Question 1

Pecan, Inc., has a contribution margin of 50% and fixed costs of $220,000. What sales revenue is needed to attain a $60,000 profit?

Accepted Answer

A)  $70,400 
B)  $440,000 
C)  $560,000 
D)  $240,000 
A)  $70,400 
B)  $440,000 
C)  $560,000 
D)  $240,000

Question 2

Ironwood Inc. has a variable cost ratio of 60% and fixed costs of $90,000. What sales revenue is needed to generate a $120,000 profit?

Accepted Answer

A)  $128,572 
B)  $225,000 
C)  $375,000 
D)  $525,000 
A)  $128,572 
B)  $225,000 
C)  $375,000 
D)  $525,000

Question 3

Break-even units can be found by dividing fixed costs by the unit contribution margin

Accepted Answer

A) True 
 B)False

Question 4

Leather Company sold 20,000 units, had variable costs of $12 per unit, fixed costs of $100,000, and profits of $60,000. What is the selling price per unit?

Accepted Answer

A)  $8 
B)  $17 
C)  $20 
D)  $32 
A)  $8 
B)  $17 
C)  $20 
D)  $32

Question 5

The margin of safety tells managers:

Accepted Answer

A)  how much sales would have to increase to hit the target profit. 
B)  how much profit would drop if sales decreased. 
C)  how much sales could drop before the firm no longer earns profits. 
D)  how much profit would have to increase to hit target sales. 
A)  how much sales would have to increase to hit the target profit. 
B)  how much profit would drop if sales decreased. 
C)  how much sales could drop before the firm no longer earns profits. 
D)  how much profit would have to increase to hit target sales.

Question 6

Knoll, Inc. currently sells 15,000 units a month for $50 each, has variable costs of $20 per unit, and fixed costs of $300,000. Knoll is considering increasing the price of its units to $60 per unit. If the price is changed, how many units will Knoll need to sell for profit to remain the same as before the price change?

Accepted Answer

A)  10,000 
B)  11,250 
C)  12,000 
D)  12,500 
A)  10,000 
B)  11,250 
C)  12,000 
D)  12,500

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Bugle Corp. has sales of $400,000, a variable cost ratio of 40%, and a profit of $40,000. If 10,000 units were sold, what is the contribution margin per unit?

Accepted Answer

A)  $60.00 
B)  $36.00 
C)  $24.00 
D)  $18.00 
A)  $60.00 
B)  $36.00 
C)  $24.00 
D)  $18.00

Question 9

The margin of safety is the difference between:

Accepted Answer

A)  actual sales and budgeted sales. 
B)  actual sales and break-even sales. 
C)  target sales and actual sales. 
D)  target sales and budgeted sales. 
A)  actual sales and budgeted sales. 
B)  actual sales and break-even sales. 
C)  target sales and actual sales. 
D)  target sales and budgeted sales.

Question 10

Virgil Corp. has a selling price of $30 per unit, and variable costs of $20 per unit. When 12,000 units are sold, profits equaled $55,000. How many units must be sold to break-even?

Accepted Answer

A)  4,000 
B)  12,000 
C)  6,500 
D)  5,500 
A)  4,000 
B)  12,000 
C)  6,500 
D)  5,500

Question 11

Which of the following statements is correct about the break-even point?

Accepted Answer

A)  The break-even point is the point where a company achieves its target profit. 
B)  The break-even point is the point where all variable costs are covered (but fixed costs are not). 
C)  The break-even point is the point where all fixed costs are covered (but variable costs are not). 
D)  The break-even point quantifies the number of units that must be sold to cover total costs with zero profit. 
A)  The break-even point is the point where a company achieves its target profit. 
B)  The break-even point is the point where all variable costs are covered (but fixed costs are not). 
C)  The break-even point is the point where all fixed costs are covered (but variable costs are not). 
D)  The break-even point quantifies the number of units that must be sold to cover total costs with zero profit.

Question 12

Duncan had revenues of $900,000 in March. Fixed costs in March were $480,000 and profit was $60,000. 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 was the margin of safety for March?

Accepted Answer

a. 60% = ($480,000 +

Question 13

Martol, Inc. has fixed costs of $200,000 and a contribution margin ratio of 40%. How much sales revenue must be earned for a profit of $80,000?

Accepted Answer

A)  $140,000 
B)  $560,000 
C)  $700,000 
D)  $1,120,000 
A)  $140,000 
B)  $560,000 
C)  $700,000 
D)  $1,120,000

Question 14

Frontier Corp. sells units for $50, has unit variable costs of $20, and fixed costs of $300,000. Frontier sells 15,000 units. If sales increase 20%, by how much will profits increase?

Accepted Answer

A)  20% 
B)  30% 
C)  60% 
D)  90% 
A)  20% 
B)  30% 
C)  60% 
D)  90%

Question 15

Indigo Corp. has a selling price of $45 and variable costs of $30 per unit. When 10,000 units are sold, profits equaled $25,000. What is the margin of safety?

Accepted Answer

A)  $75,000 
B)  $25,000 
C)  $80,000 
D)  $150,000 
A)  $75,000 
B)  $25,000 
C)  $80,000 
D)  $150,000

Question 16

Degree of operating leverage is calculated by dividing sales by profit

Accepted Answer

A) True 
 B)False

Question 17

The formula for target units is:

Accepted Answer

A)  (Total fixed costs + Target profit)/Contribution margin ratio 
B)  (Total variable costs + Total fixed costs)/Contribution margin ratio 
C)  (Total fixed costs + Target profit)/Unit contribution margin 
D)  (Total variable costs + Total fixed costs)/Unit contribution margin 
A)  (Total fixed costs + Target profit)/Contribution margin ratio 
B)  (Total variable costs + Total fixed costs)/Contribution margin ratio 
C)  (Total fixed costs + Target profit)/Unit contribution margin 
D)  (Total variable costs + Total fixed costs)/Unit contribution margin

Question 18

Vesper Company has sales of $200,000, variable costs of $8 per unit, fixed costs of $50,000, and a profit of $30,000. How many units were sold?

Accepted Answer

A)  10,000 
B)  15,000 
C)  20,000 
D)  25,000 
A)  10,000 
B)  15,000 
C)  20,000 
D)  25,000

Question 19

Thunder Corp. has a selling price of $25 per unit, variable costs of $20 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 20

At a sales level of 20,000 units, Pony Corp. has sales of $400,000, a variable cost ratio of 60%, and a profit of $40,000. What is the break-even point in units?

Accepted Answer

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

Pecan, Inc., has a contribution margin of 50% and fixed costs of $220,000. What sales revenue is needed to attain a $60,000 profit?

Ironwood Inc. has a variable cost ratio of 60% and fixed costs of $90,000. What sales revenue is needed to generate a $120,000 profit?

Break-even units can be found by dividing fixed costs by the unit contribution margin

Leather Company sold 20,000 units, had variable costs of $12 per unit, fixed costs of $100,000, and profits of $60,000. What is the selling price per unit?

The margin of safety tells managers:

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

Bugle Corp. has sales of $400,000, a variable cost ratio of 40%, and a profit of $40,000. If 10,000 units were sold, what is the contribution margin per unit?

The margin of safety is the difference between:

Virgil Corp. has a selling price of $30 per unit, and variable costs of $20 per unit. When 12,000 units are sold, profits equaled $55,000. How many units must be sold to break-even?

Which of the following statements is correct about the break-even point?

Duncan had revenues of $900,000 in March. Fixed costs in March were $480,000 and profit was $60,000. 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 was the margin of safety for March?

Martol, Inc. has fixed costs of $200,000 and a contribution margin ratio of 40%. How much sales revenue must be earned for a profit of $80,000?

Frontier Corp. sells units for $50, has unit variable costs of $20, and fixed costs of $300,000. Frontier sells 15,000 units. If sales increase 20%, by how much will profits increase?

Indigo Corp. has a selling price of $45 and variable costs of $30 per unit. When 10,000 units are sold, profits equaled $25,000. What is the margin of safety?

Degree of operating leverage is calculated by dividing sales by profit

The formula for target units is:

Vesper Company has sales of $200,000, variable costs of $8 per unit, fixed costs of $50,000, and a profit of $30,000. How many units were sold?

Thunder Corp. has a selling price of $25 per unit, variable costs of $20 per unit, and fixed costs of $35,000. How many units must be sold to break even?

At a sales level of 20,000 units, Pony Corp. has sales of $400,000, a variable cost ratio of 60%, and a profit of $40,000. What is the break-even point in units?

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

Exam 6: Cost-Volume-Profit Analysis

Pecan, Inc., has a contribution margin of 50% and fixed costs of $220,000. What sales revenue is needed to attain a $60,000 profit?

Ironwood Inc. has a variable cost ratio of 60% and fixed costs of $90,000. What sales revenue is needed to generate a $120,000 profit?

Break-even units can be found by dividing fixed costs by the unit contribution margin

Leather Company sold 20,000 units, had variable costs of $12 per unit, fixed costs of $100,000, and profits of $60,000. What is the selling price per unit?

The margin of safety tells managers:

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

Bugle Corp. has sales of $400,000, a variable cost ratio of 40%, and a profit of $40,000. If 10,000 units were sold, what is the contribution margin per unit?

The margin of safety is the difference between:

Virgil Corp. has a selling price of $30 per unit, and variable costs of $20 per unit. When 12,000 units are sold, profits equaled $55,000. How many units must be sold to break-even?

Which of the following statements is correct about the break-even point?

Duncan had revenues of $900,000 in March. Fixed costs in March were $480,000 and profit was $60,000. 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 was the margin of safety for March?

Martol, Inc. has fixed costs of $200,000 and a contribution margin ratio of 40%. How much sales revenue must be earned for a profit of $80,000?

Frontier Corp. sells units for $50, has unit variable costs of $20, and fixed costs of $300,000. Frontier sells 15,000 units. If sales increase 20%, by how much will profits increase?

Indigo Corp. has a selling price of $45 and variable costs of $30 per unit. When 10,000 units are sold, profits equaled $25,000. What is the margin of safety?

Degree of operating leverage is calculated by dividing sales by profit

The formula for target units is:

Vesper Company has sales of $200,000, variable costs of $8 per unit, fixed costs of $50,000, and a profit of $30,000. How many units were sold?

Thunder Corp. has a selling price of $25 per unit, variable costs of $20 per unit, and fixed costs of $35,000. How many units must be sold to break even?

At a sales level of 20,000 units, Pony Corp. has sales of $400,000, a variable cost ratio of 60%, and a profit of $40,000. What is the break-even point in units?

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