SB Ch.03: Analysis of Cost, Volume, and Pricing to Increase Profitability Flashcards
The point at which profit equals zero is called the blank point.
break-even
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?
10 units
($100N - $20N) - $800 = $0 N = $800 ÷ $80 = 10 units
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.
23
$14+9
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?
5,000
($10,000 + $10,000) ÷ ($10 - $6) =
When a company sells a product for the variable cost to produce plus 25% of the variable cost, they are using a(n) _____-______
_______ strategy
Cost-plus pricing
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?
100 units
($20N - $5N) - $1,500 = $0 N = $1,500 ÷ $15 =
Calculate contribution margin per unit assuming sales price is $21, variable cost is $11, and fixed cost is $6 per unit.
$10
$21 - $11 =
The contribution margin ratio is calculated by dividing contribution margin by blank.
sales
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?
400 units
($1,000 + $1,000) ÷ ($12 - $7)
Determining the sales price by marking up the cost is blank.
cost-plus pricing
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?
250
9,000 ÷ $9 = 1,000 units; $9,000 ÷ $12 = 750 units for a decrease of 250 units.
Reducing fixed costs will blank the number of units necessary to earn a desired profit.
reduce
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?
1200
4,000 ÷ $5 = 800 units; $4,000 ÷ $2 = 2,000 units for an increase of 1,200 units.
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?
($20N - $5N) - $1,500 = $0 N = $1,500 ÷ $15 = 100 units
When compared to companies with high variable cost structures, companies with high fixed costs structures have blank risk.
higher
Increasing fixed costs will blank the number of units necessary to earn a desired profit.
Increase
On a CVP graph the blank axis represents activity in units.
horizontal
The amount at which a company’s sales can fall short before incurring loses is the blank.
margin of safety
Investigating a multitude of what-if possibilities involving simultaneous changes in fixed cost, variable cost, and volume is called _______ analaysis
Sensitivity
The amount by which a company’s sales can fall short and still break even is called the
Margin of safety
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
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.
