Question 1

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

Accepted Answer

A) True 
 B)False  True

Question 2

Frontier Corp.has fixed costs of $300,000 and profit of $150,000.What is its degree of operating leverage?

Accepted Answer

A) 0.33 
B) 1.67 
C) 2.50 
D) 3.00 
A) 0.33 
B) 1.67 
C) 2.50 
D) 3.00 D

Question 3

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 B

Question 4

Megan,Inc.has fixed costs of $400,000,sales price of $40,and variable cost of $30 per unit.How many units must be sold to earn profit of $80,000?

Accepted Answer

A) 2,000 
B) 10,000 
C) 40,000 
D) 48,000 
A) 2,000 
B) 10,000 
C) 40,000 
D) 48,000

Question 5

Jasmine Inc.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 margin of safety in sales dollars?

Accepted Answer

a.7,500 units = $150,000/($50 - $30)
b.1

Question 6

Dancer Corp.has a selling price of $20 per unit,and variable costs of $10 per unit.When 12,000 units are sold,profits equaled $35,000.How many units must be sold to break-even?

Accepted Answer

A) 32,300 
B) 20,400 
C) 24,366 
D) 8,500 
A) 32,300 
B) 20,400 
C) 24,366 
D) 8,500

Question 7

Keith Corp.has sales of $200,000,a contribution margin ratio of 35%,and a profit of $40,000.If 10,000 units were sold,what is the variable cost per unit?

Accepted Answer

A) $13.00 
B) $20.00 
C) $7.00 
D) $3.00 
A) $13.00 
B) $20.00 
C) $7.00 
D) $3.00

Question 8

Akron Corp.had a margin of safety of $500,000 last month,with sales revenue of $1,250,000 and fixed costs of $150,000.
a.What are break-even sales?
b.What is the contribution margin ratio?
c.How much profit did Akron earn last month?
d.How much would sales have to be for Akron to earn profit of 500,000?

Accepted Answer

a.$750,000 = $1,250,000 - $500,000
b.20%

Question 9

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 10

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 11

Merlot,Inc.has fixed costs of $200,000,sales price of $50,and variable cost of $30 per unit.How many units must be sold to earn profit of $80,000?

Accepted Answer

A) 2,800 
B) 11,200 
C) 14,000 
D) 202,400 
A) 2,800 
B) 11,200 
C) 14,000 
D) 202,400

Question 12

Last month Empire Company had a $30,000 profit on sales of $250,000.Fixed costs are $60,000 a month.By how much would sales be able to decrease for Empire to still break even?

Accepted Answer

A) $90,000 
B) $83,333 
C) $166,667 
D) $280,000 
A) $90,000 
B) $83,333 
C) $166,667 
D) $280,000

Question 13

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 14

Idaho Corp.has fixed costs of $20,000 and a contribution margin ratio of 50%.Currently,sales are $75,000.What is Idaho's margin of safety?

Accepted Answer

A) $28,000 
B) $35,000 
C) $42,000 
D) $70,000 
A) $28,000 
B) $35,000 
C) $42,000 
D) $70,000

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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 17

Last month Stagecoach Company had a $60,000 loss on sales of $300,000.Fixed costs are $120,000 a month.What sales revenue is needed for Stagecoach to break even?

Accepted Answer

A) $360,000 
B) $480,000 
C) $600,000 
D) $420,000 
A) $360,000 
B) $480,000 
C) $600,000 
D) $420,000

Question 18

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 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)/$600,000
b.

Question 20

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.

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

Frontier Corp.has fixed costs of $300,000 and profit of $150,000.What is its degree of operating leverage?

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?

Megan,Inc.has fixed costs of $400,000,sales price of $40,and variable cost of $30 per unit.How many units must be sold to earn profit of $80,000?

Dancer Corp.has a selling price of $20 per unit,and variable costs of $10 per unit.When 12,000 units are sold,profits equaled $35,000.How many units must be sold to break-even?

Keith Corp.has sales of $200,000,a contribution margin ratio of 35%,and a profit of $40,000.If 10,000 units were sold,what is the variable cost per unit?

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?

Degree of operating leverage is used to:

Merlot,Inc.has fixed costs of $200,000,sales price of $50,and variable cost of $30 per unit.How many units must be sold to earn profit of $80,000?

Last month Empire Company had a $30,000 profit on sales of $250,000.Fixed costs are $60,000 a month.By how much would sales be able to decrease for Empire to still break even?

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?

Idaho Corp.has fixed costs of $20,000 and a contribution margin ratio of 50%.Currently,sales are $75,000.What is Idaho's margin of safety?

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

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

Last month Stagecoach Company had a $60,000 loss on sales of $300,000.Fixed costs are $120,000 a month.What sales revenue is needed for Stagecoach to break even?

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?

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

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing and Cost Management

Cost Behavior

Incremental Analysis for Short-Term Decision Making

Budgetary Planning

Standard Costing and Variance Analysis

Decentralized Performance Evaluation

Capital Budgeting

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters

Exam 6: Cost-Volume-Profit Analysis

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

Frontier Corp.has fixed costs of $300,000 and profit of $150,000.What is its degree of operating leverage?

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?

Megan,Inc.has fixed costs of $400,000,sales price of $40,and variable cost of $30 per unit.How many units must be sold to earn profit of $80,000?

Dancer Corp.has a selling price of $20 per unit,and variable costs of $10 per unit.When 12,000 units are sold,profits equaled $35,000.How many units must be sold to break-even?

Keith Corp.has sales of $200,000,a contribution margin ratio of 35%,and a profit of $40,000.If 10,000 units were sold,what is the variable cost per unit?

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?

Degree of operating leverage is used to:

Merlot,Inc.has fixed costs of $200,000,sales price of $50,and variable cost of $30 per unit.How many units must be sold to earn profit of $80,000?

Last month Empire Company had a $30,000 profit on sales of $250,000.Fixed costs are $60,000 a month.By how much would sales be able to decrease for Empire to still break even?

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?

Idaho Corp.has fixed costs of $20,000 and a contribution margin ratio of 50%.Currently,sales are $75,000.What is Idaho's margin of safety?

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

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

Last month Stagecoach Company had a $60,000 loss on sales of $300,000.Fixed costs are $120,000 a month.What sales revenue is needed for Stagecoach to break even?

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?

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

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing and Cost Management

Cost Behavior

Incremental Analysis for Short-Term Decision Making

Budgetary Planning

Standard Costing and Variance Analysis

Decentralized Performance Evaluation

Capital Budgeting

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters