Cost Volume Profit Analysis Essay

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Register to read the introduction… A recent income statement of Fox Corporation reported the following data: Sales revenue Variable costs Fixed costs $3,600,000 1,600,000 1,000,000

If these data are based on the sale of 10,000 units, the break-even point would be: A. 2,000 units. B. 2,778 units. C. 3,600 units. D. 5,000 units. E. an amount other than those above. Answer: D LO: 1 Type: A 14. A recent income statement of Yale Corporation reported the following data: Sales revenue Variable costs Fixed costs $2,500,000 1,500,000 800,000

If these data are based on the sale of 5,000 units, the break-even sales would be: A. $2,000,000. B. $2,206,000. C. $2,500,000. D. $10,000,000. E. an amount other than those above. Answer: A LO: 1 Type: A 15. Lawton, Inc., sells a single product for $12. Variable costs are $8 per unit and fixed costs total $360,000 at a volume level of 60,000 units. Assuming that fixed costs do not change, Lawton's break-even point would be: A. 30,000 units. B. 45,000 units. C. 90,000 units. D. negative because the company loses $2 on every unit sold. E. a positive amount other than those given above. Answer: C LO: 1 Type: A

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Hilton, Managerial Accounting, Seventh
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Dana sells a single product at $20 per unit. The firm's most recent income statement revealed unit sales of 100,000, variable costs of $800,000, and fixed costs of $400,000. If a $4 drop in selling price will boost unit sales volume by 20%, the company will experience: A. no change in profit because a 20% drop in sales price is balanced by a 20% increase in volume. B. an $80,000 drop in profitability. C. a $240,000 drop in profitability. D. a $400,000 drop in profitability. E. a change in profitability other than those above. Answer: C LO: 4 Type: A 42. Grimes is studying the profitability of a change in operation and has gathered the following information: Current Operation $38,000 $16 $10 9,000 Anticipated Operation $48,000 $22 $12 …show more content…
Vince's Pizza delivers pizzas to dormitories and apartments near a major state university. The company's annual fixed costs are $48,000. The sales price averages $9, and it costs the company $3 to make and deliver each pizza. Required: A. How many pizzas must Vince's sell to break even? B. How many pizzas must the company sell to earn a target net profit of $54,000? C. If budgeted sales total 9,900 pizzas, how much is the company's safety margin? D. Vince's assistant manager, an accounting major, has suggested that the firm should try to increase the contribution margin per pizza. Explain the meaning of "contribution margin" in layman's terms. LO: 1, 4 Type: RC, A Answer: A. Selling price per pizza Less: Variable cost per pizza Unit contribution margin Break-even pizzas: $48,000  $6 = 8,000 B. C. D. Pizzas to earn $54,000: ($48,000 + $54,000) ÷ $6 = 17,000 Safety margin: (9,900 x $9) - (8,000 x $9) = $17,100 The contribution margin is the amount that each unit (pizza) contributes toward covering fixed cost and producing a profit. Once a company's fixed costs are covered, operating income will increase by the amount of the contribution margin. Mathematically, it is computed as the difference between selling price and the variable cost per

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