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Exam 18: Cost-Volume-Profit Analysis

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Question 51

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A company manufactures and sells spotlights.Each spotlight sells for $145.The variable cost per unit is $98,and the company's total fixed costs are $235,000.Predicted sales are 15,000 units.What is the contribution margin per unit?

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Question 52

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A firm expects to sell 25,000 units of its product at $11 per unit.Pretax income is predicted to be $60,000.If the variable costs per unit are $6,total fixed costs must be:

A) $65,000
B) $90,000
C) $125,000
D) $215,000
E) $275,000

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

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Wilson Co.is preparing next period's forecasts.Total fixed costs are expected to be $300,000 and the contribution margin ratio is expected to be 30%.The applicable income tax rate is 25%. a.Calculate the company's break-even point in dollar sales. b.If sales are $1,800,000 above the break-even point,what will income be pretax income and after-tax income?

A special case of cost-volume-profit analysis is:

Unit contribution margin is the amount each unit contributes to both fixed costs and net income.

Reference: 18_01 Willco Inc. manufactures electronic parts. They are analyzing their monthly maintenance costs to determine the best way to budget these costs in the future. They have collected the following data for the last six months: $\begin{array} { | l | c | c | } \hline { \text { Month } } & \text { Machine Hours } & \text { Maintenance Costs } \\\hline \text { January } & 30,000 & \$ 62,000 \\\hline \text { February } & 40,000 & \$ 74,500 \\\hline \text { March } & 37,500 & \$ 65,900 \\\hline \text { April } & 39,000 & \$ 68,750 \\\hline \text { May } & 42,300 & \$ 74,000 \\\hline \text { June } & 35,000 & \$ 64,500 \\\hline\end{array}$ -Using the high-low method and the Willco data above,what is the approximate fixed cost component of the monthly maintenance costs?

A company manufactures and sells a product for $120 per unit.The company's fixed costs are $68,760,and its variable costs are $90 per unit.The company's break-even point in units is:

Dividing a mixed cost into its separate fixed and variable cost components makes it more difficult to do cost-volume-profit analysis.

A firm sells two different products,A and A. Total fixed costs for this firm are $1,260,000. Additional selling prices and cost information for both products follow: $\begin{array}{rrr}&\text { Selling } &\text { Variable }\\ \text { Product } &\text { Price per }&\text { Costs per }\\&\text { Unit } &\text { Unit } \\\text { A } & \$ 72 & \$ 40 \\\text { B } & 48 & 28\end{array}$ Required: a. Calculate the contribution margin per composite unit. b. Calculate the break-even point in units of each individual product. c. If pretax income before taxes of $294,000 is desired, how many units of A and B must be sold? B. For each unit of B, the firm sells two units of

What do unit contribution margin and contribution margin ratio reveal about a company's cost structure?

A product has a contribution margin per unit of $17 and sells at $25 per unit.If the break-even point is 82,000 units,calculate (a)the variable costs per unit and (b)the total fixed costs.

Curvilinear costs are also known as nonlinear costs.

An important assumption in the analysis of a multiproduct situation is that the sales mix is known and remains constant.

A method that estimates cost behavior by connecting the costs linked to the highest and lowest volume levels on a scatter diagram with a straight line is called the:

Cost-volume-profit analysis is a precise tool for perfectly predicting the profit consequences of cost changes,price changes,and volume changes.

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?

A company has a contribution margin per unit of $8.25 and a contribution margin ratio of 12%.What is the selling price of the product?

Solving problems to determine the relationship of cost,volume,and profit often commences with the measurement of the _____________ point.Further analysis emphasizing profitability may be accomplished by measuring the _______________ and _________________.

Reference: 18_04 A firm sells two products, A and B. For every unit of A the firm sells, two units of B are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow: $\begin{array}{rrr}&\text { Unit }&\text { Variables}\\&\text { Sales }&\text { Costs}\\\text { Product}&\text { Price } &\text { per Unit }\\\hline\mathrm{A} & \$ 20 & \$ 8 \\\mathrm{~B} & 24 & 4\end{array}$ -The contribution margin per composite unit is:

A company has total fixed costs of $360,000.Its product sells for $40 per unit and variable costs amount to $25 per unit.What is the break-even point in dollar sales?