K(Operating leverage) The C. M. Quarles Distributing Company manufactures an assortment of cold air intake systems for high-performance engines. The average selling price for the various units is $650. Theassociated variable cost is $250 per unit. Fixed costs for the firm average $180,000 annuallya. What is the break-even point in units for the company?b. What is the dollar sales volume the firm must achieve to reach the break-even point?c. What is the degree of operating leverage for a production and sales level of 3,000 units for the firm? (Calculate to three decimal places.)d. What will be the projected effect on earnings before interest and taxes if the firm's sales level should increase by 45 percent from the volume noted in part c?a. What is the break-even point in units for the company?units (Round to the nearest whole number)

The break-even mark for the C.M. Quarles Distributing Company is 706 units, which corresponds to a…

Answered: K (Operating leverage) The C. M.…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 36P: Faldo Company produces a single product. The projected income statement for the coming year, based...

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Faldo Company produces a single product. The projected income statement for the coming year, based on sales of 200,000 units, is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. Suppose that 30,000 units are sold above the break-even point. What is the profit? 2. Compute the contribution margin ratio and the break-even point in dollars. Suppose that revenues are 200,000 greater than expected. What would the total profit be? 3. Compute the margin of safety in sales revenue. 4. Compute the operating leverage. Compute the new profit level if sales are 20 percent higher than expected. 5. How many units must be sold to earn a profit equal to 10 percent of sales? 6. Assume the income tax rate is 40 percent. How many units must be sold to earn an after-tax profit of 180,000?
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Assume a company is considering adding a new product. The expected cost and revenue data for this product are as follows: Annual sales 5,000 units Unit selling price $ 60 Unit variable costs: Production $ 33 Selling $ 6 Incremental fixed costs per year: Production $ 34,500 Selling $ 45,000 If the company adds the new product, it expects the contribution margin of other product lines to drop by $15,300 per year. What is the financial advantage (disadvantage) of adding the new product? Multiple Choice $40,800 $10,200 $89,700 $25,500
CVP analysis, margin of safety. Suppose Morrison Corp.’s breakeven point is revenues of $1,100,000. Fixed costs are $660,000. Required: Compute the contribution margin percentage. Compute the selling price if variable costs are $16 per unit. Suppose 75,000 units are sold. Compute the margin of safety in units and dollars. What does this tell you about the risk of Morrison making a loss? What are the most likely reasons for this risk to increase?
[The following information applies to the questions displayed below.] Charlevoix Cases makes mobile phone cases. The company has collected the following price and cost characteristics: Sales price Variable costs Fixed costs $ 12.00 per case 5.50 per case 391,950 per year Assume that the company plans to sell 75,300 units annually. Consider requirements (b), (c), and (d) independently of each other. Required: a. What will be the operating profit? b. What is the impact on operating profit if the sales price decreases by 20 percent? Increases by 10 percent? Note: Do not round intermediate calculations. c. What is the impact on operating profit if variable costs per unit decrease by 20 percent? Increase by 10 percent? Note: Do not round intermediate calculations. d. Suppose that fixed costs for the year are 20 percent lower than projected and variable costs per unit are 20 percent higher tha projected. What impact will these cost changes have on operating profit for the year? Will profit…
If the company adds the new product expects the contribution margin of other product lines to drop by $18,500 per year. What is the financial advantage (disadvantage) of adding the new product? a) $25,000 b) $86,500 c)$6,500 d) $43,500
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Sundial, Inc., produces two models of sunglasses-AU and NZ. the sunglasses have the following characteristics. Au NZ Selling price per unit $ 160 $ 160 Variable cost per unit $ 80 $ 60 Expected units sold per year 70,000 30,000 The total fixed costs per year for the company are $3,612,000. Required: a. What is the anticipated level of profits for the expected sales volumes? b. Assuming that the product mix is the same at the break-even point, compute the break-even point. c. If the product sales mix were to change to four pairs of UA sunglasses for each pair of NZ sunglasses, what would be the new break-even volume for Sundial, Inc? Complete the question by entering your answers in the tabs below. Required A What is the…
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Required: 1. How many units would the company need to sell to earn a profit before taxes of $10,000? 2. If the company achieves its projections, what will be its degree of operating leverage?
Suppose ABC Corp’s break-even point is revenues of $1,100,000. Fixed costs are $660,000A ACalculate the contribution margin percentage. B. Calculate the selling price if variable costs are $16 per unit.c. Suppose 75 000 units are sold. Calculate the profit earned. D. Will the company be profitable if able to sell 30,000 units? Explain. c. What should the company do to increase its profit above break-even point?

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