

71) Cost-volume-profit analysis is based on necessary assumptions. Which of the following is not one of these assumptions?

A) Costs can be classified as variable or fixed.

B) Relevant range includes all possible levels of activity that a company might experience.

C) Sales price and variable costs per unit of output remain constant as volume changes.

D) A constant sales mix in a multiproduct company.

E) Total fixed costs are held constant.

72) Target income refers to:

A) Income at the break-even point.

B) Income from the most recent period.

C) Income planned for a future period.

D) Income only in a multiproduct environment.

E) Income at the minimum contribution margin.

73) The margin of safety is the excess of:

A) Break-even sales over expected sales.

B) Expected sales over variable costs.

C) Expected sales over fixed costs.

D) Fixed costs over expected sales.

E) Expected sales over break-even sales.

74) If a firm's forecasted sales are $250,000 and its break-even sales are $190,000, the margin of safety in dollars is:

A) $60,000.

B) $250,000.

C) $190,000.

D) $440,000.

E) $24,000.

75) The excess of expected sales over the sales level at the break-even point is known as the:

A) Sales turnover.

B) Profit margin.

C) Contribution margin.

D) Relevant range.

E) Margin of safety.

76) 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 $5, total fixed costs must be:

A) $65,000.

B) $90,000.

C) $125,000.

D) $215,000.

E) $275,000.

77) During March, a firm expects its total sales to be $160,000, its total variable costs to be $95,000, and its total fixed costs to be $25,000. The contribution margin for March is:

A) $65,000.

B) $90,000.

C) $120,000.

D) $40,000.

E) $25,000.

78) A firm expects to sell 25,000 units of its product at $11 per unit and to incur variable costs per unit of $6. Total fixed costs are $70,000. The total contribution margin is:

A) $55,000.

B) $90,000.

C) $125,000.

D) $150,000.

E) $380,000.

79) A firm expects to sell 25,000 units of its product at $11 per unit and to incur variable costs per unit of $6. Total fixed costs are $70,000. The pretax net income is:

A) $55,000.

B) $90,000.

C) $125,000.

D) $150,000.

E) $380,000.

80) Watson Company has monthly fixed costs of $83,000 and a 40% contribution margin ratio. If the company has set a target monthly income of $15,000, what dollar amount of sales must be made to produce the target income?

A) $245,000

B) $207,500

C) $37,300

D) $170,000

E) $39,200

81) During its most recent fiscal year, Raphael Enterprises sold 200,000 electric screwdrivers at a price of $15 each. Fixed costs amounted to $400,000 and pretax income was $600,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?

A) $2,400,000.

B) $1,600,000.

C) $3,000,000.

D) $2,000,000.

E) $1,000,000.

82) During its most recent fiscal year, Dover, Inc. had total sales of $3,200,000. Contribution margin amounted to $1,500,000 and pretax income was $400,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year?

A) $1,900,000.

B) $2,800,000.

C) $1,300,000.

D) $1,100,000.

E) $1,700,000.

83) During its most recent fiscal year, Dover, Inc. had total sales of $3,200,000. Contribution margin amounted to $1,500,000 and pretax income was $400,000. What amount should have been reported as fixed costs in the company's contribution margin income statement for the year?

A) $1,900,000.

B) $2,800,000.

C) $1,300,000.

D) $1,100,000.

E) $1,700,000.

84) Henderson Co. has fixed costs of $36,000 and a contribution margin ratio of 24%. If expected sales are $200,000, what is the margin of safety as a percent of sales?

A) 6%.

B) 25%.

C) 33%.

D) 50%.

E) 75%.

85) Gladstone Co. has expected sales of $326,000 for the upcoming month and its monthly break even sales are $300,000. What is the margin of safety as a percent of sales, rounded to the nearest whole percent?

A) 9%.

B) 108%.

C) 52%.

D) 8%.

E) 92%.

86) A product sells for $200 per unit, and its variable costs per unit are $130. Total fixed costs are $420,000. If the firm wants to earn $35,000 pretax income, how many units must be sold?

A) 6,500.

B) 6,000.

C) 500.

D) 5,000.

E) 5,500.

87) A company has fixed costs of $320,000 and a contribution margin per unit of $15. If the company wants to earn a target $40,000 pretax income, how many units must be sold (rounded to the nearest whole unit)?

A) 24,000.

B) 21,333.

C) 18,666.

D) 2,667.

E) 20,000.

88) A company has fixed costs of $270,000, a unit contribution margin of $14, and a contribution margin ratio of 55%. If the company wants to earn a target $60,000 pretax income, what amount of sales must it make (rounded to the nearest whole dollar)?

A) 490,909.

B) 330,000.

C) 109,090.

D) 381,818.

E) 600,000.

89) Management anticipates fixed costs of $72,500 and variable costs equal to 40% of sales. What will pretax income equal if sales are $325,000?

A) $57,500.

B) $122,500.

C) $130,000.

D) $181,250.

E) $252,500.

90) Locus Company has total fixed costs of $112,000. Its product sells for $35 per unit and variable costs amount to $25 per unit. Next year Locus Company wishes to earn a pretax income that equals 10% of fixed costs. How many units must be sold to achieve this target income level?

A) 1,120.

B) 8,214.

C) 11,200.

D) 12,320.

E) 14,080.

91) Raven Company has a target of $70,000 pre-tax income. The contribution margin ratio is 30%. What amount of dollar sales must be achieved to reach the goal if fixed costs are $36,000?

A) $23,333.

B) $36,000.

C) $300,000.

D) $353,333.

E) $420,000.

92) Use the following information to determine the margin of safety in dollars:

A) $88,500.

B) $108,500.

C) $173,600.

D) $326,400.

E) $500,000.

93) Use the following information to determine the break-even point in sales dollars:

A) $88,500.

B) $108,500.

C) $173,600.

D) $326,400.

E) $500,000.

94) Use the following information to determine the break-even point in units (rounded to the nearest whole unit):

A) 12,828

B) 26,571

C) 8,455

D) 46,667

E) 24,800

95) Use the following information to determine the contribution margin ratio:

A) 6.9%.

B) 48.3%.

C) 24.5%.

D) 51.7%.

E) 34.1%.

96) The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. Compute the number of units that must be sold in order to achieve a target pretax income of $130,000.

A) 53,165.

B) 81,250.

C) 36,207.

D) 50,000.

E) 58,621.

97) The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. If Burkett Corporation achieves the budgeted level of sales, what will be its margin of safety in dollars?

A) $172,420.

B) $150,000.

C) $262,500.

D) $275,862.

E) $310,115.

98) In cost-volume-profit analysis, the unit contribution margin is:

A) Sales price per unit less cost of goods sold per unit.

B) Sales price per unit less unit fixed cost per unit.

C) Sales price per unit less total variable cost per unit.

D) Sales price per unit less unit total cost per unit.

E) The same as the contribution margin ratio.

99) The contribution margin ratio:

A) Is the percent of each sales dollar that remains after deducting the total unit variable cost.

B) Is the percent of each sales dollar that remains after deducting the total unit fixed cost.

C) Is the percent of each sales dollar that remains to cover the variable and fixed costs.

D) Cannot be used in conjunction with other analytical tools.

E) Is the same as the unit contribution margin.

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

A) Degree of operating leverage.

B) Contribution margin ratio.

C) Margin of safety.

D) Sales mix.

E) Break-even point in units.

101) Which of the following is the correct interpretation of a degree of operating leverage of 5?

A) Operating leverage of 5 means that sales can decrease by 5% before the firm's current level of sales will hit the break-even point.

B) Operating leverage of 5 means that if sales increase by 5% the firm will hit its break-even point.

C) Operating leverage of 5 means that if sales increase by 5%, there will be a 25% increase in the firm's pretax profit.

D) Operating leverage of 5 measures the degree of debt employed by the firm's debt structure.

E) Operating leverage of 5 means that the company would need to increase sales by 5 times in order to hit its break-even point.

102) A statistical method for identifying cost behavior is the:

A) Scatter diagram method.

B) High-low method.

C) Composite method.

D) CVP charting method.

E) Least-squares regression method.

103) The least-squares regression method is:

A) A graphical method to identify cost behavior.

B) An algebraic method to identify cost behavior.

C) A statistical method to identify cost behavior.

D) The only identify cost estimation method allowed by GAAP.

E) A cost estimation method that only uses the two extreme values.

104) A graph used to analyze past cost behaviors by displaying costs and unit data for each period as points on a diagram is called a:

A) Least-squares diagram.

B) Step-wise diagram.

C) Scatter diagram.

D) Break-even diagram.

E) Composite diagram.

105) A line on a scatter diagram that is intended to reflect the past relation between cost and unit volume is the:

A) Margin of safety line.

B) Break-even line.

C) Contribution margin line.

D) Estimated line of cost behavior.

E) Standard cost line.

106) A method that estimates cost behavior by using just the highest and lowest volume levels is called the:

A) Scatter method.

B) High-low method.

C) Least-squares method.

D) Break-even method.

E) Step-wise method.

107) The following information is available for a company's utility cost for operating its machines over the last four months.

Using the high-low method, the estimated variable cost per machine hour for utilities is:

A) $3.38.

B) $6.00.

C) $2.50.

D) $4.22.

E) $6.17.

108) The following information is available for a company's utility cost for operating its machines over the last four months.

Using the high-low method, the estimated total fixed cost for utilities is:

A) $1,500.

B) $3,600.

C) $6,000.

D) $3,300.

E) $2,100.

109) The following information is available for a company's cost of sales over the last five months.

Using the high-low method, the estimated variable cost of sales per unit sold is:

A) $25.42.

B) $77.50.

C) $34.23.

D) $15.00.

E) $30.62.

110) The following information is available for a company's cost of sales over the last five months.

Using the high-low method, the estimated total fixed cost is:

A) $25,000.

B) $30,000.

C) $13,692.

D) $100,000.

E) $50,000.

111) The sales level at which a company neither earns a profit nor incurs a loss is the:

A) Relevant range.

B) Margin of safety.

C) Step-wise variable level.

D) Break-even point.

E) Contribution margin.

112) A company's product sells at $12 per unit and has a $5 per unit variable cost. The company's total fixed costs are $98,000. The contribution margin per unit is:

A) $5.00.

B) $7.00.

C) $8.17.

D) $12.00.

E) $17.00.

113) A company's product sells at $12 per unit and has a $5 per unit variable cost. The company's total fixed costs are $98,000. The break-even point in units is:

A) 5,158.

B) 7,000.

C) 8,167.

D) 14,000.

E) 19,600.

114) Maroon Company's contribution margin ratio is 24%. Total fixed costs are $84,000. What is Maroon's break-even point in sales dollars?

A) $20,160.

B) $110,526.

C) $350,000.

D) $240,000.

E) $84,000.

115) Fuschia Company's contribution margin per unit is $12. Total fixed costs are $84,000. What is Fuschia's break-even point in units?

A) 7,000.

B) 26,520.

C) 57,600.

D) 5,760.

E) 70,000.

116) A product sells for $200 per unit, and its variable costs are 65% of sales. The fixed costs are $420,000. What is the break-even point in sales dollars?

A) $2,100.

B) $6,000.

C) $420,000.

D) $646,154.

E) $1,200,000.

117) A product sells for $30 per unit and has variable costs of $18 per unit. The fixed costs are $720,000. If the variable costs per unit were to decrease to $15 per unit, fixed costs increase to $900,000, and the selling price does not change, break-even point in units would:

A) Increase by 20,000.

B) Equal 6,000.

C) Increase by 6,000.

D) Decrease by 20,000.

E) Not change.

118) Forrester Company is considering buying new equipment that would increase monthly fixed costs from $120,000 to $150,000 and would decrease the current variable costs of $70 by $10 per unit. The selling price of $100 is not expected to change. Forrester's current break-even sales are $400,000 and current break-even units are 4,000. If Forrester purchases this new equipment, the revised contribution margin ratio would be:

A) 30%.

B) 60%.

C) 40%.

D) 10%.

E) 70%.

119) Forrester Company is considering buying new equipment that would increase monthly fixed costs from $120,000 to $150,000 and would decrease the current variable costs of $70 by $10 per unit. The selling price of $100 is not expected to change. Forrester's current break-even sales are $400,000 and current break-even units are 4,000. If Forrester purchases this new equipment, the revised break-even point in dollars would be:

A) $300,000.

B) $400,000.

C) $325,000.

D) $500,000.

E) $375,000.

120) Forrester Company is considering buying new equipment that would increase monthly fixed costs from $120,000 to $150,000 and would decrease the current variable costs of $70 by $10 per unit. The selling price of $100 is not expected to change. Forrester's current break-even sales are $400,000 and current break-even units are 4,000. If Forrester purchases this new equipment, the revised break-even point in units would:

A) Increase by 250.

B) Decrease by 250.

C) Increase by 12,000.

D) Decrease by 8,000.

E) Increase by 8,000.

121) The difference between sales price per unit and variable cost per unit is the:

A) Gross profit from sales.

B) Gross margin per unit.

C) Fixed cost per unit.

D) Margin of safety per unit.

E) Contribution margin per unit.

122) The contribution margin per unit expressed as a percentage of the product's selling price is the:

A) Volume variance.

B) Margin of safety.

C) Contribution margin ratio.

D) Break-even point.

E) Rate of return on sales.

123) A company manufactures and sells a product for $120 per unit. The company's fixed costs are $68,760, and its variable costs are $90 per unit. The company's break-even point in units is:

A) 2,292.

B) 573.

C) 764.

D) 327.

E) 840.

124) A company manufactures and sells a product for $120 per unit. The company's fixed costs are $68,760, and its variable costs are $90 per unit. The company's break-even point in sales dollars is:

A) $91,680.

B) $68,760.

C) $2,292.

D) $275,040.

E) $206,280.

125) A company has fixed costs of $90,000. Its contribution margin ratio is 30% and the product sells for $75 per unit. What is the company's break-even point in dollar sales?

A) $60,000.

B) $128,571.

C) $180,000.

D) $210,000.

E) $300,000.

126) Mason Company manufactures and sells shoelaces for $2.00 per pair. Its variable cost per unit is $1.70. Mason's total fixed costs are $10,500. How many pairs must Mason sell to break even?

A) 5,250.

B) 6,176.

C) 35,000.

D) 52,500.

E) 61,760.

127) Goldfarb Company manufactures and sells toasters. Each toaster sells for $23.75 and the variable cost per unit is $16.25. Goldfarb's total fixed costs are $25,000, and budgeted sales are 8,000 units. What is the contribution margin per unit?

A) $7.50.

B) $16.25.

C) $23.75.

D) $60,000.

E) $1.25.

128) Leeks Company's product has a contribution margin per unit of $11.25 and a contribution margin ratio of 22.5%. What is the selling price of the product?

A) $5.

B) $20.

C) $30.

D) $40.

E) $50.

129) Alvarez Company's break-even point in units is 1,000. The sales price per unit is $10 and variable cost per unit is $7. If the company sells 2,500 units, what will net income be?

A) $4,500

B) $7,500

C) $17,000

D) $35,000

E) $3,000

130) Mullis Corp. manufactures DVDs that sell for $5.00. Fixed costs are $28,000 and variable costs are $3.60 per unit. Mullis can buy a newer production machine that will increase fixed costs by $8,000 per year, but will decrease variable costs by $0.40 per unit. What effect would the purchase of the new machine have on Mullis' break-even point in units?

A) 4,444 unit increase.

B) 9,850 unit decrease.

C) 5,714 unit increase.

D) 4,444 unit decrease.

E) No effect.

131) At Midland Company's break-even point of 9,000 units, fixed costs are $180,000 and variable costs are $540,000 in total. The unit sales price is:

A) $20.

B) $40.

C) $60.

D) $80.

E) $100.

132) 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:

A) $1,750.

B) $2,500.

C) $4,000.

D) $4,250.

E) $4,375.

133) During a recent fiscal year, Creek Company reported pretax income of $125,000, a contribution margin ratio of 25% and total contribution margin of $400,000. Total variable costs must have been:

A) $1,100,000.

B) $1,200,000.

C) $500,000.

D) $1,600,000.

E) $2,100,000.

134) In Keegan Corporation's most recent fiscal year, the company reported pretax earnings of $215,000. Fixed costs totaled $325,800, the unit selling price of the firm's only product was $60, and the variable costs per unit were 40% of the selling price. Based on this information, the firm's break-even point in units was:

A) 13,575 units.

B) 15,023 units.

C) 13,750 units.

D) 9,050 units.

E) 8,750 units.

135) A cost-volume-profit chart is also known as a(n)

A) Operating profit chart.

B) Operating leverage chart.

C) Break-even chart.

D) Margin of safety chart.

E) Sales chart.

136) When graphing cost-volume-profit data on a CVP chart:

A) Units are plotted on the horizontal axis; costs on the vertical axis.

B) Units are plotted on the vertical axis; costs on the horizontal axis.

C) Both units and costs are plotted on the horizontal axis.

D) Both units and cost are plotted on the vertical axis.

E) Data points always represent expected future points.

137) A CVP graph presents data on:

A) Profit and loss on a per unit basis.

B) Profit, loss, and break-even on a total dollar basis.

C) Profit, loss, and break-even on a per unit basis.

D) Only profit and loss on a total basis.

E) Profit and loss on a budget and actual basis.

138) A firm sells two products, Regular and Ultra. For every unit of Regular sold, two units of Ultra are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow. The contribution margin per composite unit is:

A) $12.

B) $20.

C) $32.

D) $44.

E) $52.

139) A firm sells two products, Regular and Ultra. For every unit of Regular sold, two units of Ultra are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow. What is the firm's break-even point in units of Regular and Ultra?

A) 31,000 Regular units and 31,000 Ultra units.

B) 31,000 Regular units and 62,000 Ultra units.

C) 10,333 Regular units and 20,667 Ultra units.

D) 36,167 Regular units and 72,333 Ultra units.

E) 62,000 Regular units and 31,000 Ultra units.

140) The ratio (proportion) of the sales volumes for the various products sold by a company is called the:

A) Current product mix.

B) Relevant mix.

C) Sales mix.

D) Inventory cost ratio.

E) Production ratio.

141) Mott Company's sales mix is 3 units of A, 2 units of B, and 1 unit of C. Selling prices for each product are $20, $30, and $40, respectively. Variable costs per unit are $12, $18, and $24, respectively. Fixed costs are $320,000. What is the break-even point in composite units?

A) 1,111 composite units.

B) 1,600 composite units.

C) 2,666 composite units.

D) 4,000 composite units.

E) 5,000 composite units.

142) Madison Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are:

Total fixed costs are $340,000. The selling price per composite unit for the current sales mix (rounded to the nearest cent) is:

A) $17.00.

B) $ 5.67.

C) $20.00.

D) $37.00.

E) $25.00.

143) Madison Corporation sells three products (M, N, and O) in the following sales mix: 3:1:2. Unit price and cost data are:

Total fixed costs are $340,000. The contribution margin per composite unit for the current sales mix (round to the nearest cent) is:

A) $17.00.

B) $ 5.67.

C) $20.00.

D) $37.00.

E) $25.00.

144) Madison Corporation sells three products (M, N, and O) in the following sales mix: 3:1:2. Unit price and cost data are:

Total fixed costs are $340,000. The break-even point in composite units for the current sales mix (round to the nearest unit) is:

A) 17,000

B) 20,000

C) 102,000

D) 51,000

E) 34,000

145) Madison Corporation sells three products (M, N, and O) in the following sales mix: 3:1:2. Unit price and cost data are:

Total fixed costs are $340,000. The break-even point in sales dollars for the current sales mix is (round to the nearest thousand):

A) $ 20,000.

B) $289,000.

C) $400,000.

D) $629,000.

E) $740,000.

146) Barclay Bikes manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's selling price per composite unit.

A) $1,255.

B) $15,150.

C) $7,575.

D) $1,950.

E) $13,200.

147) Barclay Bikes manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's contribution margin per composite unit.

A) $1,055.

B) $1,950.

C) $1,255.

D) $7,575.

E) $1,500.

148) Barclay Bikes manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's break-even point in composite units (rounded to the nearest whole unit).

A) 7,575 composite units.

B) 15,150 composite units.

C) 858 composite units.

D) 6,161 composite units.

E) 429 composite units.

149) Barclay Bikes manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's contribution margin ratio per composite unit (rounded to the nearest whole percentage).

A) 35%

B) 50%

C) 53%

D) 200%

E) 40%

150) Barclay Bikes manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's break-even point in total sales dollars.

A) $13,250,000.

B) $13,000,000.

C) $12,750,000.

D) $12,900,050.

E) $12,750,625.

151) Kent Co. manufactures a product that sells for $50.00 and has variable costs of $24.00 per unit. Fixed costs are $260,000. Kent can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. Compute the contribution margin per unit if the machine is purchased.

A) $22.50.

B) $26.00.

C) $29.50.

D) $28.50.

E) $27.50.

152) Kent Co. manufactures a product that sells for $50.00 and has variable costs of $24.00 per unit. Fixed costs are $260,000. Kent can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. Compute the revised break-even point in units if the new machine is purchased.

A) 10,438 units.

B) 8,814 units.

C) 10,000 units.

D) 9,200 units.

E) 9,869 units.

153) Kent Co. manufactures a product that sells for $50.00. Fixed costs are $260,000 and variable costs are $24.00 per unit. Kent can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. What effect would the purchase of the new machine have on Kent's break-even point in units?

A) 800 unit increase.

B) 800 unit decrease.

C) 5,714 unit increase.

D) 4,444 unit decrease.

E) No effect on the break-even point in units.

154) Kent Co. manufactures a product that sells for $50.00. Fixed costs are $260,000 and variable costs are $24.00 per unit. Kent can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. Compute the revised break-even point in dollars with the purchase of the new machine.

A) $500,000.

B) $440,678.

C) $521,923.

D) $480,000.

E) $460,000.

155) McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the contribution margin per composite unit.

A) $310.

B) $200.

C) $300.

D) $330.

E) $285.

156) McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the break-even point in composite units.

A) 2,092.

B) 3,805.

C) 1,350.

D) 1,395.

E) 1,550.

157) McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the number of units of Product A McCoy must sell to break even.

A) 1,350.

B) 6,750.

C) 2,700.

D) 10,463.

E) 6,200.

158) McCoy Brothers manufactures and sells two products, A and Z in the ratio of 4:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the number of units of Product Z McCoy must sell to break even.

A) 9,300.

B) 6,200.

C) 1,550.

D) 3,100.

E) 6,750.

159) Wang Co. manufactures and sells a single product that sells for $450 per unit; variable costs are $270 per unit. Annual fixed costs are $800,000. Current sales volume is $4,200,000. Compute the contribution margin per unit.

A) $450.

B) $270.

C) $200.

D) $190.

E) $180.

160) Wang Co. manufactures and sells a single product that sells for $450 per unit; variable costs are $270 per unit. Annual fixed costs are $800,000. Current sales volume is $4,200,000. Compute the contribution margin ratio.

A) 40.0%.

B) 66.7%.

C) 20.7%.

D) 50.0%.

E) 19.3%.

161) Wang Co. manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000. Compute the break-even point in units.

A) 5,500.

B) 1,933.

C) 4,444.

D) 2,900.

E) 1,160.

162) Wang Co. manufactures and sells a single product that sells for $450 per unit; variable costs are $270 per unit. Annual fixed costs are $800,000. Current sales volume is $4,200,000. Compute the break-even point in dollars.

A) $1,740,000.

B) $2,000,000.

C) $1,304,348.

D) $4,202,899.

E) $2,640,000.

163) Wang Co. manufactures and sells a single product that sells for $450 per unit; variable costs are $270 per unit. Annual fixed costs are $800,000. Current sales volume is $4,200,000. Management targets an annual pre-tax income of $1,125,000. Compute the unit sales to earn the target pre-tax net income.

A) 4,444.

B) 7,500.

C) 6,650.

D) 10,694.

E) 11,750.

164) Wang Co. manufactures and sells a single product that sells for $450 per unit; variable costs are $270 per unit. Annual fixed costs are $800,000. Current sales volume is $4,200,000. Management targets an annual pre-tax income of $1,125,000. Compute the dollar sales to earn the target pre-tax net income.

A) $5,640,000.

B) $4,812,500.

C) $3,378,378.

D) $2,991,004.

E) $2,612,613.

165) Wang Co. manufactures and sells a single product that sells for $450 per unit; variable costs are $270 per unit. Annual fixed costs are $800,000. Current sales volume is $4,200,000. Compute the current margin of safety in dollars.

A) $1,560,000.

B) $2,000,000.

C) $2,200,000.

D) $2,895,652.

E) $2,460,000.

166) Carver Packing Company reports total contribution margin of $72,000 and pretax net income of $24,000 for the current month. In the next month, the company expects sales volume to increase by 8%. The degree of operating leverage and the expected percent change in income, respectively, are:

A) 4.0 and 32%

B) 0.33 and 8%

C) 0.33 and 2.7%

D) 3.0 and 8%

E) 3.0 and 24%

167) Morse Company reports total contribution margin of $48,000 and pretax net income of $12,000 for the current month. The degree of operating leverage is:

A) 4.0

B) 0.25

C) 1.25

D) 2.5

E) 250%

168) A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials, $10 per unit, Direct labor, $6 per unit, Variable overhead, $70,000, and Fixed overhead, $120,000. The total product cost per unit under absorption costing is:

A) $16 per unit.

B) $23 per unit.

C) $35 per unit.

D) $28 per unit.

E) $17 per unit.

169) A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials, $10 per unit, Direct labor, $6 per unit, Variable overhead, $70,000, and Fixed overhead, $120,000. The total product cost per unit under variable costing is:

A) $16 per unit.

B) $23 per unit.

C) $35 per unit.

D) $28 per unit.

E) $17 per unit.

170) A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials, $10 per unit, Direct labor, $6 per unit, Variable overhead, $70,000, and Fixed overhead, $120,000. Of the 10,000 units produced, 9,200 were sold, and 800 remain in inventory at year-end. Under absorption costing, the value of the inventory is:

A) $12,800.

B) $18,400.

C) $28,000.

D) $22,400.

E) $13,600.

171) A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials, $10 per unit, Direct labor, $6 per unit, Variable overhead, $70,000, and Fixed overhead, $120,000. Of the 10,000 units produced, 9,200 were sold, and 800 remain in inventory at year-end. Under variable costing, the value of the inventory is:

A) $12,800.

B) $18,400.

C) $28,000.

D) $22,400.

E) $13,600.

172) A manufacturer reports the following information below for its first three years in operation.

Income for year 1 using absorption costing is:

A) $76,000.

B) $82,400.

C) $88,800.

D) $106,600.

E) $111,000.

173) A manufacturer reports the following information below for its first three years in operation.

Income for year 2 using absorption costing is:

A) $109,000.

B) $117,000.

C) $106,600.

D) $115,000.

E) $111,000.

174) A manufacturer reports the following information below for its first three years in operation.

Income for year 3 using absorption costing is:

A) $109,000.

B) $117,000.

C) $106,600.

D) $115,000.

E) $111,000.

175) A manufacturer reports the following information below for its first three years in operation.

Income for year 3-year period using absorption costing is:

A) $280,000.

B) $310,000.

C) $300,000.

D) $305,000.

E) $308,000.

176) Shown below are terms or phrases preceded by letters a through j followed by a list of definitions. Match the terms or phrases 1 through 10 with the correct definitions by placing the letter of the term or phrase in the answer space provided at the beginning of each definition.

(a) Mixed cost

(b) Fixed cost

(c) Contribution margin per unit

(d) Curvilinear cost

(e) Variable cost

(f) Step-wise cost

(g) Relevant range of operations

(h) Estimated line of cost behavior

(i) Least-squares regression

(j) Cost-volume-profit analysis

________(1) The amount that the sale of one unit contributes toward covering fixed costs and generating profit.

________(2) A cost that changes in total in proportion to changes in volume of activity.

________(3) A cost that includes both fixed and variable cost components.

________(4) A cost that changes as volume changes, but at a nonconstant rate.

________(5) A line drawn on a graph to reflect the relation between cost and unit volume.

________(6) A statistical method for identifying cost behavior that is more precise than the high-low method and a scatter diagram.

________(7) A company's normal operating range of production volume; excludes extremely high and low operating levels that are unlikely to recur.

________(8) A cost that remains constant over limited ranges of volumes of activity but shifts to another level when volume changes significantly.

________(9) A business planning tool that helps managers predict how changes in costs and sales levels affect profit.

________(10) A cost that remains unchanged in total amount despite variations in the volume of activity within a relevant range.

177) Define variable cost, fixed cost, and mixed cost.

178) What are the cost behaviors per unit and in total for variable cost and fixed costs within the relevant range?

179) Describe what happens to the net income of a company under each of the following assumptions: (a) Units sold are less than break-even units. (b) Units sold are greater than break-even units. (c) Units sold are equal to the break-even units.

180) Discuss how CVP analysis can be useful in planning.

181) Describe and compare the three cost estimation methods used to develop a cost equation.

182) What are the unit contribution margin and the contribution margin ratio? What do these measures reveal about a company's cost structure?

183) What is operating leverage? How can the degree of operating leverage be used in analyzing changes in sales?

184) What is a scatter diagram? How is a scatter diagram used to estimate cost behavior?

185) What is the high-low method? Briefly describe how it is applied.

186) Define the break-even point of a company.

187) Briefly describe a CVP chart, including its major components.

188) Describe how a cost-volume-profit analysis would be performed for a company that sells more than one product when the sales mix is known.

189) A company has a goal of earning $128,000 in pre-tax income. The contribution margin ratio is 30%. What dollar amount of sales must be achieved to reach the goal if fixed costs are $64,000?

190) A company has total fixed costs of $200,000. Its product sells for $25 per unit and variable costs amount to $15 per unit. The company has a target pre-tax income of $50,000. How many units must be sold to achieve this pre-tax target income?

191) Proctor Company has fixed costs of $315,000 and a contribution margin ratio of 24%. If sales are expected to be $1,500,000, what is the margin of safety, in percent?

192) Johnston Co. anticipates total fixed costs of $120,000 and variable costs equal to 40% of sales. What is the pretax income if sales are $650,000?

193) Journey Company is considering the production and sale of a new product with the following sales and cost data: unit sales price $18; unit variable costs $8.50; and total fixed costs of $81,250. Determine the dollar sales needed to generate a pre-tax income of $44,000, rounded to the nearest whole dollar.

194) Philadelphia Co. is considering the production and sale of a new product with the following sales and cost data: unit sales price, $300; unit variable costs, $180; total fixed costs, $270,000; and projected sales, $900,000. What is the margin of safety:

(a) In dollar sales? And (b) As a percent of sales?

195) Zola Co. has a contribution margin ratio of 40% and would like to determine whether an additional advertising expenditure of $4,000 would increase sales by $8,000. Calculate the increase or decrease in net income that would result from this change, and comment on whether Zola should purchase the additional advertising.

196) Portal Manufacturing has total fixed costs of $520,000. A unit of product sells for $15 and variable costs per unit are $11.

a) Prepare a contribution margin income statement showing predicted net income (loss) if Portal sells 100,000 units for the year ended December 31.

b) At a minimum, how many units must Portal sell in order not to incur a loss?

197) Crookshank Manufacturing has total fixed costs of $460,000. A unit of product sells for $20 and variable costs per unit are $11.

Prepare a contribution margin income statement showing predicted net income (loss) if Crookshank sells 100,000 units for the year ended December 31.

198) Margin 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. Should Margin reduce its per unit sales price and pay for the additional advertising? (Support your answer with calculations.)

199) The following data relate to a product sold by Hallstone Company:

(a) Calculate the number of units expected to be sold.

(b) Calculate the expected total dollar sales.

200) A product is sold for $45 and has variable costs of $33 per unit. The total fixed costs for the firm are $180,600. If the firm desires to earn a pretax income of $77,400, how many units must be sold?

201) A firm produces and sells a product with a contribution margin of $32 per unit. The firm is presently selling 90,000 units and earning $320,000 in pre-tax income. If the firm desires to increase its pre-tax income to $ 400,000, how many more units must it sell?

202) Isaacson Co. has total fixed costs of $240,000 and a contribution margin ratio of 40%. If rent expense increases by $5,000, how much will total sales revenue have to increase to cover this increase in costs?

203) A company is looking into two alternative methods of producing its product. The following information about the two alternatives is available. If the company's expected sales volume is 35,000 units, which alternative should be selected?Prepare forecasted contribution margin income statements and compute the degree of operating leverage to assess the alternatives.

204) Dodge Industries incurs the following costs during the current year:

Sales for the year were $80,000 and Dodge determined that only the direct production costs and factory supplies are to be classified as variable costs; all other costs are classified as fixed costs. Dodge sold 400 units.

(a) Calculate the unit contribution margin and the contribution margin ratio for Dodge

Industries.

(b) Dodge Industries is considering plans that would increase the contribution margin ratio for next year. Should it pursue these plans? Explain.

205) Glover Headgear produces specialty logo baseball caps for a variety of customers. Selected cost data for Glover follows: direct materials cost $17,000; depreciation on factory equipment, $21,000; direct labor, $16,000; factory lease, $24,000. If Glover sells 6,100 caps at an average price of $12 for each cap, what is the company's contribution margin in total dollars?

206) Ludington Corporation provides the following data from a recent period for its manufacture of shoes: direct material costs, $24,000; direct labor costs, $12,000; and total fixed costs, $40,000. Sales were $60,000 based on 12,000 units sold during the period. Calculate the contribution margin and the contribution margin ratio.

207) A company has total fixed costs of $360,000. Its product sells for $40 per unit and variable costs amount to $25 per unit. What is the break-even point in dollar sales?

208) The following information describes a product expected to be produced and sold by Quark Corporation:

Selling price…………………………… $33 per unit

Variable costs………………………… $27 per unit

Total fixed costs……………………… $855,000 per year

Required:

(a) Calculate the contribution margin per unit.

(b) Calculate the break-even point in units.

209) A company manufactures and sells searchlights. Each searchlight sells for $345. The variable cost per unit is $198, and the company's total fixed costs are $635,000. Predicted sales are 15,000 units. What is the contribution margin per unit?

210) Clockworks Co. reports the following data for the current year:

Units sold………………………………………… 1,200

Unit sales price…………………………………… $30

Unit variable cost………………………………… $10

Total fixed cost…………………………………… $18,000

Required:

(a) Calculate Clockworks' pretax income.

(b) Calculate Clockworks' degree of operating leverage.

211) Fielder Productions reports the following information:

Total contribution margin………………… $32,000

Total fixed costs…………………………… $28,000

Required:

(a) Calculate Fielder's degree of operating leverage (DOL).

(b) If sales increase by 6%, what is the expected percentage increase in pretax income?

212) Craft Company and Jarmer Company each have sales of $200,000 and costs of $140,000. Craft Company's costs consist of $40,000 fixed and $100,000 variable, while Jarmer Company's costs consist of $100,000 fixed and $40,000 variable. Which company will suffer the greatest decline in profits if sales volume declines by 15%?Prepare contribution margin income statements and compute the degree of operating leverage

213) Wolowitz 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?

214) A company sells a single product that has a contribution margin ratio of 28%. If the company's total fixed costs are $84,000, what is the break-even point in dollar sales?

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

216) Expanse 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 $50; and total fixed costs of $150,000. Calculate the break-even point in units and in dollar sales.

217) Seaquest Company's contribution margin income statement is presented below. Sales for the current period consisted of 5,000 units. Determine the company's break-even point in dollars.

218) The following information is available for Alba Company's maintenance cost over the last four months.

Use the high-low method to estimate both the fixed and variable component of its maintenance cost.

219) The following information is available for a company's cost of sales over the last four months.

Use the high-low method to estimate the fixed and variable components of the cost of sales.

220) A company manufactures a product and sells it for $120 per unit. The total fixed costs of manufacturing and selling the product are expected to be $155,250, and the variable costs are expected to be $75 per unit. What is the company's break-even point in (a) units and (b) dollar sales?

221) A product has a contribution margin per unit of $17 and sells at $25 per unit. If the break-even point is 82,000 units, calculate (a) the variable costs per unit and (b) the total fixed costs.

222) A firm provides the following sales data:

Expected unit sales………… 5,000 Unit variable cost………… $10

Unit selling price…………… $16 Total fixed cost…………… $12,000

Required:

(a) Calculate the break-even point in dollar sales.

(b) Calculate the margin of safety in dollar sales.

223) Parker Co. is preparing next period's forecasts. Total fixed costs are expected to be $300,000 and the contribution margin ratio is expected to be 30%.

(a) Calculate the company's break-even point in dollar sales.

(b) If sales are $1,800,000 above the break-even point, what will Parker's pretax income be?

224) The following information describes a product expected to be produced and sold by Garr Company:

Selling price……………………………………… $80 per unit

Variable costs…………………………………… $32 per unit

Total fixed costs………………………………… $630,000

Required:

(a) Calculate the contribution margin ratio.

(b) Calculate the break-even point in dollar sales.

(c) What dollar amount of sales would be necessary to achieve a pretax income of $120,000?

225) Identify items a, b, and c in the cost-volume-profit graph shown below.

226) The sales mix of Desert Springs Company is 5 units of A, 3 units of B, and 1 unit of C. Per unit sales prices for each product are $30, $40, and $50, respectively. Variable costs per unit are $14, $24, and $34, respectively. Fixed costs are $597,600. What is the break-even point in composite units and in units of A, B, and C?

227) A firm sells two different products, A and B. For each unit of B sold, the firm sells two units of A. Total fixed costs $1,260,000. Additional selling prices and cost information for both products follow:

Required:

(a) Calculate the contribution margin per composite unit.

(b) Calculate the break-even point in units of each individual product.

(c) If pretax income before taxes of $294,000 is desired, how many units of A and B must be sold?

228) Benjamin Co. has three products A, B, and C, and its fixed costs are $69,000. The sales mix for its products are 3 units of A, 4 units of B, and 1 unit of C. Information about the three products follows:

(a) Calculate the company's break-even point in composite units and sales dollars.

(b) Calculate the number of units of each individual product to be sold at the break-even point.

229) Varigon Co. produces and sells three products–Household, Commercial, and Industrial, and has total fixed costs of $52,000. Sales and cost data follow:

Household Commercial Industrial

Sales price per unit……………… $6 $8 $10

Variable costs per unit…………… 4 6 7

Sales mix……………..………… 3 2 1

Calculate the break-even point in composite units.

230) Whiting Company sells a mix of three related products. Total fixed costs are $144,000. The following additional information is available for Whiting Company.

Determine the company's break-even point in composite units.

231) Preston Company is analyzing two alternative methods of producing its product. The production manager indicates that variable costs can be reduced 40% by installing a machine that automates production, but fixed costs would increase. Alternative 1 shows costs before installing the machine; Alternative 2 shows costs after the machine is installed. (a) Compute the break-even point in units and dollars for both alternatives. (b) Prepare a forecasted income statement for both alternatives assuming that 30,000 units will be sold. The statements should report sales, total variable costs, contribution margin, fixed costs, income before taxes, income taxes, and net income. Below the income statement, compute the degree of operating leverage. Which alternative would you recommend and why?

232) Magnolia Company is considering the production and sale of a new product with the following sales and cost data: unit sales price, $350; unit variable costs, $180; total fixed costs, $399,500; and projected sales, $910,000. Round your answers to the nearest whole unit or dollar.

(a) Calculate break-even in units.

(b) Calculate break-even in dollars (use four decimal places when calculating the contribution margin ratio).

(c) Calculate number of units that would need to be sold to generate an after-tax profit of $420,000 assuming a 30% tax rate.

(d) Calculate dollar sales that would be needed to generate the same profit as above.

(e) Calculate the margin of safety stated as a percentage using the $910,000 projected sales level.

Be sure to label each calculation and show all calculations.

233) Dubashi Windows manufactures two standard size windows, J and R, in the ratio of 5:3. J has a selling price of $150 per unit and R has a selling price of $200 per unit. The variable cost of J is $75.00 and the variable cost of R is $90.00. Fixed costs are $352,500. Compute the (a) contribution margin per composite unit, (b) break-even point in composite units, (c) number of units of each product that will be sold at the break-even point.

234) Bing Company's contribution margin income statement is presented below. Sales for the current period consisted of 7,500 units. Compute the company's break-even point in (a) units, and (b) dollars. Compute the margin of safety in (c) dollars and (d) percent.

235) A ________ cost is one that remains unchanged despite variations in the volume of activity within a relevant range. A ________ cost is one that changes in proportion to changes in volume of activity.

236) A ________ cost is one that includes both fixed and variable cost components; a ________ cost is one that reflects a step pattern.

237) Three important assumptions in cost-volume-profit analysis are that (1) ________ per unit is constant, (2) ________ per unit is constant, and (3) ________ are constant in total.

238) Solving problems to determine the relationship of cost, volume, and profit often starts with measuring the ________ point. Further analysis emphasizing profitability may be accomplished by measuring the ________ and ________.

239) Three methods to separate costs into fixed and variable are the ________, ________, and ________ methods.

240) The unit contribution margin divided by the selling price per unit is the ________.

241) The difference between the unit sales price and the unit variable cost of an item is defined as the ________.

242) Examining strategies that impact several estimates in the CVP analysis is known as ________.

243) One aid in measuring cost behavior involves creating a display of the data about past costs in graphical form. Such a visual display is called a ________.

244) When using the high-low method for estimating cost behavior, the slope, or variable cost per unit, is calculated by ________.

245) ________ is a statistical method of identifying an estimated line of cost behavior.

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

247) A graphic presentation of cost-volume-profit data is known as a ________ graph (or chart); this presentation is also sometimes called a ________ chart.

248) The ratio (proportion) of the sales volumes of the various products sold by a company is called the ________.