T/F The contribution margin ratio is computed by multiplying contribution margin by unit selling price.
Answer: False
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Accounting 2000 Chapter 18
- Simmons Company has required sales of $1,500,000 to meet its target net income. It has fixed costs of $200,000 and the contribution margin ratio is 40%. The company's target net income is
- Bergman Company has total fixed costs of $350,000 and a contribution margin ratio of 20%. Hampton's target net income is $250,000. Sales in dollars to meet the target net income would be
- Required sales in dollars to meet a target net income is computed by dividing
- The mathematical equation for computing required sales to obtain target net income is: Required sales =
- Palms, Inc. wants to sell enough palm trees to earn a profit of $20,000. If the unit sales price is $40, unit variable cost is $22, and total fixed costs are $120,400, how many trees must be sold to earn a profit of $20,000?
- Moss, Inc. has total fixed costs of $56,000 and a contribution margin ratio of 40%. Moss wants to generate net income totaling $35,000. How much will sales revenue be at Moss' target net income?
- T/F Target net income is an income objective for individual product lines set by management.
- Maya Company manufactures a product which sells for $20 each. Each unit of product has a variable cost of $5 to manufacture. Fixed costs normally incurred are $60,000. Maya Company is considering automating the manufacturing process, which would require a capital investment which would increase fixed costs by $30,000. As a result of the automation, variable costs would decrease by 20%. What would the new breakeven level in units be for Maya Company if it decides to automate the manufacturing process?
- Dahlia Company sells a product which has a unit selling price of $5. Variable costs are 60% of the sales and total fixed costs are $200,000. The number of units that the Dahlia Company must sell to break even is
- Benson Company produces flash drives for computers which have variable costs of $10 per flash drive to produce. Each flash drive sells for $20 each. During the current month, 1,000 flash drives were sold. Fixed costs for the current month were $4,500. If variable costs increase by 10%, what happens to the breakeven level in units for the month for Benson Company?
- Walden Company expects to sell 500,000 units for $6 per unit. The contribution margin ratio is 30%. If Walden will break even at this level of sales, fixed costs are
- At the break-even point
- The break-even point in dollars is computed by dividing
- The break-even point can be
- Gossen Company is planning to sell 200,000 pliers for $4 per unit. The contribution margin ratio is 25%. If Gossen will break even at this level of sales, what are the fixed costs?
- Brownstone Company's contribution margin ratio is 30%. If Brownstone's sales revenue is $100 greater than its break-even sales in dollars, its net income
- Panera Bread sells a box of bagels for $6 with a contribution margin of 62.5%. Its fixed costs are $150,000 per year. How much sales in dollars does Panera Bread need to break-even per year if bagels are its only product?
- Werth Company produces tie racks. Its estimated fixed costs for the year are $288,000, and the estimated variable costs per unit are $14. Werth expects to produce and sell 60,000 racks at a price of $20 per unit. How many units will be sold at breakeven?
- T/F The amount of income or loss at each level of sales can be derived from the total sales and total cost lines in a CVP graph.
- T/F At the break-even point, contribution margin equals total variable costs.
- Contribution margin is
- When comparing a traditional income statement to a CVP income statement
- Contribution margin
- Which one of the following is correct concerning contribution margin?
- What is contribution margin?
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