Question

9(B). Butters Corporation recently noticed an increase in its fixed cost. All other costs and

revenues were unchanged. What impact will this have on
break-even point and the margin of safety (increase, decrease, or
stay the same… **and why? – feel free to make-up numbers to
help explain why.**

- Breakeven: _________________ Why:_______________________________________________________________
- Margin of Safety: _________________ Why:_______________________________________________________________

10. Chef Company makes and sells pre-packed lunches. The variable cost of each lunch is $5. The lunches are sold for $10 each. Fixed operating expenses amount to $10,000. Using the space below, prepare a break-even graph. Indicate the following on the graph: (a) fixed cost, (b) total cost, (c) total revenue, (d) loss, (e) breakeven point, and (f) profit area.

Answer #1

Answer to Question 9.

The Break even point will increase if Fixed Cost increases, while other revenue and Expenses remain unchanged.

Break even Point is the point where Net Income is zero, or fixed cost is equal to Contribution margin.

If other Revenue and expenses remains unchanged, the Contribution margin will remain unchanged and more units will be needed to cover the increased fixed cost with same Contribution margin.

Break even point = Fixed Cost / Contribution margin per unit

The Margin of safety will decrease as it is excess of Current Sales over Break even sales. If Fixed cost increases and other costs remains unchanged will increase Break Even Sales and it will in turn decrease Margin of Safety

Margin of Safety = Current Sales - Break Even Sales

What effect will an increase in unit variable cost or total
fixed costs have on the break-even point? What effect will an
increase in the unit sales price have on the break-even point?
Please explain.

XYZ company's sales $800000, unit variable cost $8, fixed
expense $100000, and number of units sold equals 80000.
Requirements (1-10):
Net operating income.
2. Contribution margin percentage.
3. Unit fixed cost.
4. Break-even point in unit sold.
5. Break-even point in total sales dollar.
6. Unit sales to attain the target profit 76000.
7. Margin of safety (Units).
8. Margin of safety (%).
9. Degree of operating leverage.
10.In original information, if the number of quantity sold
increase by 10%,...

________ is the excess of sales over the cost of goods sold.
A) Gross margin
B) Contribution-margin ratio
C) Variable-cost ratio
D) Contribution margin
Answer:
Which statement is FALSE?
A) Each different sales-mix of products has a different
break-even point.
B) Changes in the sales-mix of products sold affects a company's
net operating profit.
C) Changes in the sales-mix of products sold affects a company's
contribution margin.
D) If the sales-mix of products sold changes, the break-even
point does not...

UX Corporation sells a single product for $40. Its management
estimates the following revenues and costs for the year
2020:
Net sales
$388,000
Selling expenses—variable
$21,100
Direct materials
85,400
Selling expenses—fixed
20,100
Direct labour
56,400
Administrative expenses—variable
9,400
Manufacturing overhead—variable
21,700
Administrative expenses—fixed
9,800
Manufacturing overhead—fixed
9,700
a)Assuming fixed costs and net sales are spread evenly
throughout the year, determine YUX’s monthly break-even point in
units and dollars
b) Calculate the contribution margin ratio, the annual margin of
safety ratio,...

Cost-Volume-Profit, Margin of Safety
Victoria Company produces a single product. Last year’s income
statement is as follows:
Victoria Company
Contribution Margin Income Statement
For the Last Year
1
Sales (29,000 units)
$1,218,000.00
2
Variable cost
812,000.00
3
Total contribution margin
$406,000.00
4
Fixed cost
300,000.00
5
Operating income
$106,000.00
Required:
1.
Compute the break-even point in units and sales dollars
calculated using the break-even units.
2.
What was the margin of safety for Victoria last year in sales
dollars?
3....

Chapter 5 Cost-Volume-Profit Relationships
What is the Contribution income statement?
__________________________
__________________________
__________________________
__________________________
__________________________
What is the gross profit
ratio?_____________________________________________
What is the contribution margin
ratio?______________________________________
What is the break-even
point?_____________________________________________
Give 3 ways of stating breakeven: (relating items from the
contribution income statement)
_____________________________
_____________________________
_____________________________
What is the formula to find the breakeven number of
units?____________________________
How can you determine the number of units necessary to attain a
certain level of profit?
_____________________________________________________________________________
How can you determine...

Total fixed cost = $66,000
Selling price per unit = $14
Variable costs per unit = $6
Net target income (after tax) = $52,000
Tax rate = 35%.
a)Calculate break even point in units
b) calculate the sales revenue (in dollars) required to achieve
the target income
c) calculate the difference in operating income when one extra
unit is sold
d) if fixed cost increased by 20%, what is the new unit
contribution margin required to maintain the same break-even...

Mastery Problem: CVP Analysis - Constructing a
Cost-Volume-Profit Chart
CVP Analysis and the Contribution Margin Income
Statement
For planning and control purposes, managers have a powerful tool
known as cost-volume-profit (CVP) analysis. CVP analysis shows how
revenues, expenses, and profits behave as volume changes, which
helps identify problems and create solutions. In CVP analysis,
costs are classified according to behavior: variable or fixed,
rather than by category: product (which includes both variable and
fixed) or period (which includes both variable...

Mastery
Problem: CVP Analysis - Constructing a Cost-Volume-Profit
Chart
CVP Analysis
and the Contribution Margin Income Statement
For planning and
control purposes, managers have a powerful tool known as
cost-volume-profit (CVP) analysis. CVP analysis shows how revenues,
expenses, and profits behave as volume changes, which helps
identify problems and create solutions. In CVP analysis, costs are
classified according to behavior: variable or fixed, rather than by
category: product (which includes both variable and fixed) or
period (which includes both variable...

Chapter 5 Cost-Volume-Profit Relationships
The dashed lines indicate a "Fill in the blank"
area
1) What is the Contribution income statement?
__________________________
__________________________
__________________________
__________________________
__________________________
2) What is the gross profit
ratio?_____________________________________________
3) What is the contribution margin
ratio?______________________________________
4) What is the break-even
point?_____________________________________________
5) Give 3 ways of stating breakeven: (relating items from the
contribution income statement)
_____________________________
_____________________________
_____________________________
6) What is the formula to find the breakeven number of
units?____________________________
7) How can you determine...

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