Question 1

Use the following information to determine the break-even point in units (rounded to the nearest whole unit):

Accepted Answer

The answer of Use the following information to determine the...

Question 2

Raven Company has a target of $70,000 pre-tax income.The contribution margin ratio is 30%.What amount of dollar sales must be achieved to reach the goal if fixed costs are $36,000?

Accepted Answer

Contribution margin (CM) = Sales - Variable costs 
CM ratio = CM/Sales

We can use the formula method to find the dollar sales needed:

$70,000 + $36,000 = (Sales * 30%) 
$106,000 = 0.3(Sales) 
$353,333 = Sales

Question 3

A company has fixed costs of $320,000 and a contribution margin per unit of $15.If the company wants to earn a target $40,000 pretax income,how many units must be sold (rounded to the nearest whole unit)?

Accepted Answer

The correct answer is A.The contribution margin per unit is $15, and the company wants to earn a target $40,000 pretax income. So, the number of units that must be sold is $40,000/$15 = 2,666.67. Rounded to the nearest whole unit, this is 2,667 units.

Question 4

A product sells for $200 per unit,and its variable costs per unit are $130.Total fixed costs are $420,000.If the firm wants to earn $35,000 pretax income,how many units must be sold?

Accepted Answer

To find the number of units needed to be sold to achieve a pretax income of $35,000, we use the formula:  Units = (Fixed Costs + Desired Pretax Income) / (Selling Price per Unit - Variable Cost per Unit)  Units = ($420,000 + $35,000) / ($200 - $130)  Units = $455,000 / $70  Units = 6,500.

Question 5

The contribution margin ratio:

Accepted Answer

The contribution margin ratio is calculated as the unit contribution margin divided by the sales price, expressed as a percentage. It represents the percent of each sales dollar that remains after deducting the total unit variable cost. This ratio helps in determining the profitability of a product or service and facilitates the calculation of the break-even point.

Question 6

During its most recent fiscal year,Dover,Inc.had total sales of $3,200,000.Contribution margin amounted to $1,500,000 and pretax income was $400,000.What amount should have been reported as fixed costs in the company's contribution margin income statement for the year?

Accepted Answer

The contribution margin is the amount remaining after variable costs are subtracted from sales. Fixed costs can be calculated by subtracting pretax income from the contribution margin: $1,500,000 (contribution margin) - $400,000 (pretax income) = $1,100,000 (fixed costs).

Question 7

The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year.Compute the number of units that must be sold in order to achieve a target pretax income of $130,000.

Accepted Answer

The answer of The budgeted income statement presented below is...

Question 8

Total contribution margin in dollars divided by pretax income is the:

Accepted Answer

The degree of operating leverage is calculated by dividing the total contribution margin by the net operating income (or pretax income). This measure indicates how a percentage change in sales will affect profits by considering the proportion of fixed and variable costs in the company's cost structure.

Question 9

During its most recent fiscal year,Dover,Inc.had total sales of $3,200,000.Contribution margin amounted to $1,500,000 and pretax income was $400,000.What amount should have been reported as variable costs in the company's contribution margin income statement for the year?

Accepted Answer

The answer of During its most recent fiscal year,Dover,Inc.had total...

Question 10

The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year.If Burkett Corporation achieves the budgeted level of sales,what will be its margin of safety in dollars?

Accepted Answer

The answer of The budgeted income statement presented below is...

Question 11

Use the following information to determine the contribution margin ratio:

Accepted Answer

The answer of Use the following information to determine the...

Question 12

Gladstone Co.has expected sales of $326,000 for the upcoming month and its monthly break even sales are $300,000.What is the margin of safety as a percent of sales,rounded to the nearest whole percent?

Accepted Answer

The answer of Gladstone Co.has expected sales of $326,000 for...

Question 13

Henderson Co.has fixed costs of $36,000 and a contribution margin ratio of 24%.If expected sales are $200,000,what is the margin of safety as a percent of sales?

Accepted Answer

The answer of Henderson Co.has fixed costs of $36,000 and...

Question 14

In cost-volume-profit analysis,the unit contribution margin is:

Accepted Answer

The unit contribution margin represents the amount of revenue from one unit of product that goes towards covering the variable costs associated with producing that unit. Therefore, it is calculated as the sales price per unit less the total variable cost per unit. Option A is incorrect because it only subtracts the cost of goods sold and not other variable costs. Option B subtracts only unit fixed costs, but not other variable costs. Option D subtracts the total cost per unit including fixed costs, which is not the correct calculation for contribution margin. Option E is incorrect because the contribution margin ratio represents the percentage of revenue that goes towards covering variable costs, not the dollar amount.

Question 15

Management anticipates fixed costs of $72,500 and variable costs equal to 40% of sales.What will pretax income equal if sales are $325,000?

Accepted Answer

Pretax income is calculated by subtracting total costs (fixed + variable) from sales. Variable costs are 40% of $325,000, which equals $130,000. Fixed costs are $72,500. Total costs are $130,000 + $72,500 = $202,500. Sales are $325,000, so pretax income is $325,000 - $202,500 = $122,500.

Question 16

Use the following information to determine the break-even point in sales dollars:

Accepted Answer

The answer of Use the following information to determine the...

Question 17

A company has fixed costs of $270,000,a unit contribution margin of $14,and a contribution margin ratio of 55%.If the company wants to earn a target $60,000 pretax income,what amount of sales must it make (rounded to the nearest whole dollar)?

Accepted Answer

To find the required sales, use the formula: Required Sales = (Fixed Costs + Target Income) / Contribution Margin Ratio. Here, Required Sales = ($270,000 + $60,000) / 0.55 = $600,000.

Question 18

Locus Company has total fixed costs of $112,000.Its product sells for $35 per unit and variable costs amount to $25 per unit.Next year Locus Company wishes to earn a pretax income that equals 10% of fixed costs.How many units must be sold to achieve this target income level?

Accepted Answer

To achieve the target income, first calculate the target income: 10% of $112,000 = $11,200. The total target amount (fixed costs + target income) = $112,000 + $11,200 = $123,200. The contribution margin per unit = selling price - variable cost = $35 - $25 = $10. To find the number of units, divide the total target amount by the contribution margin per unit: $123,200 / $10 = 12,320 units.

Question 19

During its most recent fiscal year,Raphael Enterprises sold 200,000 electric screwdrivers at a price of $15 each.Fixed costs amounted to $400,000 and pretax income was $600,000.What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?

Accepted Answer

The answer of During its most recent fiscal year,Raphael Enterprises...

Question 20

Use the following information to determine the margin of safety in dollars:

Accepted Answer

The answer of Use the following information to determine the...

Quiz 18: Cost Behavior and Cost-Volume-Profit Analysis

Use the following information to determine the break-even point in units (rounded to the nearest whole unit) :

Raven Company has a target of $70,000 pre-tax income.The contribution margin ratio is 30%.What amount of dollar sales must be achieved to reach the goal if fixed costs are $36,000?

A company has fixed costs of $320,000 and a contribution margin per unit of $15.If the company wants to earn a target $40,000 pretax income,how many units must be sold (rounded to the nearest whole unit) ?

A product sells for $200 per unit,and its variable costs per unit are $130.Total fixed costs are $420,000.If the firm wants to earn $35,000 pretax income,how many units must be sold?

The contribution margin ratio:

During its most recent fiscal year,Dover,Inc.had total sales of $3,200,000.Contribution margin amounted to $1,500,000 and pretax income was $400,000.What amount should have been reported as fixed costs in the company's contribution margin income statement for the year?

The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year.Compute the number of units that must be sold in order to achieve a target pretax income of $130,000.

Total contribution margin in dollars divided by pretax income is the:

During its most recent fiscal year,Dover,Inc.had total sales of $3,200,000.Contribution margin amounted to $1,500,000 and pretax income was $400,000.What amount should have been reported as variable costs in the company's contribution margin income statement for the year?

The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year.If Burkett Corporation achieves the budgeted level of sales,what will be its margin of safety in dollars?

Use the following information to determine the contribution margin ratio:

Gladstone Co.has expected sales of $326,000 for the upcoming month and its monthly break even sales are $300,000.What is the margin of safety as a percent of sales,rounded to the nearest whole percent?

Henderson Co.has fixed costs of $36,000 and a contribution margin ratio of 24%.If expected sales are $200,000,what is the margin of safety as a percent of sales?

In cost-volume-profit analysis,the unit contribution margin is:

Management anticipates fixed costs of $72,500 and variable costs equal to 40% of sales.What will pretax income equal if sales are $325,000?

Use the following information to determine the break-even point in sales dollars:

A company has fixed costs of $270,000,a unit contribution margin of $14,and a contribution margin ratio of 55%.If the company wants to earn a target $60,000 pretax income,what amount of sales must it make (rounded to the nearest whole dollar) ?

Locus Company has total fixed costs of $112,000.Its product sells for $35 per unit and variable costs amount to $25 per unit.Next year Locus Company wishes to earn a pretax income that equals 10% of fixed costs.How many units must be sold to achieve this target income level?

Use the following information to determine the margin of safety in dollars: