Ch:5 Cost-Volume-Profit Analysis

Variable Expense Ratio =

• Break-Even Point/Variable Expenses

• Variable Expenses/Sales

• Contribution Margin/Sales

• Contribution Margin/Variable Expenses

The Breakeven Point is where....

• Variable Expenses = Sales

• Fixed Expenses = Sales

• Total Expenses = Sales

• Operating Leverage = Sales

Profit=

• Sales - Variable Expenses

• Sales - Variable Expenses - Fixed Expenses

• Sales - Fixed Expenses

• Net Income + Break-Even Sales

Under Target Profit Analysis,

• Dollar Sales to attain target profit = (target profit+fixed expenses)/

  CM Ratio

• Dollar Sales to attain target profit = (target profit+fixed expenses)/

  CM Per Unit

• Unit Sales to attain target profit = (target profit + fixed expenses)/

  CM Ratio

• Units sales to attain target profit = (target profit + fixed expenses)/

  CM Per Unit

Degree of Operating Leverage =

• CM Per Unit/

  Net Operating Income

• Sales/Net Operating Income

• Variable Expenses/

  Net Operating Income

• Sales - Variable Expenses/

  Net Operating Income

Which of following is an advantage of high fixed cost structure compared to low fixed cost structure?

• Taxes will be lower in good years

• Income will be higher in good years

Sales = $200k , Breakeven Sales = $120k, Total Fixed Expenses = $50k

What is the Margin of Safety % ?

• 40%

• 60%

• 45%

• 88%

What is the amount of Variable Expenses?

• 150k

• 390k

• 210k

• 240k

If the company decides to reduce sales salaries by $5k and replace this form of compensation with a sales commission of 2.5%, then the new UNIT sales needed to breakeven is closest to...

• 2405 Units

• 2694 Units

• 2392 Units

• 2576 Units

Sales = $180k, Contribution Margin Ratio = 40%, Total Fixed Expenses = $45k

What is the Margin of Safety % ?

• 67.5%

• 37.5%

• 25%

• 62.5%