Accounting 202 - Chapter 7 Mixed

The weighted-average contribution margin is calculated by finding the average contribution margin for each type of coffee, weighted by the proportion of sales for each type. In this case, since Reynold Coffee sells three large coffees for every two small ones, the proportion of sales for large coffees is 3/5 and the proportion of sales for small coffees is 2/5.

The contribution margin for a small coffee is $2 ($4 selling price - $2 variable cost) and the contribution margin for a large coffee is $2 ($5 selling price - $3 variable cost).

To calculate the weighted-average contribution margin, we multiply the contribution margin for each type of coffee by its respective proportion of sales and sum the results:

(3/5) * $2 + (2/5) * $2 = $1.20 + $0.80 = $2.00

Therefore, the correct answer is $2.00.

If the variable cost per unit decreases while the sales price per unit and total fixed costs remain constant, the contribution margin will increase. This is because the contribution margin is calculated by subtracting the variable cost per unit from the sales price per unit. With a decrease in variable cost per unit, the difference between the sales price and variable cost per unit will increase, resulting in a higher contribution margin. Additionally, as the contribution margin increases, the breakeven point will decrease. This is because the breakeven point is the point at which total revenue equals total costs, and with a higher contribution margin, the breakeven point can be reached with fewer units sold.

When the sales price per unit increases while the variable cost per unit and total fixed costs remain constant, the contribution margin increases. The contribution margin is the difference between the sales price per unit and the variable cost per unit. As the sales price per unit increases, the contribution margin also increases. Additionally, the breakeven point decreases. The breakeven point is the point at which the total revenue equals the total costs, and it is calculated by dividing the total fixed costs by the contribution margin. When the contribution margin increases, the breakeven point decreases.

The breakeven point in units is the point at which the total revenue equals the total cost, resulting in zero profit or loss. If both fixed expenses and the sale price per unit increase while variable costs per unit remain unchanged, the breakeven point in units could increase if the increase in fixed expenses and sale price per unit is greater than the increase in variable costs per unit. Alternatively, the breakeven point in units could decrease if the increase in fixed expenses and sale price per unit is smaller than the increase in variable costs per unit. Lastly, the breakeven point in units could remain unchanged if the increase in fixed expenses and sale price per unit is equal to the increase in variable costs per unit.

The contribution margin ratio is calculated by subtracting the variable costs per unit from the selling price per unit, and then dividing the result by the selling price per unit. In this case, the selling price per unit is $15 and the variable costs per unit are $9.

($15 - $9) / $15 = $6 / $15 = 0.4

Multiplying this result by 100 gives the contribution margin ratio as 40%. This means that for every dollar of sales, Akron Laser Wash contributes 40 cents towards covering the fixed costs and generating profit.

If the variable cost per unit increases while the sale price per unit and total fixed costs remain constant, the breakeven point in units will increase. This is because the breakeven point is the point at which the total revenue equals the total cost, and an increase in variable cost per unit will require more units to be sold in order to cover the fixed costs and break even. Therefore, the breakeven point in units will increase.

The correct answer is (fixed expenses + operating income) / contribution margin ratio. This formula is used to determine the sales revenue needed to either break even or achieve a target profit. It takes into account the fixed expenses and operating income, which are subtracted from the sales revenue to calculate the contribution margin. The contribution margin ratio is then used to divide the sum of fixed expenses and operating income, giving the required sales revenue.

Managers can quickly forecast the operating income by multiplying projected sales revenue by the contribution margin ratio and then subtracting fixed costs. The contribution margin ratio represents the percentage of each sales dollar that contributes to covering fixed costs and generating profit. By multiplying the projected sales revenue by the contribution margin ratio, managers can determine the amount of contribution margin available to cover fixed costs. Subtracting fixed costs from the contribution margin gives the operating income, allowing managers to forecast the profitability of the business.

The unit contribution margin represents the excess of the selling price per unit of a product over the variable cost of obtaining and selling each unit. It is calculated by subtracting the variable cost per unit from the selling price per unit. This measure helps businesses understand how much each unit contributes to covering fixed costs and generating profit.

Managers can quickly forecast the total contribution margin by dividing the projected sales revenue by the contribution margin ratio. The contribution margin ratio is calculated by dividing the contribution margin (which is the difference between sales revenue and variable costs) by the sales revenue. This ratio helps managers determine the percentage of each sales dollar that contributes to covering fixed costs and generating profit. By dividing the projected sales revenue by the contribution margin ratio, managers can estimate the total contribution margin and make informed decisions about the profitability of the business.

The contribution margin ratio is calculated by dividing the contribution margin (which is the sales revenue minus variable costs) by the sales revenue. This ratio helps in determining the percentage of each sales dollar that is available to cover fixed costs and contribute towards profit.

Sales below the breakeven point indicate a loss because the company is not generating enough revenue to cover its fixed and variable costs. On the other hand, sales above the breakeven point indicate a profit because the company is generating more revenue than its costs, resulting in a positive financial outcome.

The contribution margin ratio is calculated by dividing the contribution margin by the sales revenue. This ratio helps to determine the percentage of each sales dollar that is available to cover fixed costs and contribute to profits. By dividing the contribution margin (which is the sales revenue minus variable costs) by the sales revenue, we can determine the proportion of each dollar of sales that is available to cover fixed costs and generate profit.

Contribution margin is the difference between sales revenue and variable costs. Fixed costs are expenses that do not change with the level of production or sales. Subtracting fixed costs from the contribution margin gives us operating income, which is the profit earned from normal business operations before taxes and interest expenses. Therefore, the correct answer is operating income.

If the sale price per unit decreases and variable costs remain the same, the contribution margin ratio will decrease. The contribution margin ratio is calculated by subtracting variable costs from the sale price per unit and dividing it by the sale price per unit. When the sale price per unit decreases, the numerator of the ratio decreases while the denominator remains the same, resulting in a lower contribution margin ratio.

The breakeven point is the point at which the company's total revenue equals its total costs, resulting in no profit or loss. To calculate the breakeven point, we need to determine the contribution margin per unit for each product. The contribution margin is the difference between the selling price and the variable cost per unit. For Basic models, the contribution margin is $10 ($40 - $30), and for Deluxe models, it is $8 ($48 - $40). Since the company typically sells three Basic models for every Deluxe model, the weighted average contribution margin per unit is (($10 * 3) + ($8 * 1)) / 4 = $9.50. To cover the fixed costs of $76,000, the company needs to sell 8,000 units ($76,000 / $9.50). Therefore, the breakeven point in total units is 8,000 units.

The contribution margin is equal to the sales revenues minus the variable expenses. This is because the contribution margin represents the amount of revenue that is available to cover fixed expenses and contribute to profit after variable expenses have been deducted. Subtracting the variable expenses from the sales revenues gives us the contribution margin.

The correct answer is (fixed expenses + operating income) / contribution margin per unit. This formula is used to calculate the number of units that need to be sold in order to break even or generate a target profit. By adding the fixed expenses and operating income and dividing it by the contribution margin per unit, we can determine the number of units required to cover the costs and achieve the desired profit.

The margin of safety is a measure of how much a company's actual sales exceed its breakeven point. It represents the cushion that a company has in case of a decrease in sales. Therefore, the correct answer is "actual sales - expected sales" because it calculates the difference between the actual sales and the expected sales, indicating the amount of sales that are above the breakeven point.

The company's margin of safety can be stated in units, dollars, or as a percentage of sales. This means that it can be expressed in different ways depending on the information available or the preference of the person analyzing the data.

The unit contribution margin is a measure of the profitability of each unit sold. It is calculated by subtracting the variable cost per unit from the sales price per unit. This calculation allows a company to determine how much each unit contributes towards covering fixed costs and generating profit. By subtracting the variable cost per unit from the sales price per unit, the company can determine the amount of revenue that is left over to cover fixed costs and contribute to profit.

If total fixed costs decrease while the sale price per unit and variable costs per unit remain constant, the breakeven point in units will decrease. This is because the breakeven point is the point at which total revenue equals total costs, and a decrease in fixed costs means that the company needs to sell fewer units to cover its costs and reach the breakeven point. Therefore, the correct answer is that the breakeven point in units decreases.

The contribution margin ratio is a measure that indicates the percentage of each sales dollar that contributes towards covering fixed costs and generating a profit. It helps in understanding the profitability of a company by showing how much of the revenue from each sale is available to cover fixed costs and contribute to the bottom line. By analyzing the contribution margin ratio, a company can make informed decisions about pricing, cost control, and overall profitability.

To compute the unit contribution margin, all variable costs should be subtracted from the sales price per unit. This is because the unit contribution margin is the amount of money left over from each unit sold after deducting all variable costs. By subtracting all variable costs, the company can determine how much each unit contributes towards covering fixed costs and generating profit.

The given formula calculates the margin of safety percentage. Margin of safety is the difference between the actual or projected sales and the break-even point. It represents the amount by which sales can decrease before the company reaches the break-even point. Dividing this margin of safety by the total predicted sales gives the margin of safety percentage, which indicates the proportion of sales that can be lost before the company starts incurring losses.

The contribution margin per car wash is calculated by subtracting the variable costs per wash ($9) from the selling price per wash ($15). Therefore, the contribution margin per car wash for Akron Laser Wash is $15 - $9 = $6.00.

The breakeven point is the point at which a company's revenue equals its total costs, resulting in zero profit or loss. To calculate the breakeven point, we need to divide the total fixed costs by the contribution margin per unit. The contribution margin per unit is the selling price per unit minus the variable cost per unit. In this case, the contribution margin per pound is $20 - $12 = $8. Therefore, the breakeven point is $6,000 / $8 = 750 pounds of fudge.

The projected monthly income can be calculated by subtracting the total variable costs and fixed costs from the total revenue. In this case, the total revenue can be calculated by multiplying the price per customer ($15) by the number of patrons (12,000), which equals $180,000. The total variable costs can be calculated by multiplying the variable cost per wash ($9) by the number of patrons (12,000), which equals $108,000. Subtracting the total variable costs ($108,000) and fixed costs ($40,000) from the total revenue ($180,000) gives us the projected monthly income of $72,000.

If the fixed costs increase while the sales price per unit and variable costs per unit remain constant, the contribution margin (sales price per unit minus variable costs per unit) will stay the same. However, since the fixed costs have increased, the breakeven point (the point at which total revenue equals total costs) will increase because more units need to be sold to cover the higher fixed costs. Therefore, the statement "The contribution margin stays the same and the breakeven point increases" is true.

The formula to calculate the break-even sales in units is fixed costs divided by the weighted-average contribution margin per unit. This formula helps determine the number of units that need to be sold in order to cover all fixed costs and reach the break-even point. By dividing the fixed costs by the contribution margin per unit, we can determine how many units need to be sold to cover those costs and break even. Therefore, the correct answer is break-even sales in units.