GE003 Final Examination

The systematic examination of the relationships among selling prices, volume of sales and production, costs, and profits is termed:

• contribution margin analysis

• budgetary analysis

• cost-volume-profit analysis

• gross profit analysis

The most useful information derived from a breakeven chart is the

• Amount of sales revenue needed to cover enterprise variable costs.

• Amount of sales revenue needed to cover enterprise fixed costs.

• Relationship among revenues, variable costs, and fixed costs at various levels of activity.

• Volume or output level at which the enterprise breaks even.

The most likely strategy to reduce the breakeven point would be to

• Increase both the fixed costs and the contribution margin.

• Decrease both the fixed costs and the contribution margin.

• Decrease the fixed costs and increase the contribution margin.

• Increase the fixed costs and decrease the contribution margin.

A company’s breakeven point in peso sales may be affected by equal percentage increases in both selling price and variable cost per unit (assume all other factors are equal within the relevant range). The equal percentage changes in selling price and variable cost per unit will cause the breakeven point in peso sales to

• Decrease by less than the percentage increase in selling price.

• Decrease by more than the percentage increase in the selling price.

• Increase by less than the percentage increase in selling price.

• Remain unchanged.

A company increased the selling price for its product from P1.00 to P1.10 a unit when total fixed costs increased from P400,000 to P480,000 and variable cost per unit remained unchanged. How would these changes affect the breakeven point?

• The breakeven point in units would be increased.

• The breakeven point in units would be decreased.

• The breakeven point in units would remain unchanged.

• The effect cannot be determined from the information given.

Green Corporation expects to sell 3,000 plants a month. Its operations manager estimated the following monthly costs:

Variable costs P7,500; and Fixed costs P15,000

What sales price per plant does she need to achieve to begin making a profit if she sells the estimated number of plants per month?

An organization's break-even point is 4,000 units at a sales price of P50 per unit, variable cost of P30 per unit, and total fixed costs of P80,000. If the company sells 500 additional units, by how much will its profit increase?

Consider the following:

Fixed expenses, P78,000; Unit contribution margin P12; and Target net profit P42,000.

How many unit sales are required to earn the target net profit?

The sales price per unit will increase from P32 to P40. The variable cost per unit will remain at P24, and the fixed costs will remain unchanged at P400,000. How many fewer units must be sold to break-even at the new sales price of P40 per unit?

Carribean Company produces a product that sells for P60. The variable manufacturing costs are P30 per unit. The fixed manufacturing cost is P10 per unit based on the current level of activity, and fixed selling and administrative costs are P8 per unit. A selling commission of 10% of the selling price is paid on each unit sold. The contribution margin per unit is: