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Exam 20: Cost-Volume-Profit Analysis

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Question 31

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During the current year,Simpson,Inc.incurred $9,000 in fixed costs and $13,000 in variable costs.If the number of units produced is halved next year,the company will incur $4,500 as fixed costs and $6,500 as variable costs.

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Question 32

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Emara Company sells two generators-Model A and Model B-for $456 and $394,respectively.The variable cost of Model A is $406 and of Model B is $304.The company will generate lower revenues but a higher net income if it sells more of Model B than Model A.

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Question 33

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The fundamental assumption of cost-volume-profit (CVP)analysis is that,in the long run,fixed costs become variable costs.

Ron Moss,a manager of Waterworks,Inc. ,was reviewing the water bills of a dog daycare and spa.He determined that its highest and lowest bills of $3,600 and $2,800 were incurred in the months of May and November,respectively.If 500 dogs were washed in May and 200 dogs were washed in November,what was the variable cost per dog associated with the company's water bill? (Round your answer to the nearest cent. )

The degree of operating leverage can be measured by ________.

Young Company has provided the following information: $\begin{array} { | l | r | } \hline \text { Sales price per unit } & \$ 52 \\\hline \text { Variable cost per unit } & 16 \\\hline \text { Fixed costs per month } & \$ 14,000 \\\hline\end{array}$ Calculate the contribution margin per unit.

If a company reduces its fixed costs,the operating income will increase by the same amount as the cost reduction.

Total fixed costs can change from one relevant range to another.

From the graph given below,identify the fixed costs line.

Young Guns Company,which sells tents,has provided the following information: $\begin{array} { | l | r | } \hline \text { Sales price per unit } & \$ 45 \\\hline \text { Variable cost per unit } & 11 \\\hline \text { Fixed costs per month } & \$ 12,700 \\\hline\end{array}$ What are the required sales in units for Young to break even? (Round your answer up to the nearest whole unit. )

The fixed costs per unit will ________.

What is the margin of safety? List three ways in which margin of safety can be expressed.

Contribution margin ratio is the ratio of contribution margin to net income.

Complete the statement,using the following terms: increase,decrease,or have no effect on. - Increases in sales price per unit ________ contribution margin per unit and ________ the breakeven point.

Moylan Roofing Company has provided the following information: $\begin{array} { | l | r | } \hline \text { Sales revenue } & \$ 779,000 \\\hline \text { Variable costs } & 506,000 \\\hline \text { Fixed costs } & 216,000 \\\hline\end{array}$ Which of the following statements is true,if the sales volume increases by 10%?

Fixed costs per unit is inversely proportional to the volume of units produced.

In the graph below,the area between the lines AC and OB to the right of point E represents ________.

Gould Enterprises sells computer disks for $3.16 per disk.Unit variable cost is $0.06.The breakeven point in units is 3,600,and expected sales in units are 4,300.What is the margin of safety in dollars?

Complete the statement,using the following terms: increase,decrease,or have no effect on. - Decreases in sales price per unit_______ contribution margin per unit and ________ the breakeven point.

Gainesville Company has provided the following information: $\begin{array} { | l | r | } \hline \text { Sales price per unit } & \$ 56 \\\hline \text { Variable cost per unit } & 12 \\\hline \text { Fixed costs per month } & \$ 12,000 \\\hline\end{array}$ Calculate the contribution margin ratio.(Round your answer to two decimal places. )