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Exam 21: Cost-Volume-Profit Analysis

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Question 81

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Lee Industry's sales are $525,000, variable costs are 53% of sales, and operating income is $19,000. What is the contribution margin ratio?

A) 47%
B) 26.5%
C) 9.5%
D) 53%

E) A) and B)
F) All of the above

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Question 82

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Cost-volume-profit analysis can be presented in both equation form and graphic form.

A) True
B) False

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Question 83

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Total fixed costs change as the level of activity changes.

Even if a business sells six products, it is possible to estimate the break-even point.

Cordell, Inc. has an operating leverage of 3. Sales are expected to increase by 9% next year. What is the expected change in operating income next year?

Assume that Corn Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year. The unit contribution margins for Products A and B are $30 and $60, respectively. Corn has fixed costs of $378,000. The break-even point in units is

Louis Company sells a single product at a price of $65 per unit. Variable costs per unit are $45, and total fixed costs are $625,500. Louis is considering the purchase of a new piece of equipment that would increase the fixed costs to $800,000, but decrease the variable costs per unit to $42. Required If Louis Company expects to sell 44,000 units next year, should it purchase this new equipment?

Thompson Company manufactures and sells cookware. Because of current trends, it expects to increase sales by 15% next year. If this expected level of production and sales occurs and plant expansion is not needed, how should this increase affect next year's total amounts for the following costs?​Variable Costs Fixed Costs Mixed Costs

If fixed costs are $400,000 and the unit contribution margin is $20, what amount of units must be sold in order to have a zero profit?

If fixed costs are $300,000, the unit selling price is $31, and the unit variable costs are $22, what are the break-even sales (units) if fixed costs are reduced by $30,000?

Racer Industries has fixed costs of $900,000. Selling price per unit is $250, and variable cost per unit is $130. Required (a) How many units must Racer sell in order to break even? (b) How many units must Racer sell in order to earn a profit of $480,000? (c) A new employee suggests that Racer Industries sponsor a 10K marathon as a form of advertising. The cost tosponsor the event is $7,200. How many more units must be sold to cover this cost?

If sales total $2,000,000, fixed costs total $800,000, and variable costs are 60% of sales, the contribution margin ratio is 60%.

Which of the following is an example of a cost that varies in total as the number of units produced changes?

The contribution margin ratio is the same as the profit-volume ratio.

Unit variable cost does not change as the number of units of activity changes.

Payton Industries has fixed costs of $490,000, the unit selling price is $35, and the unit variable costs are $20. What are the break-even sales (units) if fixed costs are reduced by $40,000?

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

Most operating decisions of management focus on a narrow range of activity called the

If direct materials cost per unit increases, the break-even point will increase.

Match the following terms (a-e) with their definitions. -The relative distribution of sales among products sold by a company