Chapter 5: Cost-Volume-Profit Relationships [Smartbook]

Question 1

The calculation of contribution margin (CM) ratio is Blank______.

Answer 1

contribution margin ÷ sales

Question 2

The variable expense ratio equals variable expenses divided by Blank______.

Answer 2

sales

Question 3

Spice sells paprika for $9.00 per bottle. Variable cost is $2.43 per bottle and Spice’s annual fixed costs are $825,000. The variable expense ratio for paprika is Blank______.

Answer 3

27%

Question 4

Which tool can be used to easily calculate the change in profit resulting from a change in sales price, sales volume, variable costs, or fixed costs?

Answer 4

CVP analysis

Question 5

CVP analysis allows companies to easily identify the change in profit due to changes in Blank______.

Answer 5

Product Mix, Volume, and Selling Price

Question 6

Daisy’s Dolls sold 30,000 dolls this year. Each doll sold for $40 and had a variable cost of $19. Fixed expenses were $250,000. Net operating income for the year is Blank______.

Answer 6

$380,000

Question 7

The contribution margin as a percentage of sales is referred to as the contribution margin or CM

Answer 7

ratio

Question 8

The variable expense ratio is the ratio of variable expense to Blank______.

Answer 8

sales

Question 9

The Cutting Edge sells ice skates. Total sales are $845,000, total variable expenses are $245,050 and total fixed expenses are $302,000. The variable expense ratio is Blank______.

Answer 9

29%

Question 10

Vivian’s Violins has sales of $326,000, contribution margin of $184,000 and fixed costs total $85,000. Vivian’s Violins net operating income is Blank______.

Answer 10

$99,000 [$184,000 - $85,000]

Question 11

Operating leverage is a measure of how sensitive ______ is to a given percentage change in unit sales.

Answer 11

net operating income