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?
CVP; operating leverage; income statementRacine Tire Co. manufactures tires for all-terrain vehicles. The tires sell for $60, and variable cost per tire is $30; monthly fixed cost is $450,000.a. What is the break-even point in units and sales dollars?Break-even point in units: Break-even in sales dollars: b. If Ronnie Rice, the company’s CEO, wants the business to earn a pre-tax profit of 25 percent of revenues, how many tires must be sold each month? c. If the company is currently selling 20,000 tires monthly, what is the degree of operating leverage? d. 1. If the company can increase sales volume by 15 percent above the current level, what will be the increase in net income? What will be the new net income?New net income $ Increase in net income $ 2. Prove your calculations with an income statement.Note: Do not use negatives signs with your answers.
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
[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…
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…
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?
Ignite Products is a price-taker. The company produces large spools of electrical wire in a highly competitive market; thus, it uses target pricing. The current market price of the electric wire is $800 per unit. The company has $3,200,000 in average assets, and the desired profit is a return of 8% on assets. Assume all products produced are sold. The company provides the following information: Sales volume Variable costs Fixed costs O A $12,000,000 B. $71,000,000 units per year per unit $12,000,000 per year If fixed costs cannot be reduced, how much reduction in variable costs will be needed to achieve the desired target? OC. $256,000 O D. $3,256,000 100,000 $710
Suppose ABC Corp’s break-even point is revenues of $1,100,000. Fixed costs are $660,000 a. Calculate 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?
Stuart CompanyStuart Company manufactures a single product. Each unit sells for $15. The firm's projected costs are listed below: Variable costs per unit: Production $5 SG&A $1 Fixed costs: Production $40,000 SG&A $60,000 Estimated volume 20,000 units Refer to Stuart Company. What is Stuart's projected degree of operating leverage for the current year? Select one: a. 2.25 b. 1.67 c. 3.75 d. 1.80
How I can resolve this problem. The management of a firm wants to introduce a new product. the product will sell for $4 a unit and can be produced by either of two scales of operation. in the first, total cost are. TC= $3,000 +$2.8Q In the second scale of operation, total cost are TC=$5,000+$2.04Q a. what is the break-even level of outpur for each scale of operation? b. what will be the firm;s profit for each scale of operation if sales reach 5,000 units? c. one-half of the fixed cost are noncash(depreciation) . all other expenses are for cash. if sale are 2,000 units, will cash receipts cover cash expenses for each scale of operation? d. the anticipaded levels of sales are the following: Year Unit Sales 1 4,000 2 5000 3 6,000 4 7,000 If management selects the scale of production which higher fixed cost, what can it expect…
Consider the previous question with the following new information: Fixed costs are assumed to be $550,000 per year. The company estimates the variable cost per unit (v) to be $120 and expects to sell each unit for $ 425. There are no taxes and the required rate of return is 17% per year. Suppose that sales are currently estimated to be 5400 units per year. What is the degree of operating leverage? Blank 1. Fill in the blank, read surrounding text. (Round to the CLOSEST 1 decimal place, ie 2.3) Using your answer from above, ESTIMATE what the new annual operating cash flow (OCF) will be if sales increase by 150 units: $ Blank 2. Fill in the blank, read surrounding text. (Round your answer to the nearest $1000, and do NOT use commas in your response, ie. 1234000)
The Poseidon Swim Company produces swim trunks. The average selling price for one of their swim trunks is $64.63. The variable cost per unit is $21.75, Poseidon Swim has average fixed costs per year of $7,993. Assume that current level of sales is 314 units. What will be the resulting percentage change in EBIT if they expect units sold to changes by -4.2 percent? (You should calculate the degree of operating leverage first). (Write the percentage sign in the "units" box). Round the answer to two decimal places.

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