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Exam 4: Cost-Volume-Profit Analysis: a Managerial Planning Tool

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Question 51

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Common fixed expenses are the fixed costs that are traceable to the segments and would be avoided if the segment did not exist.

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B) False

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Question 52

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The _________________________________ can be measured for a given level of sales by taking the ratio of contribution margin to operating income.

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Question 53

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In the equation to determine the number of units that must be sold to earn a target income, targeted income is subtracted from fixed expense in the numerator.

Which of the following is not an assumption of a cost-volume-profit analysis?

Melody Company sells a product for $14, variable costs are $10 per unit, and total fixed costs are $5,040. What is the per unit contribution margin?

The profit-volume graph

Assuming that fixed costs remain unchanged, the _____________________ can be used to find the profit impact of a change in sales revenue.

Figure 4-1.Foster Company makes power tools. The budgeted sales are $420,000, budgeted variable costs are $147,000, and budgeted fixed costs are $227,500. -Refer to Figure 4-1. What is the break-even point in sales dollars?

Dirth Company sells only one product at a regular price of $7.50 per unit. Variable expenses are 60% of sales and fixed expenses are $30,000. Management has decided to decrease the selling price to $6.00 in hopes of increasing its volume of sales. What is the sales dollars level required to break even at the old price of $7.50?

The Young Manufacturing Company produces the following three products: Fixed costs are $76,000 per year. 50% of all sales in units are hammers, 30% are screwdrivers, and 20% are saws. Required: Calculate the following values:

To determine the number of units that must be sold to earn a target operating income, one can use the equation for operating income and replace the operating income term with the target operating income.

______________________ are those fixed costs that can be traced to each segment and would be avoided if the segment did not exist.

Figure 4-5.Standlar Company makes wireless speakers. The standard model price is $360 and variable expenses are $210. The deluxe model price is $500 and variable expenses are $300. The superior model price is $1,600 and variable expense per unit is $600. Total fixed expenses are $300,000. Generally, Standlar sells 8 standard models and 4 deluxe models for every superior model sold. -Refer to Figure 4-5. What is the number of standard models sold at break-even?

Which of the following is not an assumption used to prepare a cost-volume-profit graph?

The cost-volume profit graph depicts the relationships among cost, volume, and profits, by plotting the total revenue line and the total cost line on the graph.

The use of fixed costs to extract higher percentage changes in profits as sales activity changes.

Figure 4-2.Pauley Company provides home health care. Pauley charges $35/hour for professional care. Variable costs are $21/hour and fixed costs are $78,000. Next year, Pauley expects to charge out 12,000 hours of home health care. -Refer to Figure 4-2. What is the break-even point in hours? (round to the nearest whole hour)

__________ is the relative combination of products being sold by a firm.

Operating leverage is the relative mix of

On a cost-volume-profit graph, the break-even point is where