Questions and Answers
Which one of the following events will increase the company's overall break-even point?
What will be the effect on operating income if the variable cost per unit is decreased by 10% and the total fixed cost is increased by 20%?
In order to break even, how many units should UCB produce and sell?
How much were the total fixed costs for The James Company, which requires 22,223 units to be sold to break even?
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The contribution margin ratio (CM ratio) is:
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How many units does J&J Co. need to sell in order to earn a profit of $150,000?
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What is the contribution margin per unit of the edible straws for Ringo and Paul Corp.?
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What is the change to pre-tax income if Mane and Guchey Ltd. implements the new piece of machinery?
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Which one of the following is a TRUE key assumption when using cost-volume-profit (CVP)?
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Using the sales mix provided, calculate the weighted average contribution margin to determine the total sales BPC must attain in order to reach a target profit of $90,000.
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Study Notes
Cost Volume Profit Analysis
- Company XYZ's contribution margins per unit: Rocks highest, scissors lowest. Increased direct material costs raise overall break-even point.
- Decreasing variable costs by 10% and raising total fixed costs by 20% leads to a $1,000 increase in operating income.
- UCB reported losses despite $3,120,000 sales; needed 230,000 units to break even based on current performance.
- James Company requires $100,004 in total fixed costs based on selling price of $10 and variable costs of $5.50 per unit, needing to sell 22,223 units to break even.
- Contribution Margin (CM) ratio calculated as CM dollar value divided by sales value, important for understanding profitability.
- J&J Co. needs to sell 40,000 units to achieve a profit of $150,000, given a sales price of $12.50 and variable costs of $10 per unit.
- Ringo and Paul Corp. has a contribution margin per unit for edible straws determined as $3.26, with fixed and variable cost breakdowns provided.
- Mane and Guchey Ltd. projects a $1,000 increase in pre-tax income with new machinery, despite increased variable manufacturing overhead and lease costs.
- A true assumption of CVP analysis includes constant sales mix in multiproduct companies, impacting overall calculations.
- Bambi's Parka Corp. must achieve total sales of $381,098 to reach a target profit of $90,000, based on the weighted average contribution margin across their product lines.
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Description
Test your knowledge on Chapter 5 of Cost Volume Profit analysis with these flashcards. This quiz covers key concepts including contribution margins and break-even points. Perfect for students looking to reinforce their understanding of cost behavior and profitability.
