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Exam 3: Cost-Volume-Profit Analysis and Pricing Decisions

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Question 21

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Which of the following is not included in the profit equation?

A) Sales revenue
B) Variable costs
C) Cost of goods sold
D) Fixed costs

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Question 22

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The breakeven graph illustrates the relationship between product and period costs,allowing managers to view a range of results at a single glance.

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Question 23

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If sales price and variable cost remain constant and fixed costs decrease,contribution margin will

Assume total fixed costs of $160,000,variable costs per unit of $6, and contribution margin per units of $4. What are the sales dollars required to earn a target net income of $50,000 assuming a tax rate of 20%?

All other things equal,a company can increase its operating leverage by converting

Grassi Company produces high definition television sets.The following information is available for this product: Grassi Company's markup percentage would be

Which of the following formulas is used to calculate the breakeven point in sales dollars?

The margin of safety represents the volume of sales that it takes to break even.

The degree of operating leverage is calculated as the contribution margin divided by the sales revenue.

Assume total fixed costs of $160,000,variable costs per unit of $6, and contribution margin per unit of $4. How many units must be sold to meet a target operating income of $50,000?

A company with a high operating leverage will experience a large percentage change in operating income as a result of a small percentage change in sales.

Lochte Inc.has collected the following data concerning one of its products:

To reduce the cost to deliver a product or service to consumers,a company must focus on

The formula for margin of safety in units is

Mounts CPA firm prepares approximately 1,200 individual tax returns each year.Since a majority of the cost of preparing tax returns results from the salary of the tax preparers and reviewers,Mounts charges customers a markup on labor rates.The highest paid preparers earn $30 per hour and are CPAs with several years' experience.Mounts charges its customers $45 per hour.If Mounts charges the same markup percentage to all clients,what price will Mounts charge for a less-experienced preparer who earns only $20 per hour?

Barbara's Boutique wants to know what it takes to have $20,000 in operating income.If her selling price is $20,variable cost is $8 and fixed costs total $40,000,what must her sales revenue be in order to reach her goal?

Benny Books sells first edition books.Benny purchases the books from his supplier for $100 a book and sells them through his website for $225 a book.Benny's fixed costs are $87,000.Benny's breakeven point in sales dollars is nearest to

Which of the following is $\textbf{ not }$ a limiting assumption of multiproduct CVP analysis?

Which of the following does not influence prices?

One assumption made when using CVP as a decision tool is that all costs can be easily and accurately separated into fixed and variable categories.