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Exam 9: Cost-Volume-Profit Analysis

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Question 1

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The traditional income statement focuses on:

A) cost function
B) cost behaviour
C) contribution margin.
D) variable costing.

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Question 2

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When calculating the break-even point in a multiproduct environment,which of the following statements is false?

A) The contribution margin per unit for each product needs to be determined.
B) Total fixed costs need to be determined.
C) Each product is assumed to count for an equal percentage of total sales.
D) The weighted-average contribution margin per unit needs to be determined.

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Question 3

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Which of the following statements is true regarding the traditional income statement?

Harrison Manufacturing Harrison Manufacturing has the following product information available: $\begin{array}{ll}\text { Sales price } & \$ 50 \text { per unit } \\\text { Variable costs } & \$ 26 \text { per unit } \\\text { Fixed costs } & \$ 87600\end{array}$ -What do total sales dollars need to be in order to earn a target profit of $200 400?

Sienna Manufacturing has the following product information: $\begin{array}{llcc} \text {Sales price } & \text { \$2.00 per unit } \\ \text {Variable costs } & \text { \( \$ 8.00 \) per unit } \\ \text { Fixed Costs (total) } &\$45000\\\end{array}$ Required: Calculate the following based on the above information: A What is the break-even paint in units? B. What is the break-even point in sales dollars? C. How many units need to be sold in order for the company to earn a target-profit of 499800 ? (ignore taxes)

Harrison Manufacturing Harrison Manufacturing has the following product information available: $\begin{array}{ll}\text { Sales price } & \$ 50 \text { per unit } \\\text { Variable costs } & \$ 26 \text { per unit } \\\text { Fixed costs } & \$ 87600\end{array}$ -What is the break-even point in sales dollars?

Mulvaney Inc.ignored the effect of income taxes in its calculation of the sales volume needed to achieve a target profit of $1 000 000.If the company considers the impact of income taxes in its calculation,which of the following statements would be true?

What does operating leverage reveal about a company?

Which of the following is an assumption of CVP analysis?

Crabtree Inc.produces two types of products - Gizmos and Gadgets.The following information is available related to each product: $\begin{array}{lrrr} & \underline{\text { Gizmos } }& \underline{\text { Gadgets} } \\\text { Sales price per unit }& \$ 80 & \$ 50 \\\text { Variable costs per unit } & 36 & 22\end{array}$ Three-fourths of the products sold are Gizmos and one-fourth are Gadgets.If total fixed costs are $50 000,how many total units need to be sold in order for the company to break even?

The difference between sales and cost of goods sold is called:

Poole Products Inc.has the following product information available: $\begin{array}{ll}\text { Sales price } & \$ 25 \text { per unit } \\\text { Variable costs } & \$ 10 \text { per unit } \\\text { Fixed costs } & \$ 36 \text { 000 }\end{array}$ If Poole is in the 40% tax bracket,how many units need to be sold in order to earn an after-tax target profit of $249 000?

Floyd's Barbershop has fixed costs of $3000 per month.Floyd currently breaks even when it performs 400 haircuts a month.Floyd charges customers $10 per cut.What are Floyd's variable costs per cut?

When and why should income taxes be considered in profit planning? What is the impact on target profit when income taxes are taken into account?

Haywood Inc.has the following information available for one of its products: $\begin{array} { l l } \text { Sales price per unit } & \$ 15 \\\text { Contribution margin ratio } & 60 \% \\\text { Total fixed costs } & \$ 5000 \\\text { Units prodiced and sold } & 1000\end{array}$ If Haywood sells one more unit,net income will:

Assuming a company has net income,with the sale of each additional unit,net income will increase by the ___________.

How many units need to be sold in order to earn a target profit of $249 000?

In 2009 Dillon Inc.had a total contribution margin of $100 000 and net income of $60 000.For the upcoming year,the company would like to earn a target profit of $80 000.Assuming sales volume is expected to be the same in the upcoming year as it was in the past year,give three separate options the company could implement in order to achieve their target profit in the upcoming year.

For each additional unit sold,the contribution margin per unit:

LMN Manufacturing produces two products - Product S and Product W.The following information is available related to each product: $\begin{array} { l }& \text { Product S }& \text { Product W}\\ \text { Sales price per unit }&\$25&\$40\\ \text {Variable costs per unit }&17&22\\\end{array}$ Product S accounts for 40% of total product sales and Product W accounts for the rest.LMN's total fixed costs are $24 990.How many total number of products need to be sold in order for the company to break even?