Question 1

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 2

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 3

What component of the profit equation should be set equal to zero to find the breakeven point?

Accepted Answer

A) Total sales revenue 
B) Total variable costs 
C) Total fixed costs 
D) Profit 
A) Total sales revenue 
B) Total variable costs 
C) Total fixed costs 
D) Profit

Question 4

Portia Company is a retailer of hammers.Portia pays $4.75 for each hammer and sells them for $8.00.Monthly fixed costs are $26,000.The hammer cost is the only variable cost.
a.What is the contribution margin per unit?
b.What is the break-even point in units?
c.How many units will Portia need to sell to earn target profit of $13,000?

Accepted Answer

a.$3.25 = $8.00 - $4.75
b.8,000 = $26,00

Question 5

The break-even point is:

Accepted Answer

A) the point where zero contribution margin is earned. 
B) the point where zero profit is earned. 
C) the point where selling price just equals variable cost. 
D) equal to sales revenue less fixed costs. 
A) the point where zero contribution margin is earned. 
B) the point where zero profit is earned. 
C) the point where selling price just equals variable cost. 
D) equal to sales revenue less fixed costs.

Question 6

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

Accepted Answer

A) $166,667 
B) $90,000 
C) $30,000 
D) $280,000 
A) $166,667 
B) $90,000 
C) $30,000 
D) $280,000

Question 7

Quail,Inc. ,has a contribution margin of 40% and fixed costs of $130,000.What is the break-even point in sales dollars?

Accepted Answer

A) $52,000 
B) $325,000 
C) $225,000 
D) $78,000 
A) $52,000 
B) $325,000 
C) $225,000 
D) $78,000

Question 8

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 9

In multiproduct cost-volume-profit analysis,an assumption made in addition to those used in single-product CVP analysis is that:

Accepted Answer

A) the sales mix remains constant. 
B) all costs can be classified as fixed or variable. 
C) costs are linear in the relevant range. 
D) production and sales are equal. 
A) the sales mix remains constant. 
B) all costs can be classified as fixed or variable. 
C) costs are linear in the relevant range. 
D) production and sales are equal.

Question 10

On a CVP graph,the break-even point is the point at which the contribution margin line crosses the total cost line.

Accepted Answer

A) True 
 B)False

Question 11

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 × 1

Question 12

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

Question 13

The break-even point is the point at which profit equals:

Accepted Answer

A) zero. 
B) the target. 
C) variable costs. 
D) less than five percent. 
A) zero. 
B) the target. 
C) variable costs. 
D) less than five percent.

Question 14

Graham Corp.sells two products.Product A sells for $200 per unit,and has unit variable costs of $150.Product B sells for $50 per unit,and has unit variable costs of $20.Currently,Graham sells three units of Product B for every two units of Product A sold.Graham has fixed costs of $760,000.How many units would Graham have to sell to earn a profit of $57,000?

Accepted Answer

A) 21,500 units of A and 21,500 units of B 
B) 12,900 units of A and 8,600 units of B 
C) 8,600 units of A and 12,900 units of B 
D) 10,750 units of A and 10,750 units of B 
A) 21,500 units of A and 21,500 units of B 
B) 12,900 units of A and 8,600 units of B 
C) 8,600 units of A and 12,900 units of B 
D) 10,750 units of A and 10,750 units of B

Question 15

In multiproduct cost-volume-profit analysis,a break-even point must be calculated separately for each product.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Degree of operating leverage is calculated by dividing sales by profit.

Accepted Answer

A) True 
 B)False

Question 19

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

Question 20

Elk Corp.has sales of $300,000,a contribution margin ratio of 40%,and a target profit of $30,000.If 20,000 units were sold,what is the variable cost per unit?

Accepted Answer

A) $22.50 
B) $9.00 
C) $6.00 
D) $2.00 
A) $22.50 
B) $9.00 
C) $6.00 
D) $2.00

The margin of safety is the difference between:

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?

What component of the profit equation should be set equal to zero to find the breakeven point?

The break-even point is:

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

Quail,Inc. ,has a contribution margin of 40% and fixed costs of $130,000.What is the break-even point in sales dollars?

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?

In multiproduct cost-volume-profit analysis,an assumption made in addition to those used in single-product CVP analysis is that:

On a CVP graph,the break-even point is the point at which the contribution margin line crosses the total cost line.

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?

The break-even point is the point at which profit equals:

In multiproduct cost-volume-profit analysis,a break-even point must be calculated separately for each product.

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

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

Degree of operating leverage is calculated by dividing sales by profit.

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?

Elk Corp.has sales of $300,000,a contribution margin ratio of 40%,and a target profit of $30,000.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 margin of safety is the difference between:

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?

What component of the profit equation should be set equal to zero to find the breakeven point?

The break-even point is:

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

Quail,Inc. ,has a contribution margin of 40% and fixed costs of $130,000.What is the break-even point in sales dollars?

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?

In multiproduct cost-volume-profit analysis,an assumption made in addition to those used in single-product CVP analysis is that:

On a CVP graph,the break-even point is the point at which the contribution margin line crosses the total cost line.

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?

The break-even point is the point at which profit equals:

In multiproduct cost-volume-profit analysis,a break-even point must be calculated separately for each product.

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

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

Degree of operating leverage is calculated by dividing sales by profit.

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?

Elk Corp.has sales of $300,000,a contribution margin ratio of 40%,and a target profit of $30,000.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