CVP Analysis and Marginal Analysis Paper 7

1

Based on potential sales of 1,000 units per year, a new product has estimated costs of $600,000. What is the target price to obtain a 20% return on sales?






2

The margin of safety is a key concept of CVP analysis. The margin of safety is the






3

A company sells two products, X and Y. The sales mix consists of a composite unit of 2 units of X for every 5 units of Y (2:5). Fixed costs are $49,500. The unit contribution margins for X and Y are $2.50 and $1.20, respectively. Considering the company as a whole, the number of composite units to break even is






4

Catfur Company has fixed costs of $300,000. It produces two products, X and Y. Product X has a variable cost percentage equal to 60% of its $10 per unit selling price. Product Y has a variable cost percentage equal to 70% of its $30 selling price. For the past several years, sales of Product X have averaged 66% of the sales of Product Y. That ratio is not expected to change. What is Catfur’s breakeven point in dollars?






5

Catfur Company has fixed costs of $300,000. It produces two products, X and Y. Product X has a variable cost percentage equal to 60% of its $10 per unit selling price. Product Y has a variable cost percentage equal to 70% of its $30 selling price. For the past several years, sales of Product X have averaged 66% of the sales of Product Y. That ratio is not expected to change. How many units of Product Y will Catfur sell at the breakeven point?






6

Catfur Company has fixed costs of $300,000. It produces two products, X and Y. Product X has a variable cost percentage equal to 60% of its $10 per unit selling price. Product Y has a variable cost percentage equal to 70% of its $30 selling price. For the past several years, sales of Product X have averaged 66% of the sales of Product Y. That ratio is not expected to change. Assume that Catfur Company achieved its planned breakeven level of sales in dollars, but the mix of products sold was one-to-one. All actual costs and unit selling prices equaled budgeted amounts. What is the impact on profitability?






7

Ticker Company sells two products. Product A provides a contribution margin of $3 per unit, and Product B provides a contribution margin of 4 per unit. If Ticker’s sales mix shifts toward Product A, which one of the following statements is correct?






8

Eagle Brand, Inc., produces two products. Data regarding these products are presented below.
Product X Product Y
Selling price per unit $100 $130
Variable costs per unit $80 $100
Raw materials used per unit 4 lbs 10 lbs.
Eagle Brand has 1,000 lbs. of raw materials that can be used to produce Products X and Y. Which one of the alternatives below should Eagle Brand accept in order to maximize contribution margin?






9

Due to a change in market conditions, a company finds that it can sell as many of each of its three main products as it can produce. Which one of the following is most important in determining which of the three products to produce and market?






10

During the previous year, Morrison, Inc., produced 200,000 pogo sticks and sold them all for $10 each. The explicit costs of production were $700,000, and the implicit costs of production were $200,000. The firm had






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