The
Heart Foundation is a charity that produces and sells two products, red hearts
and purple hearts, to promote health in the community. The manager estimates
clients will purchase 2,400 red hearts and 1,100 purple hearts by the end of
the next period. The unit contribution margins for red hearts and purple hearts
are $2.75 and $3.40.
What
is the weighted-average unit contribution margin?
ANSWER
INCORRECT
·
$2.59
·
YOU WERE SURE AND INCORRECT
$5.29
·
$9.52
·
THE CORRECT ANSWER
$2.95
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
The
weighted-average unit contribution margin is $2.95.
|
|
Red
Hearts
|
Purple
Hearts
|
Total
|
|
Contribution
margin
|
$2.75
|
$3.40
|
|
|
× Sales
mix
|
2,400
|
1,100
|
3,500
|
|
Contribution
margin
|
$6,600
|
$3,740
|
$10,340
|
Weighted
Contribution Margin= $10,340 / 3,500 Sales mix = $2.95
Rachel’s
Candelabra Shoppe sells candles to clients for $6.00 each. The variable cost to
produce each candle is $2.25 per candle. The fixed costs are $2,800 per month.
What
is the firm’s contribution margin per candle?
ANSWER
INCORRECT
·
$5.25
·
YOU WERE SURE AND INCORRECT
$13.50
·
THE CORRECT ANSWER
$3.75
·
$2.66
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
The firm’s contribution margin per candle
is $3.75.
Sales - Variable Costs = Contribution Margin
$6
- $2.25 = $3.75
The
manager at TV Land Productions reported total sales revenue of $900,000. The
variable expenses were $300,000, and there were $325,000 of total fixed
expenses.
Calculate
the contribution margin ratio and use the contribution margin shortcut formula
to predict the breakeven point in dollars.
ANSWER
INCORRECT
·
$449,978
·
THE CORRECT ANSWER
$487,476
·
YOU WERE SURE AND INCORRECT
$412,479
·
$899,955
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
The
breakeven point in dollars is $487,476.
|
Sales
Revenue
|
$900,000
|
|
Less:
Variable expenses
|
300,000
|
|
Contribution
margin
|
600,000
|
|
Less:
Fixed expenses
|
325,000
|
|
Operating
income
|
$275,000
|
|
Weighted-average
contribution margin
($600,000
/ $900,000) = 66.67%
|
66.67%
|
Sales
in dollars = ($325,000 + 0) / 66.67% = $487,476 of sales to break even
The
Coffee Factory sells two products, supreme and mild. The supreme sells for $120
per case (unit) with variable costs of $90 per unit. The mild sells for $90 per
unit with variable costs of $10 per unit. The manager reported $42,600 total
fixed costs.
The
Coffee Factory usually sells three supreme brands for each two mild brands.
What is the breakeven point in total units?
ANSWER
INCORRECT
·
528 units
·
THE CORRECT ANSWER
852 units
·
YOU WERE SURE AND INCORRECT
582 units
·
258 units
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
The
breakeven point in total units is 852 units.
|
|
Supreme Brand
|
Mild Brand
|
Total
|
|
Sales
|
$120
|
$90
|
|
|
Variable
Costs
|
90
|
10
|
|
|
Contribution
Margin
|
30
|
80
|
|
|
× Sales
Mix
|
3
|
2
|
5
|
|
Contribution
Margin
|
$90
|
$160
|
$250
|
Weighted-average contribution margin per unit
= $250 / 5 = $50
Fixed
Costs of $42,600 / $50 = 852 units
Which
of the following statements is TRUE about sensitivity analysis?
ANSWER
INCORRECT
·
A manager does NOT use CVP
analysis to conduct sensitivity analysis.
·
Sensitivity analysis never
helps a manager to determine scenarios about what results might occur if actual
prices change.
·
YOU WERE SURE AND INCORRECT
A manager can use sensitivity
analysis to assess the behavioral traits of employees through direct
observation.
·
THE CORRECT ANSWER
A manager uses sensitivity
analysis to determine the impact of changes to the sales price and volume.
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
A manager can use sensitivity analysis to determine the impact of
changes to the sales price and volume is a true statement. The other
answer choices are not correct.
How
many dozen chocolate glazed donuts must the manager sell to break even?
ANSWER
INCORRECT
·
THE CORRECT ANSWER
895 dozen
·
896 dozen
·
YOU WERE SURE AND INCORRECT
893 dozen
·
890 dozen
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
The manager must sell 895 dozen
chocolate glazed donuts to break even. The other answers are incorrect.
Step 1: Sales – Variable Costs = Contribution
Margin
$8 – $3.75 = $4.25
Step 2: Fixed Expenses / Contribution Margin =
Breakeven point
$3,800
/ $4.25 = 894.11, rounded up to 895 dozen chocolate glazed donuts to break even
Which
of the following is NOT true about the breakeven point?
ANSWER
INCORRECT
·
Total revenues equal total
expenses at the breakeven point.
·
THE CORRECT ANSWER
It is the sales level at which
operating income is never zero.
·
YOU WERE SURE AND INCORRECT
Sales above the breakeven point
provide a profit.
·
Sales below the breakeven point
result in a loss.
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
A sale level at which operating income is never zero is
an incorrect statement about the breakeven point. The breakeven point is the
sales level at which operating income is zero; total revenues equal total
expenses at the breakeven point; sales below the breakeven point result in a
loss; and sales above the breakeven point provide a profit are all correct
statements about the breakeven point.
QUESTION
REVIEWING 1 OF 8
CVP
analysis ________.
ANSWER
INCORRECT
·
THE CORRECT ANSWER
expresses the relationships
amongst costs, volume, and organizational profits
·
refers to the excess of the
selling price per unit over the variable cost per unit
·
YOU WERE SURE AND INCORRECT
is the ratio of contribution
margin to sales revenue
·
calculates the excess of sales
revenue over variable expenses
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
CVP analysis expresses
the relationships amongst costs, volume, and organizational profits.
Contribution margin is the excess of sales
revenue over variable expenses.
Unit contribution margin refers to the excess
of the selling price per unit over the variable cost per unit.
The
ratio of contribution margin to sales revenue is unit contribution margin
ratio.
QUESTION
REVIEWING 2 OF 8
The
operating leverage ________.
ANSWER
INCORRECT
·
THE CORRECT ANSWER
refers to a company’s amount of
relative fixed and variable costs
·
refers to the point at which a
manager would be indifferent between two options since they would both result
in the same total cost
·
YOU WERE SURE AND INCORRECT
refers to how responsive a
company’s operating income is to changes in volume
·
is the excess of actual or
expected sales over breakeven sales
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
The operating leverage refers
to a company’s amount of relative fixed and variable costs.
The margin of safety is the excess of actual
or expected sales over breakeven sales.
Indifference point refers to the point at
which a manager would be indifferent between two options since they would both
result in the same total cost.
Operating
leverage factor refers to how responsive a company’s operating income is to
changes in volume.
QUESTION
REVIEWING 3 OF 8
MaryJane’s
Bakery manufactures and sells a variety of baked goods. The selling price per
dozen of chocolate glazed donuts is $8.00. The variable costs to produce the
chocolate glazed donuts are $3.75, and total fixed costs are $3,800.
How
many dozen chocolate glazed donuts must the manager sell to break even?
ANSWER
INCORRECT
·
YOU WERE SURE AND INCORRECT
893 dozen
·
896 dozen
·
THE CORRECT ANSWER
895 dozen
·
890 dozen
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
The manager must sell 895 dozen
chocolate glazed donuts to break even. The other answers are incorrect.
Step 1: Sales – Variable Costs = Contribution
Margin
$8 – $3.75 = $4.25
Step 2: Fixed Expenses / Contribution Margin =
Breakeven point
$3,800
/ $4.25 = 894.11, rounded up to 895 dozen chocolate glazed donuts to break even
QUESTION
REVIEWING 4 OF 8
The
vertical y-axis on the CVP graph represents ________.
ANSWER
INCORRECT
·
THE CORRECT ANSWER
dollars
·
breakeven sales point
·
YOU WERE SURE AND INCORRECT
volume of units
·
sales revenue
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
The vertical y-axis
on the CVP graph represents dollars.
The horizontal x-axis on the CVP graph represents volume of units. On the CVP
graph, breakeven sales point and sales revenue display after the volume of
units and the dollars are plotted on the CVP graph.
QUESTION
REVIEWING 5 OF 8
Lisa’s
Custom Print Services produces and sells custom seashore prints. The manager
reported $5,400 in fixed expenses, operating income of $0 at the breakeven
point, and a contribution margin per unit of $50.
What
is the firm’s breakeven point in units using the shortcut approach?
ANSWER
INCORRECT
·
THE CORRECT ANSWER
108 units
·
800 units
·
YOU WERE SURE AND INCORRECT
10,800 units
·
1,800 units
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
The firm’s breakeven point in units, using the
shortcut approach, is 108 units.
The other answer choices are incorrect.
($5,400
+ 0) / $50 = 108 units
QUESTION
REVIEWING 6 OF 8
The
Coffee Factory sells two products, supreme and mild. The supreme sells for $120
per case (unit) with variable costs of $90 per unit. The mild sells for $90 per
unit with variable costs of $10 per unit. The manager reported $42,600 total
fixed costs.
The
Coffee Factory usually sells three supreme brands for each two mild brands.
What is the breakeven point in total units?
ANSWER
INCORRECT
·
258 units
·
THE CORRECT ANSWER
852 units
·
YOU WERE SURE AND INCORRECT
528 units
·
582 units
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
The
breakeven point in total units is 852 units.
|
|
Supreme Brand
|
Mild Brand
|
Total
|
|
Sales
|
$120
|
$90
|
|
|
Variable
Costs
|
90
|
10
|
|
|
Contribution
Margin
|
30
|
80
|
|
|
× Sales
Mix
|
3
|
2
|
5
|
|
Contribution
Margin
|
$90
|
$160
|
$250
|
Weighted-average contribution margin per unit
= $250 / 5 = $50
Fixed
Costs of $42,600 / $50 = 852 units
QUESTION
REVIEWING 7 OF 8
How
might a change in fixed costs affect the contribution margin?
ANSWER
INCORRECT
·
A change in fixed costs may
vary depending upon the contribution margin.
·
YOU WERE SURE AND INCORRECT
A change in fixed cost can
increase the contribution margin.
·
THE CORRECT ANSWER
A change in fixed costs does
not affect the contribution margin.
·
Changes in fixed costs can
decrease the contribution margin.
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
A
change in fixed costs will not affect the contribution margin. The other answer
choices are not correct.
QUESTION
REVIEWING 8 OF 8
Rachel’s
Candelabra Shoppe sells candles to clients for $6.00 each. The variable cost to
produce each candle is $2.25 per candle. The fixed costs are $2,800 per month.
What
is the firm’s contribution margin per candle?
ANSWER
INCORRECT
·
$13.50
·
YOU WERE SURE AND INCORRECT
$2.66
·
THE CORRECT ANSWER
$3.75
·
$5.25
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
The firm’s contribution margin per candle
is $3.75.
Sales - Variable Costs = Contribution Margin
$6
- $2.25 = $3.75
Rachel’s
Candelabra Shoppe sells candles to clients for $6.00 each. The variable cost to
produce each candle is $2.25 per candle. The fixed costs are $2,800 per month.
What
is the firm’s contribution margin per candle?
ANSWER
INCORRECT
·
$5.25
·
THE CORRECT ANSWER
$3.75
·
$2.66
·
YOU WERE SURE AND INCORRECT
$13.50
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
The firm’s contribution margin per candle
is $3.75.
Sales - Variable Costs = Contribution Margin
$6
- $2.25 = $3.75
The
Heart Foundation is a charity that produces and sells two products, red hearts
and purple hearts, to promote health in the community. The manager estimates
clients will purchase 2,400 red hearts and 1,100 purple hearts by the end of
the next period. The unit contribution margins for red hearts and purple hearts
are $2.75 and $3.40.
What
is the weighted-average unit contribution margin?
ANSWER
INCORRECT
·
$5.29
·
$2.59
·
THE CORRECT ANSWER
$2.95
·
YOU WERE SURE AND INCORRECT
$9.52
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
The
weighted-average unit contribution margin is $2.95.
|
|
Red
Hearts
|
Purple
Hearts
|
Total
|
|
Contribution
margin
|
$2.75
|
$3.40
|
|
|
× Sales
mix
|
2,400
|
1,100
|
3,500
|
|
Contribution
margin
|
$6,600
|
$3,740
|
$10,340
|
Weighted
Contribution Margin= $10,340 / 3,500 Sales mix = $2.95
The
manager at TV Land Productions reported total sales revenue of $900,000. The
variable expenses were $300,000, and there were $325,000 of total fixed
expenses.
Calculate
the contribution margin ratio and use the contribution margin shortcut formula
to predict the breakeven point in dollars.
ANSWER
INCORRECT
·
THE CORRECT ANSWER
$487,476
·
$899,955
·
$412,479
·
YOU WERE SURE AND INCORRECT
$449,978
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
The
breakeven point in dollars is $487,476.
|
Sales
Revenue
|
$900,000
|
|
Less:
Variable expenses
|
300,000
|
|
Contribution
margin
|
600,000
|
|
Less:
Fixed expenses
|
325,000
|
|
Operating
income
|
$275,000
|
|
Weighted-average
contribution margin
($600,000
/ $900,000) = 66.67%
|
66.67%
|
Sales
in dollars = ($325,000 + 0) / 66.67% = $487,476 of sales to break even
The
Heart Foundation is a charity that produces and sells two products, red hearts
and purple hearts, to promote health in the community. The manager estimates
clients will purchase 2,400 red hearts and 1,100 purple hearts by the end of
the next period. The unit contribution margins for red hearts and purple hearts
are $2.75 and $3.40.
What
is the weighted-average unit contribution margin?
ANSWER
INCORRECT
·
$5.29
·
YOU WERE SURE AND INCORRECT
$2.59
·
$9.52
·
THE CORRECT ANSWER
$2.95
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
The
weighted-average unit contribution margin is $2.95.
|
|
Red
Hearts
|
Purple
Hearts
|
Total
|
|
Contribution
margin
|
$2.75
|
$3.40
|
|
|
× Sales
mix
|
2,400
|
1,100
|
3,500
|
|
Contribution
margin
|
$6,600
|
$3,740
|
$10,340
|
Weighted
Contribution Margin= $10,340 / 3,500 Sales mix = $2.95
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