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20 COST-VOLUME-PROFIT ANALYSIS A: NAME Information regarding a product manufactured and sold by Schiffman is shown below: Maximum capacity with existing facilities 4,000 units Total fixed costs per month............................................... $50,000 Variable cost per unit........................................................ $42.00 Sales price per unit........................................................... $56.00 1 Refer to the above data. The contribution margin ratio for this product is: a 20%. c 30%. b 25%. d 40%. 2 Refer to the above data. The number of units Schiffman must sell to break even is: (rounded) a 3,927. c 4,823. b 3572. d 5,140. 3 Refer to the above data. The dollar sales volume necessary to produce monthly operating income of $12,000 before taxes is: a $188,000. c $288,000. b $186,000. d $248,000. Use the following data for questions 4 and 5. The monthly high and low levels of units and total manufacturing overhead for Ratnere Company are shown below: Manufacturing Units Overhead Highest observed level.......................... 117,000 Lowest observed level........................... 81,000 $306,000 234,000 4 Refer to the above data. The cost formula for Ratnere's monthly overhead cost can be expressed as: a $2.65 average cost per unit. b $1.75 average cost per unit. c $24,000 fixed cost plus $1.00 per unit. d $72,000 fixed cost + $2.00 per unit. IN CLASS HANDOUT QACD Page 1 20 COST-VOLUME-PROFIT ANALYSIS 5 Refer to the above data. In a month in which 30,000 equivalent full units are produced, Ratnere's manufacturing overhead should be approximately: a $52,500. c $ 132,000. b $79,500. d $ 90,500. C: NAME _______ Paulsen Company sells only one product. The regular selling price is $50. Variable costs are 70% of this selling price, and fixed costs are $7,500 per month. Management decides to increase the selling price from $50 to $55 per unit. Assume that the cost of the product and the fixed operating expenses are not changed by this pricing decision. 1 Refer to the above data. At the original selling price of $50 per unit, what is the contribution margin ratio? 2 Refer to the above data. At the original selling price of $50 per unit, how many units must Paulsen sell to break even? 3 Refer to the above data. At the original selling price of $50 per unit, what dollar volume of sales per month is required for Paulsen to earn a monthly operating income of $5,000? 4 Refer to the above data. At the increased selling price of $55 per unit, what is the contribution margin ratio? 5 Refer to the above data. At the increased selling price of $55 per unit, what dollar volume of sales per month is required to break-even? IN CLASS HANDOUT QACD Page 2 20 COST-VOLUME-PROFIT ANALYSIS IN CLASS HANDOUT QACD Page 3 20 COST-VOLUME-PROFIT ANALYSIS D: NAME Rhinefold brews reduced calorie beer and regular beer. Sales of its reduced calorie beer represent 25% of the company's total revenue. Sales of regular beer represent the remaining 75%. Reduced calorie beer has a contribution margin ratio of 80%, whereas the contribution margin ratio of regular beer is only 60%. Rhinefold's monthly fixed costs average $609,500. 1 What is the company's monthly break-even point expressed in sales dollars? $__________ 2 What monthly sales level must be achieved for Rhinefold to earn a monthly operating income of $350,000? $__________ 3 If Rhinefold generates $1,400,000 in monthly sales, it will earn a monthly operating income of $__________. 4 Assume Rhinefold's margin of safety was $300,000 in May. What was the company's operating income in May? $__________. 5 If Rhinefold's monthly fixed costs increase by $8,500, what level of monthly sales revenue will be required to break-even? $__________. IN CLASS HANDOUT QACD Page 4