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

1
Q

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

A

break-even

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2
Q

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?

A

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

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3
Q

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​.

A

23
$14+9

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4
Q

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?

A

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

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5
Q

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

A

Cost-plus pricing

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6
Q

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?

A

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

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7
Q

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

A

$10
$21 - $11 =

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8
Q

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

A

sales

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9
Q

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?

A

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

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10
Q

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

A

cost-plus pricing

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11
Q

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?

A

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

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12
Q

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

A

reduce

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13
Q

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?

A

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

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14
Q

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?

A

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

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15
Q

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

A

higher

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16
Q

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

A

Increase

17
Q

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

A

horizontal

18
Q

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

A

margin of safety

19
Q

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

A

Sensitivity

20
Q

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

A

Margin of safety

21
Q

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​

A

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.

22
Q
A