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Exam 9: Short-Term Profit Planning: Cost-Volume-Profit Cvp Analysis

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Question 31

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When using cost-volume-profit (CVP) analysis, the following information helps to show how decisions affect operating income except:

A) Variable costs.
B) Fixed costs.
C) Output level.
D) Gross margin.
E) Sales volume.

F) B) and D)
G) A) and C)

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Question 32

Multiple Choice

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In measuring the variable cost per unit, CVP analysis includes:

A) Only variable production costs.
B) Only variable distribution and selling costs.
C) Both variable production and variable selling/distribution costs.
D) Only variable and semi-variable production costs.

E) None of the above
F) B) and C)

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Question 33

Multiple Choice

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Gralyn Corp. compares two products' margin of safety ratios (MOS%) . Product A has a ratio of 0.13 and product B has a ratio of 0.31. Based on this information, what should the managers at Gralyn Corp. do and why?

Headlines Publishing Company (HPC) specializes in international business news publications. Its principal product is HPC-Monthly, which is mailed to subscribers the first week of each month. A weekly version, called HPC-Weekly, is also available to subscribers over the Web at a higher cost. Sixty percent of HPC's subscribers are nondomestic customers. The company experienced a fast growth in subscribers in its first few years of operation, but sales have begun to slow in recent years as new competitors have entered the market. HPC has the following cost structure and sales revenue for its subscription operations on a yearly basis. All costs and all subscription fees are in U.S. dollars. Required: Use these data to determine the following: 1. Contribution margin per unit for weekly and monthly subscriptions. 2. Contribution margin ratio for weekly and monthly subscriptions. 3. HPC's breakeven point in annual sales units and sales dollars (round answers up, to nearest whole number). 4. HPC's required sales to reach a target before-tax profit of $75,000 for the year. What is the breakdown of this overall level of subscriptions into Weekly and Monthly subscriptions? 5. What are the critical success factors for HPC? For its domestic subscribers? For its international subscribers? How can CVP analysis be used to make HPC more competitive?

The annual breakeven point in unit sales is calculated to be:

Which one of the following is the most useful measure for comparing the risk of two alternative products?

The sales dollars required to make an after-tax profit for Kelvin Co. of $15,000, given an income tax rate of 40%, are calculated to be:

FastQ Company, a specialist in printing, has established 500 convenience copying centers throughout the country. In order to upgrade its services, the company is considering three new models of laser copying machines for use in producing high-quality copies. These high-quality copies would be added to the growing list of products offered in the FastQ shops. The selling price to the customer for each laser copy would be the same, no matter which machine is installed in the shop. The three models of laser copying machines under consideration are 1024S (a small-volume model), 1024M (a medium-volume model), and 1024G (a large-volume model). The annual rental costs and the variable operating costs vary with the size of the machine. The machine capacities and costs are shown below Required: 1. Determine the volume level in copies where FastQ Company would be indifferent between acquiring either the small-volume model laser copier (1024S) or the medium volume model laser copier (1024M). 2. The management of FastQ Company is able to estimate the number of copies to be sold at each establishment. Present an analysis that would enable FastQ Company to select the most profitable machine without having to make a separate cost calculation for each establishment. (CMA Adapted)

Firms A and B both produce and sell computer cables. The sales price is $5 per cable. Data for both firms at a sales volume of 100 units are as follows: Required: Which firm's profit or loss is more sensitive to changes in sales volume? Explain.

Assuming that sales mix remains constant in dollars, what is the breakeven point in dollars? (Round intermediate calculations to 4 decimal places and final answer up to the nearest whole number.)

OutlyTech's margin of safety (MOS) in sales dollars is:

If an $18,000 increase in the advertising budget would increase monthly sales by $60,000, the new level of operating income for Staley Co. would be:

Which of the following factors is not involved in studying cost/volume/profit (CVP) relationships?

The annual breakeven point in sales dollars for X Company is:

The calculation of an amount given different levels of a factor that influences that amount is called:

Staley Co.'s operating income is calculated to be:

Which of the following illustrates how the level of operating profit changes over different levels of output/sales volume?

What is Staley Co.'s margin of safety (MOS) , in units, if 600 units are sold and all costs and revenues are as budgeted? (Round intermediate calculation up to nearest whole number of units.)

The sales dollars required to make a before-tax profit of $20,000 for Framing House are calculated to be:

Daley Co. manufactures computer monitors. Following is a summary of its basic cost and revenue data: Assume that Daley Co. is currently selling 700 computer monitors per month. Fixed costs are expected to be $96,000. Required: Calculate Daley Co.'s margin of safety (MOS) in units if 700 units are sold. Round your answer up, to the nearest whole number.