Question 1

What are the basic assumptions of CVP analysis with regard to variable cost, fixed cost, and selling price per unit? (Assume a single product).
3

Accepted Answer

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Question 2

Lee Company manufactures and sells widgets for $2.00 per unit. Its variable cost per unit is $1.70. Lee's total fixed costs are $10,500. How many widgets must Lee Company sell to break even?

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Question 3

Assume that sales are predicted to be $3,750, the expected contribution margin is $1,500, and a net loss of $250 is anticipated. The break-even point in sales dollars is:

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Question 4

The Haskins Company manufactures and sells radios. Each radio sells for $23.75 and the variable cost per unit is $16.25. Haskin's total fixed costs are $25,000, and budgeted sales are 8,000 units. What is the contribution margin per unit?

Accepted Answer

Contribution margin per unit = selling price per unit - variable cost per unit
Contribution margin per unit = $23.75 - $16.25
Contribution margin per unit = $7.50

Question 5

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:

-The contribution margin per composite unit is:

Accepted Answer

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Question 6

A CVP graph presents data on:

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...

Question 7

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?

Accepted Answer

$11.25 = 12% of selling price
Selling price = $8.25/.12 = $68.75

Question 8

A cost-volume-profit chart is also known as a(n)

Accepted Answer

A cost-volume-profit chart is commonly known as a break-even chart as it helps to determine the level of sales required to break even and the potential profits at different levels of sales. The other choices are not entirely accurate in describing the purpose of a cost-volume-profit chart.

Question 9

When graphing cost-volume-profit data on a CVP chart:

Accepted Answer

EA CVP chart typically plots units on the horizontal axis and costs on the vertical axis to analyze how costs and profits change with varying levels of production and sales. Additionally, the data points on a CVP chart often represent expected future points, as the purpose of the chart is to aid in forecasting and decision-making based on projections.

Question 10

Jet Company's break-even point is 5,000 units. The company's fixed costs are $240,000, and its total variable costs are $85,000. The unit sales price is:

Accepted Answer

Total cost = $240,000 + $85,000 = $325,000
At break-even point, total cost = total selling price
Total selling price = $325,000
Selling price per unit = $325,000/5,000 units = $65 per unit

Question 11

Define variable cost, fixed cost, and mixed cost.

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Question 12

Assume Moe's Southwest Grill has a break-even point of 24,000 units. At this point, total sales are $1,800,000 and total variable costs are $1,200,000. Compute total fixed costs at the break-even point.

Accepted Answer

Break-even point formula is:

Total Sales - Total Variable Costs - Total Fixed Costs = 0

We know that at the break-even point, total sales are $1,800,000 and total variable costs are $1,200,000. We can substitute these values in the formula and solve for Total Fixed Costs:

$1,800,000 - $1,200,000 - Total Fixed Costs = 0

$600,000 = Total Fixed Costs

Therefore, the Total Fixed Costs at the break-even point is $600,000. Option E is the correct answer.

Question 13

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:

-The weighted average contribution margin is:

Accepted Answer

The answer of  A firm sells two products, A...

Question 14

Camden Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are: 
$\begin{array}{lrrr}&M&N&O\
\text { Unit sales price } & \$ 7 & \$ 4 & \$ 6 \
\text { Unit variable costs } & 3 & 2 & 3
\end{array}$
Total fixed costs are $340,000. The break-even point in sales dollars for the current sales mix is:

Accepted Answer

To find the break-even point in sales dollars, calculate the weighted average contribution margin per unit, then divide total fixed costs by this margin. The contribution margins are $4 for M, $2 for N, and $3 for O. The weighted average contribution margin is $3.67. Dividing $340,000 by $3.67 gives approximately $629,000.

Question 15

At Flint Company's break-even point of 9,000 units, fixed costs are $180,000 and variable costs are $540,000 in total. The unit sales price is:

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Question 16

Discuss how CVP analysis can be useful in planning.

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Question 17

Thomas Company has total fixed costs of $360,000 and variable costs of $14 per unit. If the unit sales price is reduced from $24 to $20 and advertising is increased by $10,000, sales will increase from 40,000 to 65,000 units.
-What are the contribution margin and net income under the current conditions?

Accepted Answer

CM = 40,000($24 - $14) = $400,000
NI = $400,000 - $360,000 = $40,000

Question 18

Thomas Company has total fixed costs of $360,000 and variable costs of $14 per unit. If the unit sales price is reduced from $24 to $20 and advertising is increased by $10,000, sales will increase from 40,000 to 65,000 units.
-What are the contribution margin and net income under the revised conditions?

Accepted Answer

CM = 65,000($20-$14) = $390,000
NI = $390,000 - $370,000 = $20,000

Question 19

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?

Accepted Answer

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Question 20

The ratio of the sales volume for the various products sold by a company is called the:

Accepted Answer

The sales volume ratio for various products sold by a company is called the sales mix. It is an important factor in determining the profitability of each product and the overall revenue of the company. Options A, B, D, and E do not correctly describe the ratio of sales volume.

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

What are the basic assumptions of CVP analysis with regard to variable cost, fixed cost, and selling price per unit? (Assume a single product). 3