Question 1

Cost structure refers to:

Accepted Answer

A)  a company's break-even point. 
B)  whether fixed costs are covered by the contribution margin. 
C)  how a company uses variable versus fixed costs to perform operations. 
D)  where funds are storeD.
Cost structure refers to how a company uses variable versus fixed costs to perform operations. 
A)  a company's break-even point. 
B)  whether fixed costs are covered by the contribution margin. 
C)  how a company uses variable versus fixed costs to perform operations. 
D)  where funds are storeD.
Cost structure refers to how a company uses variable versus fixed costs to perform operations.

Question 2

Last month Angus Company had a $30,000 loss on sales of $250,000. Fixed costs are $60,000 a month. What sales revenue is needed for Angus to break even?

Accepted Answer

A)  $166,667 
B)  $500,000 
C)  $280,000 
D)  $220,000 
A)  $166,667 
B)  $500,000 
C)  $280,000 
D)  $220,000

Question 3

Raven Inc. sells a single product for $45. Variable costs include $26 for each unit plus a $10 selling expense per unit. Fixed costs are $200,000 per month.
a. What is the contribution margin percentage?
b. What is the breakeven sales revenue?
c. What sales revenue is needed to achieve a $175,000 per month profit?

Accepted Answer

a. 20% = ($45 - $26 - $10)/$45

Question 4

Degree of operating leverage is used to:

Accepted Answer

A)  calculate change in sales given change in profit. 
B)  calculate change in profit given change in sales. 
C)  calculate break-even sales given change in sales. 
D)  calculate break-even sales given change in profit. 
A)  calculate change in sales given change in profit. 
B)  calculate change in profit given change in sales. 
C)  calculate break-even sales given change in sales. 
D)  calculate break-even sales given change in profit.

Question 5

The target sales level equals fixed costs plus variable costs divided by the contribution margin ratio

Accepted Answer

A) True 
 B)False

Question 6

Frontier Corp. has fixed costs of $300,000 and profit of $150,000. 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 7

Holly Inc. sells a single product for $40. Variable costs include $22 for each unit plus a 10% sales commission. Fixed costs are $105,000 per month.
a. What is the contribution margin percentage?
b. What is the breakeven sales revenue?
c. What sales revenue is needed to achieve a $140,000 per month profit?

Accepted Answer

a. 35% = ($40 - $22 - 10% × $4

Question 8

Belle Corp. has a selling price of $50 per unit, variable costs of $40 per unit, and fixed costs of $100,000. What sales revenue is needed to break-even?

Accepted Answer

A)  $500,000 
B)  $125,000 
C)  $5,000,000 
D)  $1,000,000 
A)  $500,000 
B)  $125,000 
C)  $5,000,000 
D)  $1,000,000

Question 9

The formula for break-even point in terms of units is:

Accepted Answer

A)  Total variable costs/Unit contribution margin 
B)  Total fixed costs/Contribution margin ratio 
C)  Total fixed costs/Unit contribution margin 
D)  Total variable costs/Total fixed costs 
A)  Total variable costs/Unit contribution margin 
B)  Total fixed costs/Contribution margin ratio 
C)  Total fixed costs/Unit contribution margin 
D)  Total variable costs/Total fixed costs

Question 10

Degree of operating leverage is calculated as:

Accepted Answer

A)  profit divided by contribution margin. 
B)  break-even sales divided by profit. 
C)  profit divided by break-even sales. 
D)  contribution margin divided by profit. 
A)  profit divided by contribution margin. 
B)  break-even sales divided by profit. 
C)  profit divided by break-even sales. 
D)  contribution margin divided by profit.

Question 11

At the break-even point, the margin of safety will be:

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  equal to fixed costs. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  equal to fixed costs.

Question 12

Glade, Inc. is trying to decide whether to increase the commission-based pay of its salespeople. Currently, each of its five salespeople earns a 15% commission on the units they sell for $100 each, plus a fixed salary of $40,000 per person. Glade hopes that by increasing commissions to 20% and decreasing each salesperson's salary to $25,000, sales will increase because salespeople will be more motivated. Currently, sales are 13,000 units. Glade's other fixed costs, NOT including the salespeople's salaries, total $580,000. Glade's other variable costs, NOT including commissions, total $20 per unit.
a. What is current profit?
b. What is the current break-even point in units?
c. What would the break-even point in units be if commissions are increased and salaries decreased?
d. If sales increase by 4,000 units, what will profit be under the new plan?
e. At what sales level would Glade be indifferent between the lower-commission plan and the higher-commission plan?

Accepted Answer

a. $65,000 = ($100 × 13,000) - [(($100 ×

Question 13

Dragon, Inc. has actual sales of $400,000 and a margin of safety of $150,000. What is Dragon's break-even point in sales?

Accepted Answer

A)  $100,000 
B)  $250,000 
C)  $350,000 
D)  $450,000 
A)  $100,000 
B)  $250,000 
C)  $350,000 
D)  $450,000

Question 14

Maggie Corp. has a selling price of $20 per unit, variable costs of $10 per unit, and fixed costs of $140,000. 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

Rollag Corp. has a selling price of $30 and variable costs of $20 per unit. When 14,000 units are sold, profits equaled $45,000. What is the margin of safety?

Accepted Answer

A)  $420,000 
B)  $135,000 
C)  $142,500 
D)  $75,000 
A)  $420,000 
B)  $135,000 
C)  $142,500 
D)  $75,000

Question 16

Harvest Corp. has a contribution margin ratio of 30%, fixed costs of $45,000, and a profit of $60,000. What are total sales?

Accepted Answer

A)  $31,500 
B)  $105,000 
C)  $150,000 
D)  $350,000 
A)  $31,500 
B)  $105,000 
C)  $150,000 
D)  $350,000

Question 17

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. This will not affect costs, but demand is expected to drop 20%. Should Knoll increase the price of its product?

Accepted Answer

A)  Yes; profit will increase $30,000. 
B)  Yes, profit will increase $150,000. 
C)  No, profit will decrease $150,000. 
D)  No, profit will decrease $30,000. 
A)  Yes; profit will increase $30,000. 
B)  Yes, profit will increase $150,000. 
C)  No, profit will decrease $150,000. 
D)  No, profit will decrease $30,000.

Question 18

Chelsea Company has sales of $400,000, variable costs of $10 per unit, fixed costs of $100,000, and a target profit of $60,000. How many units were sold?

Accepted Answer

A)  12,000 
B)  18,000 
C)  24,000 
D)  30,000 
A)  12,000 
B)  18,000 
C)  24,000 
D)  30,000

Question 19

Profit is indicated on a cost-volume-profit graph by:

Accepted Answer

A)  the vertical difference between zero and the break-even point. 
B)  the horizontal difference between the revenue line and the cost line. 
C)  the vertical difference between the revenue line and the cost line. 
D)  the horizontal distance between zero and the break-even point. 
A)  the vertical difference between zero and the break-even point. 
B)  the horizontal difference between the revenue line and the cost line. 
C)  the vertical difference between the revenue line and the cost line. 
D)  the horizontal distance between zero and the break-even point.

Question 20

The degree of operating leverage can be multiplied by a change in sales to determine the change in profit

Accepted Answer

A) True 
 B)False

Cost structure refers to:

Last month Angus Company had a $30,000 loss on sales of $250,000. Fixed costs are $60,000 a month. What sales revenue is needed for Angus to break even?

Degree of operating leverage is used to:

The target sales level equals fixed costs plus variable costs divided by the contribution margin ratio

Frontier Corp. has fixed costs of $300,000 and profit of $150,000. If sales increase 20%, by how much will profits increase?

Belle Corp. has a selling price of $50 per unit, variable costs of $40 per unit, and fixed costs of $100,000. What sales revenue is needed to break-even?

The formula for break-even point in terms of units is:

Degree of operating leverage is calculated as:

At the break-even point, the margin of safety will be:

Dragon, Inc. has actual sales of $400,000 and a margin of safety of $150,000. What is Dragon's break-even point in sales?

Maggie Corp. has a selling price of $20 per unit, variable costs of $10 per unit, and fixed costs of $140,000. How many units must be sold to break even?

Rollag Corp. has a selling price of $30 and variable costs of $20 per unit. When 14,000 units are sold, profits equaled $45,000. What is the margin of safety?

Harvest Corp. has a contribution margin ratio of 30%, fixed costs of $45,000, and a profit of $60,000. What are total sales?

Chelsea Company has sales of $400,000, variable costs of $10 per unit, fixed costs of $100,000, and a target profit of $60,000. How many units were sold?

Profit is indicated on a cost-volume-profit graph by:

The degree of operating leverage can be multiplied by a change in sales to determine the change in profit

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

Cost structure refers to:

Last month Angus Company had a $30,000 loss on sales of $250,000. Fixed costs are $60,000 a month. What sales revenue is needed for Angus to break even?

Degree of operating leverage is used to:

The target sales level equals fixed costs plus variable costs divided by the contribution margin ratio

Frontier Corp. has fixed costs of $300,000 and profit of $150,000. If sales increase 20%, by how much will profits increase?

Belle Corp. has a selling price of $50 per unit, variable costs of $40 per unit, and fixed costs of $100,000. What sales revenue is needed to break-even?

The formula for break-even point in terms of units is:

Degree of operating leverage is calculated as:

At the break-even point, the margin of safety will be:

Dragon, Inc. has actual sales of $400,000 and a margin of safety of $150,000. What is Dragon's break-even point in sales?

Maggie Corp. has a selling price of $20 per unit, variable costs of $10 per unit, and fixed costs of $140,000. How many units must be sold to break even?

Rollag Corp. has a selling price of $30 and variable costs of $20 per unit. When 14,000 units are sold, profits equaled $45,000. What is the margin of safety?

Harvest Corp. has a contribution margin ratio of 30%, fixed costs of $45,000, and a profit of $60,000. What are total sales?

Chelsea Company has sales of $400,000, variable costs of $10 per unit, fixed costs of $100,000, and a target profit of $60,000. How many units were sold?

Profit is indicated on a cost-volume-profit graph by:

The degree of operating leverage can be multiplied by a change in sales to determine the change in profit

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