Question 1

Narrows Co. is considering the production and sale of a new product line with the following sales and cost data: unit sales price $125; unit variable costs $75; and total fixed costs of $140,000. Calculate the break-even point:
(a) In units.
(b) In dollar sales.

Accepted Answer

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Question 2

The following information describes a product expected to be produced and sold by Pepin Corporation:
Required:
(a) Calculate the contribution margin per unit.
(b) Calculate the break-even point in units.

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The answer of The following information describes a product expected...

Question 3

A product is sold for $45 and has variable costs of $33 per unit. The total fixed costs for the firm are $180,600. If the firm desires to earn a pretax income of $77,400, how many units must be sold?

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Question 4

Macleod Company's product has a contribution margin per unit of $62.50 and a contribution margin ratio of 25%. What is the per unit selling price of the product?

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Question 5

A firm produces and sells a product with a contribution margin of $32 per unit. The firm is presently selling 90,000 units and earning $240,000 in after-tax income. Taxes are $80,000 at a 25% tax rate. If the firm desires to increase its after-tax income to $300,000, how many more units must it sell?

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Question 6

The following data relate to a product sold by Nelson Company:
(a) Calculate the number of units expected to be sold.
(b) Calculate the expected total dollar sales.

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Question 7

Kelley Company and Mason Company each have sales of $200,000 and costs of $140,000. Kelley Company's costs consist of $40,000 fixed and $100,000 variable, while Mason Company's costs consist of $100,000 fixed and $40,000 variable. Which company will suffer the greatest decline in profits if sales volume declines by 15%? Prepare income statements and compute degree of operating leverage to assess.

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Question 8

Rudy Co. has total fixed costs of $520,000. A unit of product sells for $15 and variable costs per unit are $11.
a) Prepare a contribution margin income statement showing predicted net income (loss) if Rudy Co. sells 100,000 units for the year ended December 31.
b) At a minimum, how many units must Rudy Co. sell in order not to incur a loss?

Accepted Answer

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Question 9

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. Should Thomas reduce its per unit sales price and pay for the additional advertising? (Support your answer with calculations.)

Accepted Answer

The answer of Thomas Company has total fixed costs of...

Question 10

Hanover Hats produces specialty logo baseball caps for a variety of customers. Selected cost data for Hanover follows: direct materials cost $8,000; sales commissions, $9,000; depreciation on factory equipment, $21,000; factory labor, $16,000; factory lease, $24,000. If Hanover Hats sells 6,100 caps at an average price of $12 for each cap, what is the company's contribution margin?

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Question 11

A company sells a single product that has a contribution margin ratio of 24%. If the company's total fixed costs are $84,000, what is the break-even point in dollar sales?

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Question 12

Plymouth Industries incurs the following costs during the current year:
Sales for the year were $80,000 and Plymouth Industries determined that only the direct production costs (prime costs) and sales commissions are to be classified as variable costs; all other costs are classified as fixed costs. Plymouth sold 400 units.
(a) Calculate the unit contribution margin and the contribution margin ratio for Plymouth
Industries.
(b) Plymouth Industries is considering plans that would increase the contribution margin ratio for next year. Should it pursue these plans? Explain.

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Question 13

Outback Products reports the following information:
Required:
(a) Calculate Outback Products' degree of operating leverage (DOL).
(b) Outback Products forecasts a 6% increase in sales. What is the expected effect in percent on pretax income?

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Required:
(a) Calculate...

Question 14

Duxbury Co. reports the following data for the current year:
Required:
(a) Calculate Duxbury's pretax income.
(b) Calculate Duxbury's degree of operating leverage.

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Question 15

Hess Co. manufactures a product that sells for $12 per unit. Total fixed costs are $96,000 and variable costs are $7 per unit. Hess can buy a newer production machine that will increase total fixed costs by $22,800 but variable costs will be decreased by $0.40 per unit. What effect would the purchase of the new machine have on Hess's break-even point in units?

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Question 16

A company is looking into two alternative methods of producing its product. The following information about the two alternatives is available. If the company's expected sales volume is 35,000 units, which alternative should be selected? Prepare forecasted income statements and compute degree of operating leverage to assess the alternatives.

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Question 17

Abington Corporation provides the following data from a recent period for its manufacture of shoes: variable manufacturing costs, $24,000; variable selling costs, $12,000; and total fixed costs, $40,000. Sales were $60,000 based on 12,000 units sold during the period. Calculate the contribution margin and the contribution margin ratio.

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Question 18

A company manufactures and sells spotlights. Each spotlight sells for $145. The variable cost per unit is $98, and the company's total fixed costs are $235,000. Predicted sales are 15,000 units. What is the contribution margin per unit?

Accepted Answer

The answer of A company manufactures and sells spotlights. Each...

Question 19

Abrams Co. has total fixed costs of $240,000 and a contribution margin ratio of 40%. If rent expense increases by $5,000, how much will sales have to increase to cover this increase in costs?

Accepted Answer

The answer of Abrams Co. has total fixed costs of...

Question 20

A company has total fixed costs of $360,000. Its product sells for $40 per unit and variable costs amount to $25 per unit. What is the break-even point in dollar sales?

Accepted Answer

The answer of A company has total fixed costs of...

Quiz 22: Cost-Volume-Profit Analysis

Narrows Co. is considering the production and sale of a new product line with the following sales and cost data: unit sales price $125; unit variable costs $75; and total fixed costs of $140,000. Calculate the break-even point: (a) In units. (b) In dollar sales.

The following information describes a product expected to be produced and sold by Pepin Corporation: Required: (a) Calculate the contribution margin per unit. (b) Calculate the break-even point in units.

A product is sold for $45 and has variable costs of $33 per unit. The total fixed costs for the firm are $180,600. If the firm desires to earn a pretax income of $77,400, how many units must be sold?

Macleod Company's product has a contribution margin per unit of $62.50 and a contribution margin ratio of 25%. What is the per unit selling price of the product?

The following data relate to a product sold by Nelson Company: (a) Calculate the number of units expected to be sold. (b) Calculate the expected total dollar sales.

A company sells a single product that has a contribution margin ratio of 24%. If the company's total fixed costs are $84,000, what is the break-even point in dollar sales?

Outback Products reports the following information: Required: (a) Calculate Outback Products' degree of operating leverage (DOL). (b) Outback Products forecasts a 6% increase in sales. What is the expected effect in percent on pretax income?

Duxbury Co. reports the following data for the current year: Required: (a) Calculate Duxbury's pretax income. (b) Calculate Duxbury's degree of operating leverage.

A company manufactures and sells spotlights. Each spotlight sells for $145. The variable cost per unit is $98, and the company's total fixed costs are $235,000. Predicted sales are 15,000 units. What is the contribution margin per unit?

Abrams Co. has total fixed costs of $240,000 and a contribution margin ratio of 40%. If rent expense increases by $5,000, how much will sales have to increase to cover this increase in costs?

A company has total fixed costs of $360,000. Its product sells for $40 per unit and variable costs amount to $25 per unit. What is the break-even point in dollar sales?