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Exam 5: Cost Volume Profit Analysis

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Question 1

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If sales are $400,000, variable costs are 80% of sales, and operating income is $40,000, what is the operating leverage?

A) 0.0
B) 7.5
C) 2.0
D) 1.3

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

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Question 2

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If sales total $2,000,000, fixed costs total $800,000, and variable costs are 60% of sales, the contribution margin ratio is 40%.

A) True
B) False

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Question 3

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If a business sells four products, it is not possible to estimate the break-even point.

If the unit selling price is $40, the volume of sales is $3,000,000, sales at the break-even point amount to $2,500,000, and the maximum possible sales are $3,300,000, the margin of safety is 14,500 units.

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

Given the following information: Variable cost per unit = $5.00 July fixed cost per unit = $7.00 Units sold and produced in July = 28,000 What is total estimated cost for August if 30,000 units are projected to be produced and sold?

(a) If Swannanoa Company's budgeted sales are $1,000,000, fixed costs are $350,000, and variable costs are $600,000, what is the budgeted contribution margin ratio? (b) If the contribution margin ratio is 30%, sales are $900,000, and fixed costs are $200,000, what is the operating income?

If a business had a capacity of $10,000,000 of sales, actual sales of $6,000,000, break-even sales of $4,200,000, fixed costs of $1,800,000, and variable costs of 60% of sales, what is the margin of safety expressed as a percentage of sales?

The relevant range is useful for analyzing cost behavior for management decision-making purposes.

The Grant Company has sales of $300,000, and the break-even point in sales dollars if $225,000. Determine the company's margin of safety percentage.

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

Costs that vary in total in direct proportion to changes in an activity level are called

Given the following: Variable cost as a percentage of sales = 60% Unit variable cost = $30 Fixed costs = $200,000 What is the break-even point in units?

Only a single line, which represents the difference between total sales revenues and total costs, is plotted on the cost-volume-profit chart.

Variable costs as a percentage of sales for Lemon Inc. are 80%, current sales are $600,000, and fixed costs are $130,000. How much will operating income change if sales increase by $40,000?

This question has been removed by Cengage as inapplicable.

Total variable costs change as the level of activity changes.

Silver River Company sells Products S and T and has made the following estimates for the coming year: Fixed costs are estimated at $202,400. Determine: (a) the estimated sales in units of the overall product necessary to reach the break-even point for the coming year (b) the estimated number of units of each product necessary to be sold to reach the break-even point for the coming year (c) the estimated sales in units of the overall product necessary to realize an operating income of $119,600 for the coming year.

The Dean Company has sales of $500,000, and the break-even point in sales dollars of $300,000. Determine the company's margin of safety percentage.

When Isaiah Company has fixed costs of $120,000 and the contribution margin is $30, the break-even point is