Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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 3

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 4

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 + $60,000)/$900,000
b.

Question 5

Fountain Corp.has a selling price of $15 per unit and variable costs of $10 per unit.When 14,000 units are sold,profits equaled $45,000.What is the margin of safety?

Accepted Answer

A) $210,000 
B) $105,000 
C) $135,000 
D) $75,000 
A) $210,000 
B) $105,000 
C) $135,000 
D) $75,000

Question 6

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 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% × $40)/$40.00
b

Question 8

Frontier Corp.sells units for $50,has unit variable costs of $20,and fixed costs of $300,000.If Frontier sells 15,000 units,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

Question 9

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 10

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 11

Skyline Corp.has a selling price of $25 per unit,variable costs of $20 per unit,and fixed costs of $25,000.What sales revenue is needed to break-even?

Accepted Answer

A) $100,000 
B) $5,000 
C) $125,000 
D) $50,000 
A) $100,000 
B) $5,000 
C) $125,000 
D) $50,000

Question 12

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 13

Cost-volume-profit analysis assumes that total costs behave in a ________ fashion.

Accepted Answer

A) Curvilinear 
B) Linear 
C) Exponential 
D) Regressive 
A) Curvilinear 
B) Linear 
C) Exponential 
D) Regressive

Question 14

Fontaine Corp.has a selling price of $15 and variable costs of $10 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) $105,000 
D) $50,000 
A) $75,000 
B) $25,000 
C) $105,000 
D) $50,000

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

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 17

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

Question 18

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% × $15)]/$15
b.$

Question 19

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

Accepted Answer

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

Question 20

Paint Corp.has sales of $600,000,a contribution margin ratio of 30%,and a profit of $40,000.If 20,000 units were sold,what is the variable cost per unit?

Accepted Answer

A) $9.00 
B) $30.00 
C) $21.00 
D) $3.00 
A) $9.00 
B) $30.00 
C) $21.00 
D) $3.00

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

The formula for target units is:

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

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?

Fountain Corp.has a selling price of $15 per unit and variable costs of $10 per unit.When 14,000 units are sold,profits equaled $45,000.What is the margin of safety?

Degree of operating leverage is calculated as:

Frontier Corp.sells units for $50,has unit variable costs of $20,and fixed costs of $300,000.If Frontier sells 15,000 units,what is its degree of operating leverage?

The margin of safety tells managers:

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?

Skyline Corp.has a selling price of $25 per unit,variable costs of $20 per unit,and fixed costs of $25,000.What sales revenue is needed to break-even?

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

Cost-volume-profit analysis assumes that total costs behave in a ________ fashion.

Fontaine Corp.has a selling price of $15 and variable costs of $10 per unit.When 10,000 units are sold,profits equaled $25,000.What is the margin of safety?

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?

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

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?

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

Paint Corp.has sales of $600,000,a contribution margin ratio of 30%,and a profit of $40,000.If 20,000 units were sold,what is the variable cost per unit?

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

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

The formula for target units is:

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

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?

Fountain Corp.has a selling price of $15 per unit and variable costs of $10 per unit.When 14,000 units are sold,profits equaled $45,000.What is the margin of safety?

Degree of operating leverage is calculated as:

Frontier Corp.sells units for $50,has unit variable costs of $20,and fixed costs of $300,000.If Frontier sells 15,000 units,what is its degree of operating leverage?

The margin of safety tells managers:

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?

Skyline Corp.has a selling price of $25 per unit,variable costs of $20 per unit,and fixed costs of $25,000.What sales revenue is needed to break-even?

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

Cost-volume-profit analysis assumes that total costs behave in a ________ fashion.

Fontaine Corp.has a selling price of $15 and variable costs of $10 per unit.When 10,000 units are sold,profits equaled $25,000.What is the margin of safety?

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?

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

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

Paint Corp.has sales of $600,000,a contribution margin ratio of 30%,and a profit of $40,000.If 20,000 units were sold,what is the variable cost per unit?

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