Question 1

Dexter Corp. has fixed costs of $500,000 and a contribution margin ratio of 25%. Currently, margin of safety is $1,000,000. What are Dexter's current sales?

Accepted Answer

A)  $1,000,000 
B)  $2,000,000 
C)  $3,000,000 
D)  $4,000,000 
A)  $1,000,000 
B)  $2,000,000 
C)  $3,000,000 
D)  $4,000,000

Question 2

Dallas Inc. sells a product for $60. Variable costs are 60% of sales, and monthly fixed costs are $54,000. Answer the following questions:
a. What is the break-even point in units?
b. What unit sales would be required to earn a target profit of $120,000?
c. Assume they achieve the level of sales required in part b, what is the margin of safety in sales dollars?

Accepted Answer

a. 2,250 units = $54,000/[$60

Question 3

Louise Corp. has a contribution margin ratio of 35%, fixed costs of $60,000, and a profit of $45,000. What are total sales?

Accepted Answer

A)  $300,000 
B)  $105,000 
C)  $36,750 
D)  $171,429 
A)  $300,000 
B)  $105,000 
C)  $36,750 
D)  $171,429

Question 4

Managers can use cost-volume-profit analysis to help evaluate changes in price

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is not correct about cost-volume-profit analysis?

Accepted Answer

A)  CVP analysis is a decision-making tool for managers. 
B)  CVP analysis focuses on the relationship among volume and mix of units sold, prices, variable costs, fixed costs, and profit. 
C)  CVP analysis works best when all variables are changed concurrently. 
D)  Managers use CVP analysis to evaluate how changing one key variable will impact profitability, while holding everything else constant. 
A)  CVP analysis is a decision-making tool for managers. 
B)  CVP analysis focuses on the relationship among volume and mix of units sold, prices, variable costs, fixed costs, and profit. 
C)  CVP analysis works best when all variables are changed concurrently. 
D)  Managers use CVP analysis to evaluate how changing one key variable will impact profitability, while holding everything else constant.

Question 6

Malibu, Inc., which has fixed costs of $2,150,000, sells three products whose sales price, variable cost per unit, and percentage of sales units are presented in the table below.   a. What is the weighted average unit contribution margin?
b. At the break-even point, how many units of Product A must be sold?
c. To make a profit of $1,075,000, how many units of Product B must be sold?

Accepted Answer

a. $4.30 = [($7.00 - $3.00) × 60%] + [($

Question 7

If a firm sells more than one product, the break-even point in units represents:

Accepted Answer

A)  the number of units of the largest-selling product required to break even. 
B)  the number of units of the most profitable product required to break even. 
C)  the number of units of the highest-revenue product required to break even. 
D)  the sum of the units of all products required to break even. 
A)  the number of units of the largest-selling product required to break even. 
B)  the number of units of the most profitable product required to break even. 
C)  the number of units of the highest-revenue product required to break even. 
D)  the sum of the units of all products required to break even.

Question 8

Cost-volume-profit analysis assumes that all costs can be accurately described as either fixed or variable

Accepted Answer

A) True 
 B)False

Question 9

Jasper Corp. has a selling price of $30, and variable costs of $20 per unit. When 12,000 units are sold, profits equaled $70,000. How many units must be sold to break-even?

Accepted Answer

A)  19,000 
B)  12,000 
C)  14,333 
D)  5,000 
A)  19,000 
B)  12,000 
C)  14,333 
D)  5,000

Question 10

Nora Inc. sells a single product for $15. Variable costs include $6 for each unit plus a 10% sales commission. Fixed costs are $150,000 per month.
a. What is the contribution margin percentage?
b. What is the break-even sales revenue?
c. What sales revenue is needed to achieve a $100,000 per month profit?

Accepted Answer

a. 50% = [$15 - $6 - (10% × $1

Question 11

Payton Corp. has sales of $200,000, a contribution margin ratio of 35%, and a target profit of $40,000. If 10,000 units were sold, what are total variable costs?

Accepted Answer

A)  $200,000 
B)  $130,000 
C)  $240,000 
D)  $160,000 
A)  $200,000 
B)  $130,000 
C)  $240,000 
D)  $160,000

Question 12

Target units equals fixed costs plus target profit divided by the unit contribution margin

Accepted Answer

A) True 
 B)False

Question 13

If production volume does not equal sales volume:

Accepted Answer

A)  we must adjust the CVP formulas for that fact to use CVP. 
B)  we cannot use CVP, since an assumption is violated. 
C)  the CVP analysis will always indicate a breakeven point that cannot be reached. 
D)  the conclusions we draw from a CVP analysis will not be as sound as they would be if we assumed production equaled sales. 
A)  we must adjust the CVP formulas for that fact to use CVP. 
B)  we cannot use CVP, since an assumption is violated. 
C)  the CVP analysis will always indicate a breakeven point that cannot be reached. 
D)  the conclusions we draw from a CVP analysis will not be as sound as they would be if we assumed production equaled sales.

Question 14

Mustang Corp. has a selling price of $15, variable costs of $10 per unit, and fixed costs of $35,000. How many units must be sold to break-even?

Accepted Answer

A)  7,000 
B)  14,000 
C)  3,500 
D)  2,334 
A)  7,000 
B)  14,000 
C)  3,500 
D)  2,334

Question 15

The margin of safety is the difference between actual sales and budgeted sales

Accepted Answer

A) True 
 B)False

Question 16

Irwin Corp. has fixed costs of $20,000 and a contribution margin ratio of 40%. Currently, margin of safety is $35,000. What are Irwin's current sales?

Accepted Answer

A)  $35,000 
B)  $37,500 
C)  $50,000 
D)  $85,000 
A)  $35,000 
B)  $37,500 
C)  $50,000 
D)  $85,000

Question 17

Harmony sells a product for $50 per unit. Variable costs per unit are $30, and monthly fixed costs are $150,000. Answer the following questions:
a. What is the break-even point in units?
b. What unit sales would be required to earn a target profit of $100,000?
c. Assume they achieve the level of sales required in part b, what is the degree of operating leverage?
d. If sales increase by 40% from that level, by what percentage will profits increase?

Accepted Answer

a. 7,500 units = $150,000/($50

Question 18

At a level of 20,000 units sold, Gail Corp. has sales of $400,000, a contribution margin ratio of 40%, and a profit of $40,000. What is the break-even point in units?

Accepted Answer

A)  12,000 
B)  8,000 
C)  20,000 
D)  15,000 
A)  12,000 
B)  8,000 
C)  20,000 
D)  15,000

Question 19

Roland had revenues of $600,000 in March. Fixed costs in March were $200,000 and profit was $40,000. Answer the following questions:
a. What was the contribution margin percentage?
b. What monthly sales volume (in dollars) would be needed to break-even?
c. What sales volume (in dollars) would be needed to earn $150,000?

Accepted Answer

a. 40% = ($200,000 + $40,000)/

Question 20

Last month Dexter Company had a $15,000 loss on sales of $150,000. Fixed costs are $60,000 a month. By how much do sales have to increase for Dexter to break even?

Accepted Answer

A)  $60,000 
B)  $75,000 
C)  $45,000 
D)  $50,000 
A)  $60,000 
B)  $75,000 
C)  $45,000 
D)  $50,000

Dexter Corp. has fixed costs of $500,000 and a contribution margin ratio of 25%. Currently, margin of safety is $1,000,000. What are Dexter's current sales?

Louise Corp. has a contribution margin ratio of 35%, fixed costs of $60,000, and a profit of $45,000. What are total sales?

Managers can use cost-volume-profit analysis to help evaluate changes in price

Which of the following statements is not correct about cost-volume-profit analysis?

If a firm sells more than one product, the break-even point in units represents:

Cost-volume-profit analysis assumes that all costs can be accurately described as either fixed or variable

Jasper Corp. has a selling price of $30, and variable costs of $20 per unit. When 12,000 units are sold, profits equaled $70,000. How many units must be sold to break-even?

Payton Corp. has sales of $200,000, a contribution margin ratio of 35%, and a target profit of $40,000. If 10,000 units were sold, what are total variable costs?

Target units equals fixed costs plus target profit divided by the unit contribution margin

If production volume does not equal sales volume:

Mustang Corp. has a selling price of $15, variable costs of $10 per unit, and fixed costs of $35,000. How many units must be sold to break-even?

The margin of safety is the difference between actual sales and budgeted sales

Irwin Corp. has fixed costs of $20,000 and a contribution margin ratio of 40%. Currently, margin of safety is $35,000. What are Irwin's current sales?

At a level of 20,000 units sold, Gail Corp. has sales of $400,000, a contribution margin ratio of 40%, and a profit of $40,000. What is the break-even point in units?

Last month Dexter Company had a $15,000 loss on sales of $150,000. Fixed costs are $60,000 a month. By how much do sales have to increase for Dexter to break even?

Introduction to Managerial Accounting

Job-Order Costing

Process Costing

Activity-Based Cost Management

Cost Behavior and Estimation

Incremental Analysis for Short-Term Decision Making

Budgeting and Planning

Standard Costing and Variances

Decentralized Performance Evaluation

Capital Budgeting

Statement of Cash Flows

Financial Statement Analysis

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Exam 6: Cost-Volume-Profit Analysis

Dexter Corp. has fixed costs of $500,000 and a contribution margin ratio of 25%. Currently, margin of safety is $1,000,000. What are Dexter's current sales?

Louise Corp. has a contribution margin ratio of 35%, fixed costs of $60,000, and a profit of $45,000. What are total sales?

Managers can use cost-volume-profit analysis to help evaluate changes in price

Which of the following statements is not correct about cost-volume-profit analysis?

If a firm sells more than one product, the break-even point in units represents:

Cost-volume-profit analysis assumes that all costs can be accurately described as either fixed or variable

Jasper Corp. has a selling price of $30, and variable costs of $20 per unit. When 12,000 units are sold, profits equaled $70,000. How many units must be sold to break-even?

Payton Corp. has sales of $200,000, a contribution margin ratio of 35%, and a target profit of $40,000. If 10,000 units were sold, what are total variable costs?

Target units equals fixed costs plus target profit divided by the unit contribution margin

If production volume does not equal sales volume:

Mustang Corp. has a selling price of $15, variable costs of $10 per unit, and fixed costs of $35,000. How many units must be sold to break-even?

The margin of safety is the difference between actual sales and budgeted sales

Irwin Corp. has fixed costs of $20,000 and a contribution margin ratio of 40%. Currently, margin of safety is $35,000. What are Irwin's current sales?

At a level of 20,000 units sold, Gail Corp. has sales of $400,000, a contribution margin ratio of 40%, and a profit of $40,000. What is the break-even point in units?

Last month Dexter Company had a $15,000 loss on sales of $150,000. Fixed costs are $60,000 a month. By how much do sales have to increase for Dexter to break even?

Introduction to Managerial Accounting

Job-Order Costing

Process Costing

Activity-Based Cost Management

Cost Behavior and Estimation

Incremental Analysis for Short-Term Decision Making

Budgeting and Planning

Standard Costing and Variances

Decentralized Performance Evaluation

Capital Budgeting

Statement of Cash Flows

Financial Statement Analysis

Filters