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Exam 22: Cost-Volume-Profit Analysis

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Question 91

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Dunkin Company manufactures and sells a single product that sells for $480 per unit; variable costs are $300. Annual fixed costs are $990,000. Current sales volume is $4,200,000. Compute the contribution margin per unit.

A) $480.
B) $300.
C) $200.
D) $190.
E) $180.

F) C) and E)
G) B) and C)

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Question 92

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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.

F) D) and E)
G) A) and B)

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Question 93

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Ginger 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?

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

Hartman 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 product sells for $200 per unit, and its variable costs per unit are $130. The fixed costs are $420,000. What is the break-even point in dollar sales?

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

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

Ivan Company has a goal of earning $70,000 after-tax income. Ivan would need to pay $20,000 of income taxes at the target level of 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?

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

Camden 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 break-even point in sales dollars for the current sales mix is (round to the nearest thousand) :

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

A break-even point can be calculated either in units or in dollars.

The unit contribution margin divided by the selling price per unit is the ___________________.

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

Which one of the following statements is not ?

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

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

Scatter diagrams plot volume on the vertical axis and cost on the horizontal axis.