JJ Motors Inc. employs 45 sales personnel to market their line of luxury automobiles. The average
car sells for $23,000, and a 6 percent commission is paid to the salesperson. JJ Motors is considering
a change to the commission arrangement where the c
Barnes Corporation manufactures skateboards and is in the process of preparing next year's budget. The
pro forma income statement for the current year is presented below.
For the coming year, the management of Barnes Corporation anticipates a 10 perce
If the fixed costs for a product decrease and the variable costs (as a percentage of sales dollars) decrease,
what will be the effect on the contribution margin ratio and the break-even point respectively?
If VC decreases, CM% incr
Which of the following changes to a company's contribution income statement will always lower the
break-even point (either in units or in dollars)?
Sales price increases by 10%.
Sales price decreases by 5%.
Variable costs increase by 10% a
Expense A is a fixed cost expense, B is a variable cost. During the current year the volume of output has
decreased. In terms of cost per unit of output, we would expect that
expense A has remained unchanged.
expense B has decreased.
If the fixed costs are $2,400, targeted before-tax operating profit is $1,200, tax rate is 25%, selling price
per unit is $2, and contribution margin ratio is 40%, then the sales volume is 9,000 units.
(2,400 + 1,200)/(2 40%) = 4,500 units
Cost-volume-profit (CVP) analysis is a simple but powerful tool to assist management make operating
decisions. Which of the following does not represent a potential use of CVP analysis?
Ability to compute the break-even point.
Ability to d
An increase in an organization's fixed costs will result in a lower margin of safety, assuming all other
costs and sales remain unchanged.
The break-even point will be higher, leading to a smaller margin of safety.
102.The sales manager of Acme Enterprises is considering expanding sales by producing three different
versions of their product. Each will be targeted by the marketing department to different income levels and
will be produced from three different qualiti
At a break-even point of 400 units, variable costs were $400 and fixed costs were $200. What will the
401st unit sold contribute to operating profits before income taxes?
Variable costs = $400/400 = $1.00
400 = $200/
You have been provided with the following information:
If sales decrease by 500 units, how much will fixed expenses have to be reduced by to maintain the
current operating profit of $6,000?
$45,000/15 = 3,00
The following costs have been estimated based on sales of 30,000 units:
What selling price will yield a contribution margin of 40%?
($300,000 + $250,000 + $125,000 + $37,500)/30,000 = $23.75
(SP - $23.75)/SP = .
Given the following data:
If sales decrease by 500 units, by what % would fixed expenses have to be reduced by to maintain
current net income?
$45,000/15 = 3,000 units
[($15 - 9) (3,000 - 500)] - FC = $6,000
The break-even point in sales dollars is fixed costs divided by the contribution margin ratio.
This is a definition of break-even.
AICPA: FN-Decision Making
Lanen - Chapter 03 #9
If the average selling price is $.60 per unit, the average variable cost is $.36 per unit, and the total fixed
costs are $1,500, then sales of 15,000 units will result in operating profits of $3,600.
($.60 - .36) 15,000 - 1,500 = $2,100
81. EM Sales had $2,200,000 in sales last month. The contribution margin ratio was 30% and operating profits
were $180,000. What sales volume does EM's need to yield a $240,000 operating profit?
77. You have been provided with the following information:
If unit sales decrease by 10%, how much will fixed expenses have to be reduced by to maintain the current
78. You have been provided
75. Misa Corporation manufactures circuit boards and is in the process of preparing next year's budget. The pro
forma income statement for the current year is presented below.
For the coming year, the management of Misa Corporation anticipates a 5 percent
86. The Katie Corporation has budgeted fixed costs of $125,000 and an estimated selling price of $16.50 per
unit. The contribution margin ratio is 40% and the company plans to sell 25,000 units in 2011.
(a) Compute the break-even point in dollar
72. If both the variable cost per unit and the selling price per unit increase, the new contribution margin ratio in
relation to the old contribution margin ratio will be:
Not enough information to tell.
73. Misa Corp
66. Which of the following would not cause the break-even point to change?
A. Sales price increases.
B. Sales volume increases.
C. Fixed cost increases.
D. Variable costs per unit decreases.
E. Product mix shifts towards the cheaper products.
67. Which of
48. Kator Inc. manufactures industrial components. One of its products used as a subcomponent in auto
manufacturing is KB-96. The selling price and cost per unit data for 9,000 units of KB-96 is as follows.
During the next year, sales of KB-96 are expecte