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Exam 3: Analysis of Cost,Volume,and Pricing to Increase Profitability

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Question 41

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Burke Company has a break-even of $600,000 in total sales.Assuming the company sells its product for $50 per unit,what is its margin of safety in units if sales total $850,000?

A) 5,000 units
B) 250,000 units
C) 12,000 units
D) 17,000 units

E) C) and D)
F) A) and B)

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Question 42

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Broadway Company produces and sells two models of calculators.The following monthly data are provided: $\begin{array}{|l|l|r|lr}\hline & {\text { Standard }} & {\text { Premium }} \\\hline \text { Unit selling price } & \$ 100 & \$ 150 \\\hline \text { Unit variable manufacturing cost } & \$ 60 & \$ 90 \\\hline \text { Unit variable selling and } \\\text { administrative cost } & \$ 15 & \$ 30 \\\hline \\\text { Number of units produced and sold } & 3,000 & 1,000 \\\hline\end{array}$ Total monthly fixed costs are expected to be $15,000.What is the break-even point in sales dollars at the expected sales mix? (Do not round your intermediate calculations. )

A) $19,231
B) $43,478
C) $68,182
D) $64,286

E) A) and B)
F) A) and C)

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Question 43

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A company can use target profit analysis to determine the level of sales required to earn a target loss.

M and M,Inc.produces a product that has a variable cost of $3.00 per unit.The company's fixed costs are $30,000.The product is sold for $5.00 per unit and the company desires to earn a target profit of $20,000.What is the amount of sales that will be necessary to earn the desired profit?

During the current year,Goldblum Co.sold 160,000 units of its product at a selling price of $40.The variable cost per unit was $30,and Goldblum reported net income for the year of $220,000.What was the amount of Goldblum's fixed costs for the year?

To get a feel for the impact on profits of various changes in costs and volume levels management should perform:

Harris Company produces a product whose cost is $10.Assuming the company uses a cost-plus pricing system,what selling price would the company set to earn a profit margin of 20% of cost?

What is the break-even point for a company?

Camden Company sets the selling price for its product by adding a markup to the product's variable manufacturing costs.This approach to pricing is referred to as:

Consider the following cost-volume-profit graph: The line designated by the letter (A) represents which of the following?

The following information is for a product of Lanier Company: Last year,the variable cost per unit was $25.Total fixed costs were $800,000.At a volume of 170,000 units,the company achieved a profit of $50,000. Required: What was the unit sales price for the product last year?

Taylor Mayberry is sales manager for a specialty products company that has over 100 product lines.The company uses twenty-five vendors and competes with dozens of competitors.It has been the company's practice to match competitor prices on the products it sells.Describe a technique that will assist Taylor in assessing the impact of constantly changing purchase costs,selling prices,and volumes.

Canton Company produces and sells toasters.The following unit cost information assumes a production and sales volume of 15,000 units: $\begin{array}{|l|r|}\hline \text { Direct materials } & \$ 9 \\\hline \text { Direct labor } & 6 \\\hline \text { Variable overhead } & 2 \\\hline \text { Fixed overhead } & 3 \\\hline \text { Variable selling and administrative costs } & 1 \\\hline \text { Fixed selling and administrative costs } & 4 \\\hline\end{array}$ Required: 1)Compute the budgeted selling price per unit assuming Canton uses a cost-plus pricing strategy and a markup equal to 75% of production cost. 2)Compute the firm's total fixed costs. 3)Compute the firm's contribution margin per unit given the budgeted selling price you computed in Requirement 1. 4)Compute the firm's breakeven point in units and dollars,using the selling price you calculated in part 1. 5)Using the unit contribution margin,compute the firm's estimated profit if 15,000 units are sold.

What is prestige pricing? Under what circumstances should a company consider using prestige pricing?

Martin Company currently produces and sells 40,000 units of product at a selling price of $12.The product has variable costs of $6 per unit and fixed costs of $150,000.The company currently earns a total contribution margin of:

Jensen Company has a contribution margin ratio of 45%.This means that its variable costs are 55% of sales.

Wayans Company has a contribution margin ratio of 60%.This means that its variable costs are 60% of sales.

Joseph Company has variable costs of $80 per unit,total fixed costs of $200,000,and a break-even point of 5,000 units.If the variable cost per unit decreases by $8,how many units must Joseph Company sell to break-even?

In order to perform cost-volume-profit analysis,a company must be able to identify its variable and fixed costs.

The Parsons Company makes and sells two models of blenders,as follows: $\begin{array} { | l | l| l | l l | } \hline & { \text { Smoothie Pro } } & { \text { Blendmaster } } \\\hline \text { Sales price per unit } & \$ 50 & \$ 80 \\\hline \text { Variable cost per unit } & 25 & 45 \\\hline \text { Contribution margin per unit } & \$ 25 & \$ 35 \\\hline\end{array}$ The Parsons Company expects to incur annual fixed costs of $151,250.The relative sales mix of the products is 3 units of Smoothie Pro for every one unit of Blendmaster. Required: 1)Determine the total number of blenders (Smoothie Pro and Blendmaster combined)that Parsons must sell to break even. 2)What is the number of units of Smoothie Pro and of Blendmaster that Parsons would expect to sell at the break-even point?