Chapter 5

Question 1

Sales =

Answer 1

Variable Costs + Fixed Costs + Net Income

Question 2

When NI = Zero

Answer 2

then you are at breakeven
Revenues=All Expenses
(both fixed and variable)

Question 3

Targeted NI

Answer 3

Everything same as BE except NI= zero but some desired amount profit

Question 4

Profit=

Answer 4

CM-FC

Question 5

Break Even In Units Sold Formula

Answer 5

Total Fixed Costs/ CM per unit

Question 6

Breakeven in Sales Formula

Answer 6

Total Fixed Costs/CM Ratio

Question 7

of Units Sold to Reach Target Net Income Formula

Answer 7

Total Fixed + NI/ CM Per Unit

Question 8

$ in Sales to Reach Target NI Formula

Answer 8

Total Fixed + NI/ CM Ratio

Question 9

Variable cost & CM ratios and per units stay

Answer 9

CONSTANT…as volume or (total changes)

Question 10

Fixed cost ⇒

Answer 10

Total same so per unit and ratio changes inversely

Question 11

Once break-even is reached

Answer 11

net income increases by amount of the unit contribution margin for each additional unit sold (because no more additional fixed costs are generated)

Question 12

Sales-VC=

Answer 12

FC+NI

Question 13

VC +Cm=

Answer 13

Sales

Question 14

FC+Ni=

Answer 14

CM

Question 15

What does a high CM ratio mean?

Answer 15

The higher CM ratio means that once the break-even point is reached, profits will increase more rapidly than at present.