SB Ch.03: Analysis of Cost, Volume, and Pricing to Increase Profitability

Question 1

The point at which profit equals zero is called the blank​ point.

Answer 1

break-even

Question 2

The sales price of a product is $100 per unit; the variable cost is $20 per unit; and fixed costs total $800. How many units must be sold to break even?

Answer 2

10 units
($100N - $20N) - $800 = $0 N = $800 ÷ $80 = 10 units

Question 3

A company’s contribution margin is $14 per unit. If fixed costs are $6 per unit and variable costs are $9 per unit, the selling price of the product must be blank​.

Answer 3

23
$14+9

Question 4

If the sales price of a product is $10 per unit; the variable cost is $6 per unit; and fixed costs total $10,000, how many units must be sold to earn a profit of $10,000?

Answer 4

5,000
($10,000 + $10,000) ÷ ($10 - $6) =

Question 5

When a company sells a product for the variable cost to produce plus 25% of the variable cost, they are using a(n) _____-______
_______ strategy

Answer 5

Cost-plus pricing

Question 6

The sales price of a product is $20 per unit; the variable cost is $5 per unit; and fixed costs total $1,500. How many units must be sold to break even?

Answer 6

100 units
($20N - $5N) - $1,500 = $0 N = $1,500 ÷ $15 =

Question 7

Calculate contribution margin per unit assuming sales price is $21, variable cost is $11, and fixed cost is $6 per unit.

Answer 7

$10
$21 - $11 =

Question 8

The contribution margin ratio is calculated by dividing contribution margin by blank​.

Answer 8

sales

Question 9

If the sales price of a product is $12 per unit; the variable cost is $7 per unit; and fixed costs total $1,000, how many units must be sold to earn a profit of $1,000?

Answer 9

400 units
($1,000 + $1,000) ÷ ($12 - $7)

Question 10

Determining the sales price by marking up the cost is blank​.

Answer 10

cost-plus pricing

Question 11

Assume the sales price is $15 per unit, variable cost is $6 per unit, and fixed cost is $5,000. If the variable cost decreases to $3 per unit, how many fewer units will have to be sold to earn a target profit of $4,000?

Answer 11

250
9,000 ÷ $9 = 1,000 units; $9,000 ÷ $12 = 750 units for a decrease of 250 units.

Question 12

Reducing fixed costs will blank​ the number of units necessary to earn a desired profit.

Answer 12

reduce

Question 13

Assume the sales price is $10 per unit, variable cost is $5 per unit, and fixed cost is $1,000. If the variable cost increases to $8 per unit, how many additional units will need to be sold to earn a target profit of $3,000?

Answer 13

1200
4,000 ÷ $5 = 800 units; $4,000 ÷ $2 = 2,000 units for an increase of 1,200 units.

Question 14

The sales price of a product is $20 per unit; the variable cost is $5 per unit; and fixed costs total $1,500. How many units must be sold to break even?

Answer 14

($20N - $5N) - $1,500 = $0 N = $1,500 ÷ $15 = 100 units

Question 15

When compared to companies with high variable cost structures, companies with high fixed costs structures have blank​ risk.

Answer 15

higher

Question 16

Increasing fixed costs will blank​ the number of units necessary to earn a desired profit.

Answer 16

Increase

Question 17

On a CVP graph the blank​ axis represents activity in units.

Answer 17

horizontal

Question 18

The amount at which a company’s sales can fall short before incurring loses is the blank​.

Answer 18

margin of safety

Question 19

Investigating a multitude of what-if possibilities involving simultaneous changes in fixed cost, variable cost, and volume is called _______ analaysis

Answer 19

Sensitivity

Question 20

The amount by which a company’s sales can fall short and still break even is called the

Answer 20

Margin of safety

Question 21

Jen’s Shampoo Company currently earns $50,000 net income. The marketing manager believes reducing the sales price per bottle from $26 to $22 will increase sales volume from 4,375 to 5,000 units. Variable costs are $10 per unit and total fixed costs are $20,000. If the sales price is reduced and the volume increases as expected, net income will _blank​

Answer 21

decrease by $10,000

($22 × 5,000 units) - ($10 × 5,000 units) - $20,000 = $40,000.
This is $10,000 less than Jen’s current net income.