Chapter 13

Question 1

Total variable costs

Answer 1

slope is variable cost/unit
total cost (y)
# of units sold (x)

Question 2

Total fixed costs

Answer 2

stay the same in total

Question 3

Components of CVP analysis

Answer 3

sales
unit selling price
unit variable costs
total fixed costs
sales mix

Question 4

Contribution margin ratio (%) equation

Answer 4

Unit contribution margin/ unit selling price

Question 5

Target Net income equation

Answer 5

sales-variable costs- fixed costs

Question 6

Profit equation for break-even point

Answer 6

sales-variable costs- fixed costs

Question 7

Equation for break-even point in sales units using unit contribution margin

Answer 7

fixed costs/ unit contribution margin

Question 8

Describe how you would calculate the sales dollars required to meet a target net income.
A. Total fixed costs minus target net income divided by contribution margin ratio
B. Total fixed costs plus target net income divided by contribution margin ratio
C. Total fixed costs plus target net income divided by contribution margin per unit
D. Total fixed costs minus target net income divided by contribution margin per unit

Answer 8

B. Total fixed costs plus target net income divided by contribution margin ratio

Question 9

Verde, Inc. has fixed costs of $3,120,000, and the unit contribution margin is 60% of the $325 unit selling price. What is Verde’s break-even point?
• 24,000 units
16,000 units
9,600 units
6,000 units

Answer 9

16000

Question 10

Jenny’s Cutting Station offers 15-minute haircuts for mall shoppers who do not have time for lengthy appointments. Each of Jenny’s five employees is paid $3,200 per month, and each also receives tips from customers. Jenny pays rent and overhead costs or $2,000 per month. Shampoo, conditioner, and other products average $1.50 per client. The average price for a haircut is $12. Jenny pays herself $5,000 per month. What are Jenny’s fixed costs for a month?
$8,000
$11,000
$9,200

Answer 10

The fixed costs are the costs that do not change with the number of haircuts given.
The fixed costs are the salaries of the employees, the rent and overhead costs, and Jenny’s salary.
13,000

Question 11

a product’s selling price is $110 per unit, the variable costs are $45 per unit, and fixed costs are $3,000 per month, then the margin of safety in sales dollars is
- when 125 units are sold in one
month. (In your calculations, round to the next whole number.)
• $4,025
$8,580
$2,950
$2,775