Question 1

The contribution margin per unit is the price at which a unit must be sold in order for the company to break even.

Accepted Answer

A) True 
 B)False

Question 2

Contribution margin per unit is the amount by which a product's unit selling price exceeds its total variable cost per unit.

Accepted Answer

A) True 
 B)False

Question 3

The extent,or relative size,of fixed costs in the total cost structure is known as operating leverage.

Accepted Answer

A) True 
 B)False

Question 4

McCoy Brothers manufactures and sells two products,A and Z in the ratio of 5:2.Product A sells for $75;Z sells for $95.Variable costs for product A are $35;for Z $40.Fixed costs are $418,500.Compute the contribution margin per composite unit.

Accepted Answer

A) $310. 
B) $200. 
C) $300. 
D) $330. 
E) $285. 
A) $310. 
B) $200. 
C) $300. 
D) $330. 
E) $285.

Question 5

Maroon Company's contribution margin ratio is 24%.Total fixed costs are $84,000.What is Maroon's break-even point in sales dollars?

Accepted Answer

A) $20,160. 
B) $110,526. 
C) $350,000. 
D) $240,000. 
E) $84,000. 
A) $20,160. 
B) $110,526. 
C) $350,000. 
D) $240,000. 
E) $84,000.

Question 6

A product sells for $200 per unit,and its variable costs per unit are $130.The fixed costs are $420,000.If the firm wants to earn $35,000 pretax income,how many units must be sold?

Accepted Answer

A) 6,500. 
B) 6,000. 
C) 500. 
D) 5,000. 
E) 5,500. 
A) 6,500. 
B) 6,000. 
C) 500. 
D) 5,000. 
E) 5,500.

Question 7

Three important assumptions in cost-volume-profit analysis is that (1)_______________ per unit is constant, (2)_____________ per unit is constant,and (3)______________ are constant in total.
The first and second answers are interchangeable.The third answer must as shown.

Accepted Answer

selling pr

Question 8

A company has fixed costs of $90,000.Its contribution margin ratio is 30% and the product sells for $75 per unit.What is the company's break-even point in dollar sales?

Accepted Answer

A) $60,000. 
B) $128,571. 
C) $180,000. 
D) $210,000. 
E) $300,000. 
A) $60,000. 
B) $128,571. 
C) $180,000. 
D) $210,000. 
E) $300,000.

Question 9

A cost that changes in proportion to changes in volume of activity is a(n):

Accepted Answer

A) Differential cost. 
B) Fixed cost. 
C) Incremental cost. 
D) Variable cost. 
E) Product cost. 
A) Differential cost. 
B) Fixed cost. 
C) Incremental cost. 
D) Variable cost. 
E) Product cost.

Question 10

Curvilinear costs always increase:

Accepted Answer

A) With decreases in volume. 
B) In constant proportion to changes in production levels. 
C) When management performs break-even analysis. 
D) When volume increases,but at a nonconstant rate. 
E) On a per unit basis when volume of activity goes down. 
A) With decreases in volume. 
B) In constant proportion to changes in production levels. 
C) When management performs break-even analysis. 
D) When volume increases,but at a nonconstant rate. 
E) On a per unit basis when volume of activity goes down.

Question 11

The contribution margin per unit expressed as a percentage of the product's selling price is the:

Accepted Answer

A) Volume variance. 
B) Margin of safety. 
C) Contribution margin ratio. 
D) Break-even point. 
E) Rate of return on sales. 
A) Volume variance. 
B) Margin of safety. 
C) Contribution margin ratio. 
D) Break-even point. 
E) Rate of return on sales.

Question 12

At Midland Company's break-even point of 9,000 units,fixed costs are $180,000 and variable costs are $540,000 in total.The unit sales price is:

Accepted Answer

A) $20. 
B) $40. 
C) $60. 
D) $80. 
E) $100. 
A) $20. 
B) $40. 
C) $60. 
D) $80. 
E) $100.

Question 13

A __________ cost is one that includes both fixed and variable cost components;a ______________ cost is one that reflects a step pattern.
Answers must appear in this order.

Accepted Answer

The answer of A __________ cost is one that includes...

Question 14

Alvarez Company's break-even point in units is 1,000.The sales price per unit is $10 and variable cost per unit is $7.If the company sells 2,500 units,what will net income be?

Accepted Answer

A) $4,500 
B) $7,500 
C) $17,000 
D) $35,000 
E) $3,000 
A) $4,500 
B) $7,500 
C) $17,000 
D) $35,000 
E) $3,000

Question 15

A term describing a firm's normal range of operating activities is:

Accepted Answer

A) Relevant range of operations. 
B) Break-even level of operations. 
C) Margin of safety of operations. 
D) Relevant operating analysis. 
E) High-low level of operations. 
A) Relevant range of operations. 
B) Break-even level of operations. 
C) Margin of safety of operations. 
D) Relevant operating analysis. 
E) High-low level of operations.

Question 16

A method that estimates cost behavior by using just the highest and lowest volume levels is called the:

Accepted Answer

A) Scatter method. 
B) High-low method. 
C) Least-squares method. 
D) Break-even method. 
E) Step-wise method. 
A) Scatter method. 
B) High-low method. 
C) Least-squares method. 
D) Break-even method. 
E) Step-wise method.

Question 17

A company's product sells at $12 per unit and has a $5 per unit variable cost.The company's total fixed costs are $98,000.The contribution margin per unit is:

Accepted Answer

A) $5.00. 
B) $7.00. 
C) $8.17. 
D) $12.00. 
E) $17.00. 
A) $5.00. 
B) $7.00. 
C) $8.17. 
D) $12.00. 
E) $17.00.

Question 18

Gladstone Co.has expected sales of $326,000 for the upcoming month and its monthly break even sales are $300,000.What is the margin of safety as a percent of sales,rounded to the nearest whole percent?

Accepted Answer

A) 9%. 
B) 108%. 
C) 52%. 
D) 8%. 
E) 92%. 
A) 9%. 
B) 108%. 
C) 52%. 
D) 8%. 
E) 92%.

Question 19

During a recent fiscal year,Creek Company reported pretax income of $125,000,a contribution margin ratio of 25% and total contribution margin of $400,000.Total variable costs must have been:

Accepted Answer

A) $1,100,000. 
B) $1,200,000. 
C) $500,000. 
D) $1,600,000. 
E) $2,100,000. 
A) $1,100,000. 
B) $1,200,000. 
C) $500,000. 
D) $1,600,000. 
E) $2,100,000.

Question 20

During its most recent fiscal year,Raphael Enterprises sold 200,000 electric screwdrivers at a price of $15 each.Fixed costs amounted to $400,000 and pretax income was $600,000.What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?

Accepted Answer

A) $2,400,000. 
B) $1,600,000. 
C) $3,000,000. 
D) $2,000,000. 
E) $1,000,000. 
A) $2,400,000. 
B) $1,600,000. 
C) $3,000,000. 
D) $2,000,000. 
E) $1,000,000.

Exam 21: Cost-Volume-Profit Analysis

The contribution margin per unit is the price at which a unit must be sold in order for the company to break even.

Contribution margin per unit is the amount by which a product's unit selling price exceeds its total variable cost per unit.

The extent,or relative size,of fixed costs in the total cost structure is known as operating leverage.

McCoy Brothers manufactures and sells two products,A and Z in the ratio of 5:2.Product A sells for $75;Z sells for $95.Variable costs for product A are $35;for Z $40.Fixed costs are $418,500.Compute the contribution margin per composite unit.

Maroon Company's contribution margin ratio is 24%.Total fixed costs are $84,000.What is Maroon's break-even point in sales dollars?

A product sells for $200 per unit,and its variable costs per unit are $130.The fixed costs are $420,000.If the firm wants to earn $35,000 pretax income,how many units must be sold?

Three important assumptions in cost-volume-profit analysis is that (1)_______________ per unit is constant, (2)_____________ per unit is constant,and (3)______________ are constant in total. The first and second answers are interchangeable.The third answer must as shown.

A company has fixed costs of $90,000.Its contribution margin ratio is 30% and the product sells for $75 per unit.What is the company's break-even point in dollar sales?

A cost that changes in proportion to changes in volume of activity is a(n):

Curvilinear costs always increase:

The contribution margin per unit expressed as a percentage of the product's selling price is the:

At Midland Company's break-even point of 9,000 units,fixed costs are $180,000 and variable costs are $540,000 in total.The unit sales price is:

A __________ cost is one that includes both fixed and variable cost components;a ______________ cost is one that reflects a step pattern. Answers must appear in this order.

Alvarez Company's break-even point in units is 1,000.The sales price per unit is $10 and variable cost per unit is $7.If the company sells 2,500 units,what will net income be?

A term describing a firm's normal range of operating activities is:

A method that estimates cost behavior by using just the highest and lowest volume levels is called the:

A company's product sells at $12 per unit and has a $5 per unit variable cost.The company's total fixed costs are $98,000.The contribution margin per unit is:

Gladstone Co.has expected sales of $326,000 for the upcoming month and its monthly break even sales are $300,000.What is the margin of safety as a percent of sales,rounded to the nearest whole percent?

During a recent fiscal year,Creek Company reported pretax income of $125,000,a contribution margin ratio of 25% and total contribution margin of $400,000.Total variable costs must have been:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Appendix B: Time Value of Money

Appendix C: Activity-Based Costing

Filters

Three important assumptions in cost-volume-profit analysis is that (1)_________ per unit is constant, (2)_ per unit is constant,and (3)________ are constant in total. The first and second answers are interchangeable.The third answer must as shown.

A cost is one that includes both fixed and variable cost components;a ____ cost is one that reflects a step pattern. Answers must appear in this order.