Question 1

Explain how to calculate contribution margin per unit.

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Question 2

What is the break-even point for a company?

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Question 3

Company A makes and sells a single product,unless otherwise indicated.What happens to the break-even point when the variable cost per unit decreases?

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Question 4

For a company that sells several products,cost-volume-profit techniques cannot be used to calculate the sales volume required to yield a target level of profit.

Accepted Answer

Cost-volume-profit techniques can be used to calculate the sales volume required to yield a target level of profit for a company that sells multiple products, as long as the products have different selling prices, variable costs, and contribution margins. The overall mix of product sales affects the calculation of the break-even point and the required sales volume for a target profit level.

Question 5

Company A makes and sells a single product.What happens to the break-even point when total fixed costs increase?

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Question 6

To find the break-even point for a company that sells several products,the analyst must make an assumption about what the sales mix will be and calculate a weighted average contribution margin based on that sales mix.

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This statement is accurate. In order to determine the break-even point for a company with multiple products, the analyst must estimate the proportion or mix of sales for each product and calculate the weighted average contribution margin. This calculation considers the variable costs and fixed costs associated with each product and allows the analyst to determine the point at which the company's total revenues will cover its total costs.

Question 7

Assume that the company sells two products,X and Y,with contribution margins per unit of $8 and $4,respectively.What happens to the break-even point in sales dollars if the sales mix shifts to favor product Y? (In other words,sales of product Y will make up a higher percentage of the sales mix.)

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Question 8

How does an increase in variable costs affect the break-even point in sales dollars?

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Question 9

What are the assumptions on which cost-volume-profit analysis is based? Are there any additional assumptions for a multiproduct company?

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Question 10

Company A makes and sells a single product.What happens to the break-even point when variable cost per unit increases and total fixed costs decrease?

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Question 11

If you were drawing a cost-volume-profit graph for a company,what lines would you plot on the graph?

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Question 12

How would a company use target pricing to identify the desired cost for a product or service?

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Question 13

Gamble Company has a contribution margin of $20 per unit and a break-even point of 10,000 units.If Gamble sells 9,999 units,what would be its net income or loss? Explain how you calculated your answer.

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Question 14

Compare and contrast a cost-plus pricing strategy to a target pricing strategy.

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Question 15

How can contribution margin per unit be used to find the break-even point in units?

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Question 16

The assumptions underlying cost-volume-profit analysis seldom are entirely valid.How does that affect the usefulness of the technique?

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Question 17

For a company that sells several products,different sales mixes generally give rise to different break-even sales levels,even if overall sales volume remains unchanged.

Accepted Answer

This is true because different products have different profit margins and contribution margins, which affect the break-even point. If a company sells more of a higher-profit item, the break-even point will be lower than if they sell more of a lower-profit item. Therefore, the sales mix can have a significant impact on the break-even point.

Question 18

Company A makes and sells a single product.What happens to the break-even point when the variable cost per unit and selling price both decrease by the same amount?

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Question 19

How can the contribution margin ratio be used in cost-volume-profit analysis?

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Question 20

What is prestige pricing? Under what circumstances should a company consider using prestige pricing?

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Quiz 3: Analysis of Cost, volume, and Pricing to Increase Profitability

Explain how to calculate contribution margin per unit.

What is the break-even point for a company?

Company A makes and sells a single product,unless otherwise indicated.What happens to the break-even point when the variable cost per unit decreases?

For a company that sells several products,cost-volume-profit techniques cannot be used to calculate the sales volume required to yield a target level of profit.

Company A makes and sells a single product.What happens to the break-even point when total fixed costs increase?

To find the break-even point for a company that sells several products,the analyst must make an assumption about what the sales mix will be and calculate a weighted average contribution margin based on that sales mix.

Assume that the company sells two products,X and Y,with contribution margins per unit of $8 and $4,respectively.What happens to the break-even point in sales dollars if the sales mix shifts to favor product Y? (In other words,sales of product Y will make up a higher percentage of the sales mix.)

How does an increase in variable costs affect the break-even point in sales dollars?

What are the assumptions on which cost-volume-profit analysis is based? Are there any additional assumptions for a multiproduct company?

Company A makes and sells a single product.What happens to the break-even point when variable cost per unit increases and total fixed costs decrease?

If you were drawing a cost-volume-profit graph for a company,what lines would you plot on the graph?

How would a company use target pricing to identify the desired cost for a product or service?

Gamble Company has a contribution margin of $20 per unit and a break-even point of 10,000 units.If Gamble sells 9,999 units,what would be its net income or loss? Explain how you calculated your answer.

Compare and contrast a cost-plus pricing strategy to a target pricing strategy.

How can contribution margin per unit be used to find the break-even point in units?

The assumptions underlying cost-volume-profit analysis seldom are entirely valid.How does that affect the usefulness of the technique?

For a company that sells several products,different sales mixes generally give rise to different break-even sales levels,even if overall sales volume remains unchanged.

Company A makes and sells a single product.What happens to the break-even point when the variable cost per unit and selling price both decrease by the same amount?

How can the contribution margin ratio be used in cost-volume-profit analysis?

What is prestige pricing? Under what circumstances should a company consider using prestige pricing?