ACCT 241 Week 5 Assignment Help

ACCT 241 Week 5 Assignment Help | Quiz |  American University 

1.

Required information

We will learn how changes in activity affect contribution margin and net operating income. If sales are zero, the company's loss will equal its fixed expenses. Each unit that is sold reduces the loss by the amount of the unit contribution margin. Once the break-even point has been reached, each additional unit sold increases the company's profit by the amount of the unit contribution margin.

Knowledge Check 01

The following explains contribution margin ________.

·         sales minus fixed cost

·         fixed cost minus variable cost

·         sales minus variable cost minus fixed cost

·         sales minus variable cost

2.

Required information

We will learn how changes in activity affect contribution margin and net operating income. If sales are zero, the company's loss will equal its fixed expenses. Each unit that is sold reduces the loss by the amount of the unit contribution margin. Once the break-even point has been reached, each additional unit sold increases the company's profit by the amount of the unit contribution margin.

Knowledge Check 01

Atlas Corporation sells 100 bicycles during a month. The contribution margin per bicycle is $200. The monthly fixed expenses are $8,000. Compute the profit from the sale of 100 bicycles ________.

·         $12,000

·         $10,000

·         $20,000

·         $8,000

Knowledge Check 02

Atlas Corporation sells 100 bicycles during a month at a price of $500 per unit. The variable expenses amount to $300 per bicycle. How much does profit increase if it sells one more bicycle?

•        $500

•        $300

•        $200

•        $20,200

3.

Required information

We will learn how changes in activity affect contribution margin and net operating income. If sales are zero, the company's loss will equal its fixed expenses. Each unit that is sold reduces the loss by the amount of the unit contribution margin. Once the break-even point has been reached, each additional unit sold increases the company's profit by the amount of the unit contribution margin.

Knowledge Check 01

Once the break-even point has been reached, net operating income will increase by the amount of the _____ for each additional unit sold.

•        unit contribution margin

•        unit selling price

•        variable expense per unit

•        fixed expense per unit

Knowledge Check 02

Break-even point is the level of sales at which ______.

•        total profits equals total costs

•        total profits exceed total costs

•        total revenue equals total costs

•        total sales equal total projections

4.

Required information

We will learn the preparation and interpretation of a cost-volume-profit graph and a profit graph. A CVP graph highlights CVP relationships over wide ranges of activity. The anticipated profit or loss at any given level of sales is measured by the vertical distance between the total revenue line and the total expense line. The break-even point is where the total revenue and total expense lines cross. A profit graph is a simpler form of the CVP graph.

Knowledge Check 01

What is represented on the X axis of a cost-volume-profit (CVP) graph?

•        Sales revenue

•        Fixed cost

•        Sales volume

•        Variable cost

Knowledge Check 02

What is usually plotted as a horizontal line on the CVP graph?

•        Fixed expenses

•        Variable costs

•        Sales revenues

•        Break-even volume

5.

Required information

We will learn the preparation and interpretation of a cost-volume-profit graph and a profit graph. A CVP graph highlights CVP relationships over wide ranges of activity. The anticipated profit or loss at any given level of sales is measured by the vertical distance between the total revenue line and the total expense line. The break-even point is where the total revenue and total expense lines cross. A profit graph is a simpler form of the CVP graph.

Knowledge Check 01

What does the green line in the CVP graph indicate?

•        Total fixed costs

•        Total expenses

•        Total variable costs

•        Total sales revenue

6.

Required information

We will learn the preparation and interpretation of a cost-volume-profit graph and a profit graph. A CVP graph highlights CVP relationships over wide ranges of activity. The anticipated profit or loss at any given level of sales is measured by the vertical distance between the total revenue line and the total expense line. The break-even point is where the total revenue and total expense lines cross. A profit graph is a simpler form of the CVP graph.

Knowledge Check 01

The profit graph is based on the following linear equation:

•        Profit = Unit CM x Q – Fixed Expenses.

•        Sales = Unit CM – Unit Variable Cost.

•        Profit = Unit CM x Q + Fixed Expenses.

•        Profit = Selling Price x Q – Unit CM x Q.

7.

Required information

We will learn about the contribution margin ratio and the variable cost ratio. The CM ratio shows how the contribution margin will be affected by a change in total sales. The impact on net operating income of any given dollar change in total sales can be computed by applying the CM ratio to the dollar change.

Knowledge Check 01

Cartier Corporation currently sells its products for $50 per unit. The company’s variable costs are $20 per unit. Fixed expenses amount to a total of $5,000 per month. What is the company’s contribution margin ratio?

•        40%

•        60%

•        100%

•        20%

Knowledge Check 02

Cartier Corporation currently sells its products for $50 per unit. The company’s variable costs are $20 per unit. Fixed expenses amount to a total of $5,000 per month. What is the company’s variable cost ratio?

•        40%

•        60%

•        100%

•        20%

 8.

Required information

We will learn about the contribution margin ratio and the variable cost ratio. The CM ratio shows how the contribution margin will be affected by a change in total sales. The impact on net operating income of any given dollar change in total sales can be computed by applying the CM ratio to the dollar change.

Income Statement of Base Corporation

                                     Sales Volume Present

Sales                                           $100,000

Variable expenses                   50,000

Contribution margin                50,000

Fixed expenses                                     20,000

Net Operating income               $30,000

Knowledge Check 01

If sales increase by $50,000, what will be the net operating income for the company?

•           $25,000

•           $55,000

•           $15,000

•           $50,000

9.

Required information

We will learn the effect of changes in variable costs, fixed costs, selling price, and volume can be computed on an incremental basis or on a total basis. CVP concepts can be applied to study the impact of changes in variable costs, fixed costs, selling price, and sales volume. CVP concepts can also be used to determine the selling price the company can quote on special orders.

Knowledge Check 01

Taylor Company has current sales of 1,000 units, which generates sales revenue of $190,000, variable costs of $76,000 and fixed expenses of $96,000.  The company believes sales will increase by 300 units, if advertising increases by $20,000.  What is the change in net operating income after the changes?

•        Increase of $20,000

•        Decrease of $20,000

•        Increase of $14,200

•        Decrease of $12,000

10.

Required information

We will learn the effect of changes in variable costs, fixed costs, selling price, and volume can be computed on an incremental basis or on a total basis. CVP concepts can be applied to study the impact of changes in variable costs, fixed costs, selling price, and sales volume. CVP concepts can also be used to determine the selling price the company can quote on special orders.

Knowledge Check 01

Taylor Company has current sales of 1,000 units, at a selling price of $190 per unit, variable costs per unit of $76 and fixed expenses of $96,000.  The company believes sales will increase by 300 units, if the company introduces sales commissions as an incentive for the sales staff.  The change will decrease the selling price to $175 per unit, increase variable cost per unit to $100 and decrease fixed expenses by $20,000.  What is the net operating income after the changes?

•        Increase of $21,500

•        Decrease of $30,000

•        Increase of $24,500

•        Decrease of $22,000

11.

Required information

We will learn the effect of changes in variable costs, fixed costs, selling price, and volume can be computed on an incremental basis or on a total basis. CVP concepts can be applied to study the impact of changes in variable costs, fixed costs, selling price, and sales volume. CVP concepts can also be used to determine the selling price the company can quote on special orders.

Knowledge Check 01

Assume the company is considering a reduction in the selling price by $10 per unit and an increase in advertising budget by $5,000. This will increase sales volume by 50%. What is the net operating income after the changes?

•        $5,000

•        $60,000

•        $25,000

•        $35,000

12.

Required information

We will learn how to compute break-even point in unit sales and sales dollars. We can use either the equation method or the formula method to solve for the break-even point. When applying the equation method or the formula method, we use zero as the target profit in break-even analysis.

Knowledge Check 01

Frank Corporation has a single product. Its selling price is $80 and the variable costs are $30. The company’s fixed expenses are $5,000. What is the company’s break-even point in unit sales?

•        63 units

•        167 units

•        50 units

•        100 units

13.

Knowledge Check 01

Future Corporation has a single product; the product selling price is $100 and variable costs are $60. The company’s fixed expenses are $10,000. What is the company’s break-even point in sales dollars?

•        $25,000

•        $2,500

•        $250

•        $16,667

14.

Required information

We will learn that target profit analysis is one of the key uses of CVP analysis. In target profit analysis, we calculate what sales volume is needed to achieve a specific target profit. To do this, we can use either the equation method or the formula method.

The following information is extracted from the records of Johnson Corporation:

Knowledge Check 01

What are the unit sales required to attain a target profit of $120,000?

•        400,000 units

•        400 units

•        1,600 units

•        4,000 units

15.

Required information

We will learn that target profit analysis is one of the key uses of CVP analysis. In target profit analysis, we calculate what sales volume is needed to achieve a specific target profit. To do this, we can use either the equation method or the formula method.

The following information is extracted from the records of Johnson Corporation:

Knowledge Check 01

What are the sales dollars required to attain a target profit of $120,000?

•        $400,000

•        $300,000

•        $10,000

•        $60,000

16.

Required information

We will compute the margin of safety in dollars and in percentage and learned the significance of margin of safety. Companies with lower margin of safety should be concerned about how vulnerable they are to even small downturns in sales. Management can increase the margin of safety by increasing total sales or by decreasing costs, or both.

Knowledge Check 01

What is Ralph Corporation’s margin of safety in dollars?

•        $4 million

•        $5 million

•        $1 million

•        $2.2 million

Knowledge Check 02

What is Ralph Corporation’s margin of safety in percentage?

•        20%

•        100%

•        80%

•        50%

17.

Required information

We will learn that operating leverage is a measure of how sensitive net operating income is to a given percentage change in dollar sales. The degree of operating leverage is a measure, at a given level of sales, of how a percentage change in sales volume will affect profits. The degree of operating leverage is not a constant; it is greatest at sales levels near the break-even point and decreases as sales and profits rise, assuming everything else is equal.

Knowledge Check 01

The measure of how sensitive net operating income is to a given percentage change in dollar sales is called _______.

·         sensitivity leverage

·         operating leverage

·         risk leverage

18.

Required information

We will learn that operating leverage is a measure of how sensitive net operating income is to a given percentage change in dollar sales. The degree of operating leverage is a measure, at a given level of sales, of how a percentage change in sales volume will affect profits. The degree of operating leverage is not a constant; it is greatest at sales levels near the break-even point and decreases as sales and profits rise, assuming everything else is equal.

Knowledge Check 01

Winter Corporation’s current sales are $500,000. The contribution margin is $300,000 and the net operating income is $100,000. What is the company’s degree of operating leverage?

·         3.00

·         0.60

·         2.00

·         1.67

Knowledge Check 02

The current sales of Trent, Inc., are $400,000, with a contribution margin of $200,000. The company's degree of operating leverage is 2. If the company anticipates a 30% increase in sales, what is the percentage change in net operating income for Trent, Inc.?

·         24%

·         30%

·         60%

·         25%

19.

Required information

We will learn that for a multi-product company, the break-even point depends on the mix in which the various products are sold. If the sales mix changes, then the break-even point will also usually change. In preparing a break-even analysis, an assumption must be made concerning the sales mix. However, if the sales mix is expected to change, then this must be explicitly considered in any CVP computations.

Knowledge Check 01

A shift in the sales mix from high-margin items to low-margin items can cause total profit to ________.

·         decrease

·         increase

·         remain the same

20.

Required information

We will learn that for a multi-product company, the break-even point depends on the mix in which the various products are sold. If the sales mix changes, then the break-even point will also usually change. In preparing a break-even analysis, an assumption must be made concerning the sales mix. However, if the sales mix is expected to change, then this must be explicitly considered in any CVP computations.

Grace Food Company

Contribution Income Statement

for the Month of October

Knowledge Check 01

What is the amount of the break-even sales for Grace Food Company?

·         $1.2 million

·         $2.2 million

·         $2.0 million

·         $1.5 million

21.

Required information

We will discuss some of the methods to estimate the fixed and variable components of a mixed cost. Plotting the data on a scattergraph is a helpful diagnostic step to be prior to performing the high-low method or least-squares regression calculations. If the scattergraph plot reveals linear cost behavior, then it makes sense to perform the high-low or least-squares regression calculations. The least-squares regression is generally more accurate than the high-low method because, rather than relying on just two data points, it uses all of the data points to fit a line that minimizes the sum of the squared errors.

Knowledge Check 01

Generally which of the following is the most accurate for managers to use to estimate the fixed and variable components of mixed cost?

·         scattergraph

·         high-Low method

·         least-squares regression

22.

Required information

We will discuss some of the methods to estimate the fixed and variable components of a mixed cost. Plotting the data on a scattergraph is a helpful diagnostic step to be prior to performing the high-low method or least-squares regression calculations. If the scattergraph plot reveals linear cost behavior, then it makes sense to perform the high-low or least-squares regression calculations. The least-squares regression is generally more accurate than the high-low method because, rather than relying on just two data points, it uses all of the data points to fit a line that minimizes the sum of the squared errors.

Knowledge Check 01

Which of the scatter graph plots above suggests a mixed cost relationship between direct labor-hours and manufacturing overhead?

·         (a)

·         (b)

·         (c)

·         (d)

23.

Required information

We will discuss some of the methods to estimate the fixed and variable components of a mixed cost. Plotting the data on a scattergraph is a helpful diagnostic step to be prior to performing the high-low method or least-squares regression calculations. If the scattergraph plot reveals linear cost behavior, then it makes sense to perform the high-low or least-squares regression calculations. The least-squares regression is generally more accurate than the high-low method because, rather than relying on just two data points, it uses all of the data points to fit a line that minimizes the sum of the squared errors.

Knowledge Check 01

Using the high-low method, what is the variable cost?

·         $2 per direct-labor hour.

·         $2.31 per direct-labor hour.

·         $0.30 per direct-labor hour.

·         $3.33 per direct-labor hour.