Test Bank Answers Cost-Volume-Profit Analysis Chapter 6

Managerial Accounting, 4e (Whitecotton)

Chapter 6 Cost-Volume-Profit Analysis

1) Cost-volume-profit analysis assumes that all costs can be accurately described as either fixed or variable.

2) On a CVP graph, the break-even point is the point at which the contribution margin line crosses the total cost line.

3) Contribution margin is equal to fixed costs at the break-even point.

4) Break-even units can be found by dividing fixed costs by the unit contribution margin.

5) Target units equals fixed costs plus target profit divided by the unit contribution margin.

6) The target sales level equals fixed costs plus variable costs divided by the contribution margin ratio.

7) To determine the number of units needed to earn a target profit, divide the target contribution margin by the contribution margin per unit.

8) The margin of safety is the difference between actual sales and budgeted sales.

9) Managers can use cost-volume-profit analysis to help evaluate changes in price.

10) Managers can use cost-volume-profit analysis to evaluate changes in cost structure.

11) Degree of operating leverage is calculated by dividing sales by profit.

12) The degree of operating leverage can be multiplied by a change in sales to determine the change in profit.

13) A firm with a higher degree of operating leverage would be considered less risky than a comparable firm with a lower degree of operating leverage.

14) Cost-volume-profit analysis can only be performed for companies that sell only one product.

15) In multiproduct cost-volume-profit analysis, a break-even point must be calculated separately for each product.

16) Which of the following statements is not correct about cost-volume-profit analysis?

A) CVP analysis is a decision-making tool for managers.

B) CVP analysis focuses on the relationship among volume and mix of units sold, prices, variable costs, fixed costs, and profit.

C) CVP analysis works best when all variables are changed concurrently.

D) Managers use CVP analysis to evaluate how changing one key variable will impact profitability, while holding everything else constant.

17) Cost-volume-profit analysis assumes that total costs behave in a ________ fashion.

A) Curvilinear

B) Linear

C) Exponential

D) Regressive

18) Which of the following is not a key assumption of cost-volume-profit?

A) Costs must be fixed.

B) Production and sales are equal.

C) Changes in total cost are strictly due to changes in activity.

D) Total costs and revenues can be depicted with a straight line.

19) If production volume does not equal sales volume:

A) we must adjust the CVP formulas for that fact to use CVP.

B) we cannot use CVP, since an assumption is violated.

C) the CVP analysis will always indicate a breakeven point that cannot be reached.

D) the conclusions we draw from a CVP analysis will not be as sound as they would be if we assumed production equaled sales.

20) Profit is indicated on a cost-volume-profit graph by:

A) the vertical difference between zero and the break-even point.

B) the horizontal difference between the revenue line and the cost line.

C) the vertical difference between the revenue line and the cost line.

D) the horizontal distance between zero and the break-even point.

21) Which of the following statements is correct about the break-even point?

A) The break-even point is the point where a company achieves its target profit.

B) The break-even point is the point where all variable costs are covered (but fixed costs are not).

C) The break-even point is the point where all fixed costs are covered (but variable costs are not).

D) The break-even point quantifies the number of units that must be sold to cover total costs with zero profit.

22) What component of the profit equation should be set equal to zero to find the breakeven point?

A) Total sales revenue

B) Total variable costs

C) Total fixed costs

D) Profit

23) The break-even point is the point at which profit equals:

A) zero.

B) the target.

C) variable costs.

D) less than five percent.

24) The break-even point is:

A) the point where zero contribution margin is earned.

B) the point where zero profit is earned.

C) the point where selling price just equals variable cost.

D) equal to sales revenue less fixed costs.

25) Which of the following statements is not correct about the methods managers use to model the relationship between revenues, costs, profit, and volume?

A) Each method provides a different way to express the CVP relationships, yet answers the same basic question.

B) Choice of method depends, in part, on personal preference.

C) Choice of method depends, in part, on the available information.

D) Each method yields a different final answer to be used in analysis.

26) The profit equation is:

A) (Unit price × Q) - (Unit variable costs × Q) - Total fixed costs = Profit

B) (Unit price × Q) - (Unit variable costs × Q) + Total fixed costs = Profit

C) (Unit price - Unit variable costs - Total fixed costs) × Q = Profit

D) (Unit price × Q) + (Unit variable costs × Q) + Total fixed costs = Profit

27) The formula for break-even point in terms of units is:

A) Total variable costs/Unit contribution margin

B) Total fixed costs/Contribution margin ratio

C) Total fixed costs/Unit contribution margin

D) Total variable costs/Total fixed costs

28) The formula for break-even point in terms of sales dollars is:

A) Total variable costs/Contribution margin ratio

B) Total fixed costs/Contribution margin ratio

C) Total fixed costs/Unit contribution margin

D) Total variable costs/Total fixed costs

29) Mustang Corp. has a selling price of $15, variable costs of $10 per unit, and fixed costs of $35,000. How many units must be sold to break-even?

A) 7,000

B) 14,000

C) 3,500

D) 2,334

30) Thunder Corp. has a selling price of $25 per unit, variable costs of $20 per unit, and fixed costs of $35,000. How many units must be sold to break even?

A) 7,000

B) 14,000

C) 3,500

D) 2,334

31) Maggie Corp. has a selling price of $20 per unit, variable costs of $10 per unit, and fixed costs of $140,000. How many units must be sold to break even?

A) 7,000

B) 14,000

C) 3,500

D) 2,334

32) Quail, Inc., has a contribution margin of 40% and fixed costs of $130,000. What is the break-even point in sales dollars?

A) $52,000

B) $325,000

C) $225,000

D) $78,000

33) Allen, Inc., has a contribution margin of 40% and fixed costs of $250,000. What is the break-even point in sales dollars?

A) $100,000

B) $250,000

C) $375,000

D) $625,000

34) Mira Corp. has a selling price of $50 per unit, variable costs of $40 per unit, and fixed costs of $90,000. How many units must be sold to break-even?

A) 1,800

B) 2,250

C) 9,000

D) 2,000

35) Jasper Corp. has a selling price of $30, and variable costs of $20 per unit. When 12,000 units are sold, profits equaled $70,000. How many units must be sold to break-even?

A) 19,000

B) 12,000

C) 14,333

D) 5,000

36) At a level of 20,000 units sold, Gail Corp. has sales of $400,000, a contribution margin ratio of 40%, and a profit of $40,000. What is the break-even point in units?

A) 12,000

B) 8,000

C) 20,000

D) 15,000

37) Last month Peggy Company had a $30,000 profit on sales of $250,000. Fixed costs are $60,000 a month. What sales revenue is needed for Peggy to break even?

A) $166,667

B) $90,000

C) $30,000

D) $280,000

38) Last month Carlos Company had a $60,000 profit on sales of $300,000. Fixed costs are $120,000 a month. What sales revenue is needed for Carlos to break even?

A) $360,000

B) $420,000

C) $200,000

D) $240,000

39) Skyline Corp. has a selling price of $25 per unit, variable costs of $20 per unit, and fixed costs of $25,000. What sales revenue is needed to break-even?

A) $100,000

B) $5,000

C) $125,000

D) $50,000

40) Dancer Corp. has a selling price of $20 per unit, and variable costs of $10 per unit. When 12,000 units are sold, profits equaled $35,000. How many units must be sold to break-even?

A) 32,300

B) 20,400

C) 24,366

D) 8,500

41) Belle Corp. has a selling price of $50 per unit, variable costs of $40 per unit, and fixed costs of $100,000. What sales revenue is needed to break-even?

A) $500,000

B) $125,000

C) $5,000,000

D) $1,000,000

42) Virgil Corp. has a selling price of $30 per unit, and variable costs of $20 per unit. When 12,000 units are sold, profits equaled $55,000. How many units must be sold to break-even?

A) 4,000

B) 12,000

C) 6,500

D) 5,500

43) Last month Dexter Company had a $15,000 loss on sales of $150,000. Fixed costs are $60,000 a month. By how much do sales have to increase for Dexter to break even?

A) $60,000

B) $75,000

C) $45,000

D) $50,000

44) Last month Empire Company had a $30,000 profit on sales of $250,000. Fixed costs are $60,000 a month. By how much would sales be able to decrease for Empire to still break even?

A) $90,000

B) $83,333

C) $166,667

D) $280,000

45) Last month Angus Company had a $30,000 loss on sales of $250,000. Fixed costs are $60,000 a month. What sales revenue is needed for Angus to break even?

A) $166,667

B) $500,000

C) $280,000

D) $220,000

46) At a sales level of 20,000 units, Pony Corp. has sales of $400,000, a variable cost ratio of 60%, and a profit of $40,000. What is the break-even point in units?

A) 8,000

B) 12,000

C) 15,000

D) 20,000

47) Last month Stagecoach Company had a $60,000 loss on sales of $300,000. Fixed costs are $120,000 a month. What sales revenue is needed for Stagecoach to break even?

A) $360,000

B) $480,000

C) $600,000

D) $420,000

48) The formula for target units is:

A) (Total fixed costs + Target profit)/Contribution margin ratio

B) (Total variable costs + Total fixed costs)/Contribution margin ratio

C) (Total fixed costs + Target profit)/Unit contribution margin

D) (Total variable costs + Total fixed costs)/Unit contribution margin

49) The formula for target sales is:

A) (Total fixed costs + Target profit)/Contribution margin ratio

B) (Total variable costs + Total fixed costs)/Contribution margin ratio

C) (Total fixed costs + Target profit)/Unit contribution margin

D) (Total variable costs + Total fixed costs)/Unit contribution margin

50) Merlot, Inc. has fixed costs of $200,000, sales price of $50, and variable cost of $30 per unit. How many units must be sold to earn profit of $80,000?

A) 2,800

B) 11,200

C) 14,000

D) 202,400

51) Martol, Inc. has fixed costs of $200,000 and a contribution margin ratio of 40%. How much sales revenue must be earned for a profit of $80,000?

A) $140,000

B) $560,000

C) $700,000

D) $1,120,000

52) Megan, Inc. has fixed costs of $400,000, sales price of $40, and variable cost of $30 per unit. How many units must be sold to earn profit of $80,000?

A) 2,000

B) 10,000

C) 40,000

D) 48,000

53) Fern, Inc. has fixed costs of $400,000 and a contribution margin ratio of 30%. How much sales revenue must be earned for a profit of $80,000?

A) $144,000

B) $336,000

C) $1,600,000

D) $1,920,000

54) Pecan, Inc., has a contribution margin of 50% and fixed costs of $220,000. What sales revenue is needed to attain a $60,000 profit?

A) $70,400

B) $440,000

C) $560,000

D) $240,000

55) Munoz Inc. has a contribution margin ratio of 30% and fixed costs of $90,000. What sales revenue is needed to generate a $60,000 profit?

A) $45,000

B) $200,000

C) $500,000

D) $214,286

56) Louise Corp. has a contribution margin ratio of 35%, fixed costs of $60,000, and a profit of $45,000. What are total sales?

A) $300,000

B) $105,000

C) $36,750

D) $171,429

57) Ironwood Inc. has a variable cost ratio of 60% and fixed costs of $90,000. What sales revenue is needed to generate a $120,000 profit?

A) $128,572

B) $225,000

C) $375,000

D) $525,000

58) Payton Corp. has sales of $200,000, a contribution margin ratio of 35%, and a target profit of $40,000. If 10,000 units were sold, what are total variable costs?

A) $200,000

B) $130,000

C) $240,000

D) $160,000

59) Chelsea Company has sales of $400,000, variable costs of $10 per unit, fixed costs of $100,000, and a target profit of $60,000. How many units were sold?

A) 12,000

B) 18,000

C) 24,000

D) 30,000

60) Elk Corp. has sales of $300,000, a contribution margin ratio of 40%, and a target profit of $30,000. If 20,000 units were sold, what is the variable cost per unit?

A) $22.50

B) $9.00

C) $6.00

D) $2.00

61) Bugle Corp. has sales of $400,000, a variable cost ratio of 40%, and a profit of $40,000. If 10,000 units were sold, what is the contribution margin per unit?

A) $60.00

B) $36.00

C) $24.00

D) $18.00

62) Nancy Company has sales of $100,000, variable costs of $5 per unit, fixed costs of $25,000, and a profit of $15,000. How many units were sold?

A) 20,000

B) 16,000

C) 12,000

D) 8,000

63) Keith Corp. has sales of $200,000, a contribution margin ratio of 35%, and a profit of $40,000. If 10,000 units were sold, what is the variable cost per unit?

A) $13.00

B) $20.00

C) $7.00

D) $3.00

64) Vesper Company has sales of $200,000, variable costs of $8 per unit, fixed costs of $50,000, and a profit of $30,000. How many units were sold?

A) 10,000

B) 15,000

C) 20,000

D) 25,000

65) Paint Corp. has sales of $600,000, a contribution margin ratio of 30%, and a profit of $40,000. If 20,000 units were sold, what is the variable cost per unit?

A) $9.00

B) $30.00

C) $21.00

D) $3.00

66) Harvest Corp. has a contribution margin ratio of 30%, fixed costs of $45,000, and a profit of $60,000. What are total sales?

A) $31,500

B) $105,000

C) $150,000

D) $350,000

67) Leather Company sold 20,000 units, had variable costs of $12 per unit, fixed costs of $100,000, and profits of $60,000. What is the selling price per unit?

A) $8

B) $17

C) $20

D) $32

68) Last month Lyle Company had a $60,000 profit on sales of $300,000. Fixed costs are $120,000 a month. How much do sales have to increase for Lyle to earn a $100,000 profit?

A) $66,667

B) $83,333

C) $220,000

D) $400,000

69) The margin of safety is the difference between:

A) actual sales and budgeted sales.

B) actual sales and break-even sales.

C) target sales and actual sales.

D) target sales and budgeted sales.

70) At the break-even point, the margin of safety will be:

A) positive.

B) negative.

C) zero.

D) equal to fixed costs.

71) Dragon, Inc. has actual sales of $400,000 and a margin of safety of $150,000. What is Dragon's break-even point in sales?

A) $100,000

B) $250,000

C) $350,000

D) $450,000

72) Jerome Corp. has fixed costs of $500,000 and a contribution margin ratio of 40%. Currently, sales are $3,000,000. What is Jerome's margin of safety?

A) $1,750,000

B) $3,500,000

C) $5,250,000

D) $7,000,000

73) Idaho Corp. has fixed costs of $20,000 and a contribution margin ratio of 50%. Currently, sales are $75,000. What is Idaho's margin of safety?

A) $28,000

B) $35,000

C) $42,000

D) $70,000

74) The margin of safety tells managers:

A) how much sales would have to increase to hit the target profit.

B) how much profit would drop if sales decreased.

C) how much sales could drop before the firm no longer earns profits.

D) how much profit would have to increase to hit target sales.

75) Dexter Corp. has fixed costs of $500,000 and a contribution margin ratio of 25%. Currently, margin of safety is $1,000,000. What are Dexter's current sales?

A) $1,000,000

B) $2,000,000

C) $3,000,000

D) $4,000,000

76) Irwin Corp. has fixed costs of $20,000 and a contribution margin ratio of 40%. Currently, margin of safety is $35,000. What are Irwin's current sales?

A) $35,000

B) $37,500

C) $50,000

D) $85,000

77) Fountain Corp. has a selling price of $15 per unit and variable costs of $10 per unit. When 14,000 units are sold, profits equaled $45,000. What is the margin of safety?

A) $210,000

B) $105,000

C) $135,000

D) $75,000

78) Fontaine Corp. has a selling price of $15 and variable costs of $10 per unit. When 10,000 units are sold, profits equaled $25,000. What is the margin of safety?

A) $75,000

B) $25,000

C) $105,000

D) $50,000

79) Rollag Corp. has a selling price of $30 and variable costs of $20 per unit. When 14,000 units are sold, profits equaled $45,000. What is the margin of safety?

A) $420,000

B) $135,000

C) $142,500

D) $75,000

80) Indigo Corp. has a selling price of $45 and variable costs of $30 per unit. When 10,000 units are sold, profits equaled $25,000. What is the margin of safety?

A) $75,000

B) $25,000

C) $80,000

D) $150,000

81) Knoll, Inc. currently sells 15,000 units a month for $50 each, has variable costs of $20 per unit, and fixed costs of $300,000. Knoll is considering increasing the price of its units to $60 per unit. This will not affect costs, but demand is expected to drop 20%. Should Knoll increase the price of its product?

A) Yes; profit will increase $30,000.

B) Yes, profit will increase $150,000.

C) No, profit will decrease $150,000.

D) No, profit will decrease $30,000.

82) Knoll, Inc. currently sells 15,000 units a month for $50 each, has variable costs of $20 per unit, and fixed costs of $300,000. Knoll is considering increasing the price of its units to $60 per unit. If the price is changed, how many units will Knoll need to sell for profit to remain the same as before the price change?

A) 10,000

B) 11,250

C) 12,000

D) 12,500

83) All else being equal, what happens to the unit contribution margin and the contribution margin ratio if the sales price per unit increases?

A) Both unit contribution margin and contribution margin ratio increase.

B) Both unit contribution margin and contribution margin ratio decrease.

C) Unit contribution margin increases while contribution margin ratio decreases.

D) Unit contribution margin decreases while contribution margin ratio increases.

84) Cost structure refers to:

A) a company's break-even point.

B) whether fixed costs are covered by the contribution margin.

C) how a company uses variable versus fixed costs to perform operations.

D) where funds are stored.

85) Plymouth Corp. sells units for $100 each. Variable costs are $75 per unit, and fixed costs are $200,000. If Plymouth leases a new machine, fixed costs will increase by $60,000 a year, but production will be more efficient, saving $5 per unit. At what level of production will Plymouth be indifferent between leasing and not leasing the new machine?

A) 5,000

B) 10,000

C) 10,400

D) 12,000

86) A company is debating whether to change its cost structure so that fixed costs increase from $300,000 to $400,000, but variable costs decrease from $5 per unit to $4 per unit. If it were to implement the change at its current production level of 100,000 units, profit would not change. What would happen to the company's profit if the change were implemented and production increased to 125,000 units?

A) It will stay the same.

B) It will increase.

C) It will decrease.

D) It could increase or decrease.

87) A company is debating whether to change its cost structure so that variable costs increase from $4 per unit to $5 per unit but fixed costs decrease from $400,000 to $300,000. If it were to implement the change at its current production level of 100,000, profit would not change. What would happen to the company's profit if the change were implemented and production increased?

A) It will stay the same.

B) It will increase.

C) It will decrease.

D) It could increase or decrease.

88) Plymouth Corp. sells units for $100 each. Variable costs are $75 per unit, and fixed costs are $200,000. If Plymouth leases a new machine, production will be more efficient, saving $5 per unit. If Plymouth plans to sell 12,000 units, at what lease cost will Plymouth be indifferent between leasing and not leasing the new machine?

A) $10,000

B) $40,000

C) $60,000

D) $80,000

89) Which of the following statements about leverage is not correct?

A) Measuring the degree of operating leverage is a form of measuring risk.

B) Decisions about the use of debt or equity affect a company's financial leverage.

C) Decisions about whether to use fixed or variable costs affect a company's operating leverage.

D) The degree of financial leverage measures the extent to which fixed costs are used to operate the business.

90) Degree of operating leverage is calculated as:

A) profit divided by contribution margin.

B) break-even sales divided by profit.

C) profit divided by break-even sales.

D) contribution margin divided by profit.

91) Degree of operating leverage is used to:

A) calculate change in sales given change in profit.

B) calculate change in profit given change in sales.

C) calculate break-even sales given change in sales.

D) calculate break-even sales given change in profit.

92) Frontier Corp. has a contribution margin of $450,000 and profit of $150,000. What is its degree of operating leverage?

A) 0.33

B) 1.67

C) 2.50

D) 3.00

93) Frontier Corp. has a contribution margin of $450,000 and profit of $150,000. If sales increase 20%, by how much will profits increase?

A) 20%

B) 30%

C) 60%

D) 90%

94) Frontier Corp. has fixed costs of $300,000 and profit of $150,000. What is its degree of operating leverage?

A) 0.33

B) 1.67

C) 2.50

D) 3.00

95) Frontier Corp. has fixed costs of $300,000 and profit of $150,000. If sales increase 20%, by how much will profits increase?

A) 20%

B) 30%

C) 60%

D) 90%

96) Frontier Corp. sells units for $50, has unit variable costs of $20, and fixed costs of $300,000. If Frontier sells 15,000 units, what is its degree of operating leverage?

A) 0.33

B) 1.67

C) 2.50

D) 3.00

97) Frontier Corp. sells units for $50, has unit variable costs of $20, and fixed costs of $300,000. Frontier sells 15,000 units. If sales increase 20%, by how much will profits increase?

A) 20%

B) 30%

C) 60%

D) 90%

98) In multiproduct cost-volume-profit analysis, an assumption made in addition to those used in single-product CVP analysis is that:

A) the sales mix remains constant.

B) all costs can be classified as fixed or variable.

C) costs are linear in the relevant range.

D) production and sales are equal.

99) If a firm sells more than one product, the break-even point in units represents:

A) the number of units of the largest-selling product required to break even.

B) the number of units of the most profitable product required to break even.

C) the number of units of the highest-revenue product required to break even.

D) the sum of the units of all products required to break even.

100) Friar Corp. sells two products. Product A sells for $100 per unit, and has unit variable costs of $60. Product B sells for $70 per unit, and has unit variable costs of $50. Currently, Friar sells three units of product B for every one unit of product A sold. Friar has fixed costs of $750,000. What is Friar's break-even point in units?

A) 30,000 units of A and 30,000 units of B

B) 7,500 units of A and 22,500 units of B

C) 22,500 units of A and 7,500 units of B

D) 15,000 units of A and 15,000 units of B

101) Friar Corp. sells two products. Product A sells for $100 per unit, and has unit variable costs of $60. Product B sells for $70 per unit, and has unit variable costs of $50. Currently, Friar sells three units of Product B for every one unit of Product A sold. Friar has fixed costs of $750,000. How many units would Friar have to sell to earn a profit of $250,000?

A) 40,000 units of A and 40,000 units of B

B) 10,000 units of A and 30,000 units of B

C) 30,000 units of A and 10,000 units of B

D) 20,000 units of A and 20,000 units of B

102) Graham Corp. sells two products. Product A sells for $200 per unit, and has unit variable costs of $150. Product B sells for $50 per unit, and has unit variable costs of $20. Currently, Graham sells three units of Product B for every two units of Product A sold. Graham has fixed costs of $760,000. What is Graham's break-even point in units?

A) 20,000 units of A and 20,000 units of B

B) 12,000 units of A and 8,000 units of B

C) 8,000 units of A and 12,000 units of B

D) 10,000 units of A and 10,000 units of B

103) Graham Corp. sells two products. Product A sells for $200 per unit, and has unit variable costs of $150. Product B sells for $50 per unit, and has unit variable costs of $20. Currently, Graham sells three units of Product B for every two units of Product A sold. Graham has fixed costs of $760,000. How many units would Graham have to sell to earn a profit of $57,000?

A) 21,500 units of A and 21,500 units of B

B) 12,900 units of A and 8,600 units of B

C) 8,600 units of A and 12,900 units of B

D) 10,750 units of A and 10,750 units of B

Match the assumption for cost behavior patterns used in cost-volume-profit analysis with its corresponding explanation.

A) Determine the total fixed and variable costs per unit (including for mixed costs); step costs remain fixed within the relevant range.

B) Even if a company makes and sells multiple products, we assume the relative proportion of units sold remains the same.

C) Simplify the analysis with this assumption, even though we know some costs vary with production while others vary with sales.

D) Ignore other factors that affect cost and revenue, for example employee learning curves and productivity gains.

E) Use a straight line to approximate the relationship between total cost and sales volume and between total revenue and sales volume.

104) All costs can be classified as either fixed or variable.

105) There is a constant product mix.

106) There is a linear relationship between cost and revenue.

107) Only volume affects total cost and total revenue.

108) Production volume is equal to sales volume.

109) Roland had revenues of $600,000 in March. Fixed costs in March were $200,000 and profit was $40,000. Answer the following questions:

a. What was the contribution margin percentage?

b. What monthly sales volume (in dollars) would be needed to break-even?

c. What sales volume (in dollars) would be needed to earn $150,000?

110) Portia Company is a retailer of hammers. Portia pays $4.75 for each hammer and sells them for $8.00. Monthly fixed costs are $26,000. The hammer cost is the only variable cost.

a. What is the contribution margin per unit?

b. What is the break-even point in units?

c. How many units will Portia need to sell to earn target profit of $13,000?

111) Nora Inc. sells a single product for $15. Variable costs include $6 for each unit plus a 10% sales commission. Fixed costs are $150,000 per month.

a. What is the contribution margin percentage?

b. What is the break-even sales revenue?

c. What sales revenue is needed to achieve a $100,000 per month profit?

112) Raven Inc. sells a single product for $45. Variable costs include $26 for each unit plus a $10 selling expense per unit. Fixed costs are $200,000 per month.

a. What is the contribution margin percentage?

b. What is the breakeven sales revenue?

c. What sales revenue is needed to achieve a $175,000 per month profit?

113) Holly Inc. sells a single product for $40. Variable costs include $22 for each unit plus a 10% sales commission. Fixed costs are $105,000 per month.

a. What is the contribution margin percentage?

b. What is the breakeven sales revenue?

c. What sales revenue is needed to achieve a $140,000 per month profit?

114) Jasmine Inc. sells a product for $50 per unit. Variable costs per unit are $30, and monthly fixed costs are $150,000. Answer the following questions:

a. What is the break-even point in units?

b. What unit sales would be required to earn a target profit of $100,000?

c. Assume they achieve the level of sales required in part b, what is the margin of safety in sales dollars?

115) Halifax Products sells a product for $75. Variable costs per unit are $50, and monthly fixed costs are $75,000. Answer the following questions:

a. What is the break-even point in units?

b. How many units would need to be sold to earn a target profit of $200,000?

c. Assuming they achieve the level of sales required in part b, what is the margin of safety in sales dollars?

116) Juniper had revenues of $450,000 in March. Fixed costs in March were $240,000 and profit was $30,000. Answer the following questions:

a. What was the contribution margin percentage?

b. What monthly sales volume (in dollars) would be needed to break-even?

c. What was the margin of safety for March?

117) Dallas Inc. sells a product for $60. Variable costs are 60% of sales, and monthly fixed costs are $54,000. Answer the following questions:

a. What is the break-even point in units?

b. What unit sales would be required to earn a target profit of $120,000?

c. Assume they achieve the level of sales required in part b, what is the margin of safety in sales dollars?

118) Duncan had revenues of $900,000 in March. Fixed costs in March were $480,000 and profit was $60,000. Answer the following questions:

a. What was the contribution margin percentage?

b. What monthly sales volume (in dollars) would be needed to break-even?

c. What was the margin of safety for March?

119) Boise Corp had a margin of safety of $375,000 last month, with sales revenue of $1,000,000 and fixed costs of $250,000.

a. What are break-even sales?

b. What is the contribution margin ratio?

c. How much profit did Boise earn last month?

d. How much would sales have to increase for Boise to earn profit of 600,000?

120) Akron Corp. had a margin of safety of $500,000 last month, with sales revenue of $1,250,000 and fixed costs of $150,000.

a. What are break-even sales?

b. What is the contribution margin ratio?

c. How much profit did Akron earn last month?

d. How much would sales have to be for Akron to earn profit of 500,000?

121) The manager of Calypso, Inc. is considering raising its current price of $30 per unit by 10%. If she does so, she estimates that demand will decrease by 20,000 units per month. Calypso currently sells 50,000 units per month, each of which costs $25 in variable costs. Fixed costs are $180,000.

a. What is the current profit?

b. What is the current break-even point in units?

c. If the manager raises the price, what will profit be?

d. If the manager raises the price, what will be the new break-even point in units?

e. Assume the manager does not know how much demand will drop if the price increases. By how much would demand have to drop before the manager would not want to implement the price increase?

122) The manager of Arbor, Inc. is considering raising its current price of $50 per unit by 10%. If she does so, she estimates that demand will decrease by 30,000 units per month. Arbor currently sells 100,000 units per month, each of which costs $35 in variable costs. Fixed costs are $1,200,000.

a. What is the current profit?

b. What is the current break-even point in units?

c. If the manager raises the price, what will profit be?

d. If the manager raises the price, what will be the new break-even point in units?

e. Assume the manager does not know how much demand will drop if the price increases. By how much would demand have to drop before the manager would not want to implement the price increase?

123) Glade, Inc. is trying to decide whether to increase the commission-based pay of its salespeople. Currently, each of its five salespeople earns a 15% commission on the units they sell for $100 each, plus a fixed salary of $40,000 per person. Glade hopes that by increasing commissions to 20% and decreasing each salesperson's salary to $25,000, sales will increase because salespeople will be more motivated. Currently, sales are 13,000 units. Glade's other fixed costs, NOT including the salespeople's salaries, total $580,000. Glade's other variable costs, NOT including commissions, total $20 per unit.

a. What is current profit?

b. What is the current break-even point in units?

c. What would the break-even point in units be if commissions are increased and salaries decreased?

d. If sales increase by 4,000 units, what will profit be under the new plan?

e. At what sales level would Glade be indifferent between the lower-commission plan and the higher-commission plan?

124) Forge, Inc. is trying to decide whether to increase the commission-based pay of its salespeople. Currently, each of its ten salespeople earns a 10% commission on the units they sell for $90 each, plus a fixed salary of $30,000 each. Forge hopes that by increasing commissions to 20% and decreasing each salesperson's salary to $21,000, sales will increase because salespeople will be more motivated. Currently, sales are 12,000 units. Forge's other fixed costs, not including the salespeople's salaries, total $188,580. Forge's other variable costs, not including commissions, total $30 per unit.

a. What is current profit?

b. What is the current break-even point in units?

c. What would the break-even point in units be if commissions are increased and salaries decreased?

d. If sales increase by 1,000 units, what will profit be under the new plan?

e. At what sales level would Forge be indifferent between the lower-commission plan and the higher-commission plan?

125) Cantor Products sells a product for $75. Variable costs per unit are $50, and monthly fixed costs are $75,000. Answer the following questions:

a. What is the break-even point in units?

b. What unit sales would be required to earn a target profit of $200,000?

c. Assume they achieve the level of sales required in part b, what is the degree of operating leverage?

d. If sales decrease by 30% from that level, by what percentage will profits decrease?

126) Harmony sells a product for $50 per unit. Variable costs per unit are $30, and monthly fixed costs are $150,000. Answer the following questions:

a. What is the break-even point in units?

b. What unit sales would be required to earn a target profit of $100,000?

c. Assume they achieve the level of sales required in part b, what is the degree of operating leverage?

d. If sales increase by 40% from that level, by what percentage will profits increase?

127) Malibu, Inc., which has fixed costs of $2,150,000, sells three products whose sales price, variable cost per unit, and percentage of sales units are presented in the table below.

a. What is the weighted average unit contribution margin?

b. At the break-even point, how many units of Product A must be sold?

c. To make a profit of $1,075,000, how many units of Product B must be sold?

128) Drake, Inc., which has fixed costs of $1,400,000, sells three products whose sales price, variable cost per unit, and percentage of sales units are presented in the table below.  

a. What is the weighted average unit contribution margin?

b. At the break-even point, how many units of Product A must be sold?

c. To make a profit of $910,000, how many units of Product B must be sold?