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Exam 6: Cost-Volume-Profit Analysis

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Question 61

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Last month Lyle Company had a $60,000 profit on sales of $300,000. Fixed costs are $120,000 a month. How much do sales have to increase for Lyle to earn a $100,000 profit?

A) $66,667
B) $83,333
C) $220,000
D) $400,000

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Question 62

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Last month Peggy Company had a $30,000 profit on sales of $250,000. Fixed costs are $60,000 a month. What sales revenue is needed for Peggy to break even?

A) $166,667
B) $90,000
C) $30,000
D) $280,000

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Question 63

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The break-even point is the point at which profit equals:

Which of the following statements about leverage is not correct?

Keith Corp. has sales of $200,000, a contribution margin ratio of 35%, and a profit of $40,000. If 10,000 units were sold, what is the variable cost per unit?

A company is debating whether to change its cost structure so that variable costs increase from $4 per unit to $5 per unit but fixed costs decrease from $400,000 to $300,000. If it were to implement the change at its current production level of 100,000, profit would not change. What would happen to the company's profit if the change were implemented and production increased?

Jerome Corp. has fixed costs of $500,000 and a contribution margin ratio of 40%. Currently, sales are $3,000,000. What is Jerome's margin of safety?

Idaho Corp. has fixed costs of $20,000 and a contribution margin ratio of 50%. Currently, sales are $75,000. What is Idaho's margin of safety?

What component of the profit equation should be set equal to zero to find the breakeven point?

Akron Corp. had a margin of safety of $500,000 last month, with sales revenue of $1,250,000 and fixed costs of $150,000. a. What are break-even sales? b. What is the contribution margin ratio? c. How much profit did Akron earn last month? d. How much would sales have to be for Akron to earn profit of 500,000?

Which of the following statements is not correct about the methods managers use to model the relationship between revenues, costs, profit, and volume?

Last month Empire Company had a $30,000 profit on sales of $250,000. Fixed costs are $60,000 a month. By how much would sales be able to decrease for Empire to still break even?

Dancer Corp. has a selling price of $20 per unit, and variable costs of $10 per unit. When 12,000 units are sold, profits equaled $35,000. How many units must be sold to break-even?

Cantor Products sells a product for $75. Variable costs per unit are $50, and monthly fixed costs are $75,000. Answer the following questions: a. What is the break-even point in units? b. What unit sales would be required to earn a target profit of $200,000? c. Assume they achieve the level of sales required in part b, what is the degree of operating leverage? d. If sales decrease by 30% from that level, by what percentage will profits decrease?

The break-even point is:

Jasmine Inc. sells a product for $50 per unit. Variable costs per unit are $30, and monthly fixed costs are $150,000. Answer the following questions: a. What is the break-even point in units? b. What unit sales would be required to earn a target profit of $100,000? c. Assume they achieve the level of sales required in part b, what is the margin of safety in sales dollars?

Plymouth Corp. sells units for $100 each. Variable costs are $75 per unit, and fixed costs are $200,000. If Plymouth leases a new machine, production will be more efficient, saving $5 per unit. If Plymouth plans to sell 12,000 units, at what lease cost will Plymouth be indifferent between leasing and not leasing the new machine?