1. __________ = Difference in Total Cost ÷ Difference in Units Produced
Variable Cost per Unit
2. Contribution Margin = Sales – __________
Variable Costs
3. Contribution Margin Ratio = __________ ÷ Sales
Contribution Margin
4. __________ = Fixed Costs ÷ Unit Contribution Margin
Break-Even Sales (units)
5. Sales (units) = (__________ + Target Profit) ÷ Unit Contribution Margin
Fixed Costs
6. Operating Leverage = Contribution Margin ÷ __________
Operating Income
7. Margin of Safety (percent of current sales) = (Sales – Sales at Break-Even Point) ÷__________
Sales
8. Margin of Safety (SAR) = Sales (SAR) – __________
Break-Even Sales (SAR)
9. The total cost of production for the last four quarters for Moore’s Mowers is as follows. Use the high-low method to determine the variable cost per unit and the fixed cost.
Total Cost Units Produced
Quarter 1 51,000 SAR 2,000
Quarter 2 56,400 SAR 2,300
Quarter 3 49,200 SAR 1,900
Quarter 4 53,700 SAR 2,150
Variable Cost = _____________18 SAR per unit
Fixed Cost = ____________ 15,000 SAR
10. During 2023, Caps by Huely sold 50,000 finished products with a contribution margin of 55%. The variable costs totaled 40,500 SAR for the year. Determine the sales, contribution margin, and unit contribution margin.
Sales = ____________ 90,000 SAR
Sales price per unit = ____________ 1.80 SAR
Variable cost per unit = ____________ (0.81)
Contribution margin per unit= ____________ 0.99 SAR
Contribution margin= ____________ 49,500 SAR
11. If a manufacturing company had a contribution margin of $65,700 for 20Y5 from selling 25,000 products at 6 SAR each, determine the variable cost per unit, contribution margin ratio, and unit contribution margin. Round unit answers to two decimal places and percentages to the nearest whole percent.
Sales (SAR) = ____________ $150,000
Contribution margin = ____________ (65,700)
Total variable cost= ____________ $ 84,300
Variable cost per unit= ____________ $3.37
Unit contribution margin= ____________ $2.63
Contribution margin ratio = ____________ 44%
12. Determine the change in operating income for each situation for a company that has an increase in total sales of $52,000.
a. Unit contribution margin of $4.50 and each product selling for $8.
= ____________$29,250
b. Contribution margin ratio of 24% and each product selling for $10.
= ____________$12,480
c. Unit contribution margin of $6, with total variable costs of $25,000 at $5 per unit.
= ____________$30,000
13. After incurring an operating loss of $(6,000) in 20Y5, the production manager would like to know the break-even point in sales and units for the company. During 2023, the company sold 6,000 at $3 each. Variable costs for the year totaled $10,800. Determine the sales and units sold that were needed to break even.
Sales = ____________200,000 SAR
Variable costs = ____________ (80,000)
Contribution margin = ____________120,000 SAR
Fixed costs= ____________ (50,400)
Operating income = ____________ 69,600 SAR
14. A tire manufacturer sells its finished goods for 80 SAR each. The variable cost to manufacture each product is 20 SAR, while fixed costs equal 20,700 SAR. In 2022, the company earned operating income of 32,100SAR. In 2023, the CEO would like to increase operating income by 5%. Determine the sales in dollars and units needed to achieve the CEO’s goal. Round answers to the nearest whole number.
Target Profit = ____________ 33,705SAR = 32,100SAR × 1.05
Sales (units) = ____________ 907 units = (20,700SAR + 33,705SAR) ÷ $60
Sales (dollars) = ____________ $72,540 = (20,700SAR + 33,705SAR) ÷ 75%, or 907 units × 80SAR per unit
Submit as an excel document for faculty grading.
*Due to rounding, the two methods will differ by $20 in sales.
15.Prepare a cost-volume-profit chart for a company that has an 80% contribution margin for goods that it sells for $150 each. The company’s fixed costs total $54,000. Also, determine the break-even point in units and sales.
Break-Even Point (units) = ____________ 450 units = $54,000 ÷ $120 per unit
Break-Even Point (sales) = ____________ $67,500 = $54,000 ÷ 80%, or 450 units × $150 per unit
Submit as an excel document with cost-volume-profit chart for faculty grading.