How do you calculate the break-even point in sales? Contribution margin + fixed costs Fixed costs total sales Profit variable costs Fixed costs contribution margin %
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- The amount of a units sales price that helps to cover fixed expenses is its ____________________. A. contribution margin B. profit C. variable cost D. stepped costThe contribution margin is the a. amount by which sales exceed total fixed cost. b. difference between sales and total cost. c. difference between sales and operating income. d. difference between sales and total variable cost. e. difference between variable cost and fixed cost.Break-even for a multiple product firm. can be calculated by dividing total fixed costs by the contribution margin of a composite unit can be calculated by multiplying fixed costs by the contribution margin ratio of a composite unit can only be calculated when the proportion of products sold is the same for all products can be calculated by multiplying fixed costs by the contribution margin ratio of the most common product in the sales mix
- Would each of the following increase, decrease, or have an indeterminant effect on a firms break-even point (unit sales)? a. The sales price increases with no change in unit costs. b. An increase in fixed costs is accompanied by a decrease in variable costs. c. Variable labor costs decline; other things are held constant.Contribution Margin Ratio, Break-Even Sales, Operating Leverage Elgart Company produces plastic mailboxes. The projected income statement for the coming year follows: Required: 1. Compute the contribution margin ratio for the mailboxes. 2. How much revenue must Elgart earn in order to break even? 3. What is the effect on the contribution margin ratio if the unit selling price and unit variable cost each increase by 15%? 4. CONCEPTUAL CONNECTION Suppose that management has decided to give a 4% commission on all sales. The projected income statement does not reflect this commission. Recompute the contribution margin ratio, assuming that the commission will be paid. What effect does this have on the break-even point? 5. CONCEPTUAL CONNECTION If the commission is paid as described in Requirement 4, management expects sales revenues to increase by 80,000. How will this affect operating leverage? Is it a sound decision to implement the commission? Support your answer with appropriate computations.If the sales mix in a multi-product environment shifts to a higher volume in low contribution margin products, the break-even point will ____________________________________ . A. remain unchanged because all products are included in the calculation of break-even B. increase because the low contribution margin products have little effect on break-even C. increase because the per composite unit contribution margin will decrease D. decrease because the per composite unit contribution margin will increase
- The use of fixed costs to extract higher percentage changes in profits as sales activity changes involves a. margin of safety. b. unit contribution margin. c. degree of operating leverage. d. sensitivity analysis. e. variable cost reduction.The profit function for two products is: Profit3x12+42x13x22+48x2+700, where x1 represents units of production of product 1, and x2 represents units of production of product 2. Producing one unit of product 1 requires 4 labor-hours, and producing one unit of product 2 requires 6 labor-hours. Currently, 24 labor-hours are available. The cost of labor-hours is already factored into the profit function, but it is possible to schedule overtime at a premium of 5 per hour. a. Formulate an optimization problem that can be used to find the optimal production quantity of products 1 and 2 and the optimal number of overtime hours to schedule. b. Solve the optimization model you formulated in part (a). How much should be produced and how many overtime hours should be scheduled?A product has a sales price of $90 and a per-unit contribution margin of $30. What is the contribution margin ratio?
- Given the following information, answer thequestions:• The ratio of variable cost per unit divided by selling price per unit equals 0.3.• Fixed costs amount to $60,000.(a) Draw the cost-volume-profit chart.(b) What is the break-even point?(c) What effect would an 8% decrease in sellingprice have on the break-even point from part (b)?Given the following information. answer the questions:• The ratio of variable cost per unit divided by selling price per unit equals 0.25• Fixed costs amount to $50.000(a) Draw the cost-volume-profit diagram(b) What is the break-even point?(c) What effect would a 6% decrease in selling price have on the break-eventhe point from the part (b)?The break-even point in unitsis calculated as (fill in the blank) divided by the Contribution Margin in Units. (See your Chapter 20 notes, page 13) Total sales revenue Sales revenue per unit Total variable costs Fixed cost per unit Variable cost per unit Total fixed costs Contribution margin ratio
