Question 1

Which of the measures the extent to which the entity's cost function is made up of fixed costs?

Accepted Answer

A)  Operating leverage. 
B)  Total contribution margin. 
C)  Margin of safety. 
D)  Fixed cost leverage. 
A)  Operating leverage. 
B)  Total contribution margin. 
C)  Margin of safety. 
D)  Fixed cost leverage.

Question 2

Breakeven point is the point at which the entity achieves zero profit.

Accepted Answer

A) True 
 B)False

Question 3

At a breakeven point of 20,000 units, the variable costs were $30,000 and the fixed costs were $80,000. What will the next (i.e., 20,001st) unit sold contribute to profit before income taxes?

Accepted Answer

A)  $5.50 
B)  $4.00 
C)  $1.50 
D)  Cannot be determined. 
A)  $5.50 
B)  $4.00 
C)  $1.50 
D)  Cannot be determined.

Question 4

Reliable Solutions provides three services to its customers. It currently offers Basic, Deluxe and Complete Solutions. The company estimates customers will purchase the following solutions; Basic - 20, Deluxe - 5 and Complete - 15. The estimated sales mix is therefore Basic 50%, Deluxe 12.5% and Complete 37.5%.

Accepted Answer

A) True 
 B)False

Question 5

The Madison Co produces a single product. Its cost structure is: $$\begin{array} { | l | c | c | } 
\hline & \text { Fixd Cast } & \text { Variable Cast per Unit } \
\hline \text { Manufacturing Casts } & \$ 60,000 & \$ 35 \
\hline \text { Nan-Manufacturing Casts } & \$ 35,000 & \$ 10 \
\hline
\end{array}$$ If the firm sells 15,000 units per period, what price should be charged to earn $65,000?

Accepted Answer

A)  $55 
B)  $25 
C)  $50 
D)  $45 
A)  $55 
B)  $25 
C)  $50 
D)  $45

Question 6

Kingsbrae Company produces a single product. Following is cost information: $\begin{array}{lcc}
&& \text { Variable Cost } \
&\underline{\text { Fixed Costs }} &\underline{ \text { Per Unit }}\
\text { Manufacturing costs } & \$ 35,000 & \$ 15 \
\text { Non-manufacturing costs } & 60,000 & 10
\end{array}$ If the product sells for $100, how many units must be sold to break even?

Accepted Answer

A)  412 
B)  1118 
C)  1,267 
D)  3,800 
A)  412 
B)  1118 
C)  1,267 
D)  3,800

Question 7

Kelly Co. incurs $465, 000 in fixed costs while producing three products with the following characteristics: $$\begin{array} { | l | c | c | c | } 
\hline \text { Product } & \text { Sales Mix (units) } & \begin{array} { c } 
\text { Contribution } \
\text { Mar gin per unit }
\end{array} & \begin{array} { c } 
\text { Contribution } \
\text { Margin Ratin }
\end{array} \
\hline \text { Srnall } & 5 & \$ 300 & 25 \% \
\hline \text { Medium } & 3 & \$ 200 & 30 \% \
\hline \text { Larpe } & 2 & \$ 500 & 40 \% \
\hline
\end{array}$$ At the breakeven point, what is the dollar sales volume for Product Q?

Accepted Answer

A)  $800,000 
B)  $360,000 
C)  $300, 000 
D)  $120,000 
A)  $800,000 
B)  $360,000 
C)  $300, 000 
D)  $120,000

Question 8

If the total contribution margin increases and fixed costs do not change, pre-tax profit:

Accepted Answer

A)  decreases by an equal amount. 
B)  increases by an equal amount. 
C)  does not change. 
D)  increases by some other amount. 
A)  decreases by an equal amount. 
B)  increases by an equal amount. 
C)  does not change. 
D)  increases by some other amount.

Question 9

If the relevant range changes due to expanding operations the CVP analysis should be restated.

Accepted Answer

A) True 
 B)False

Question 10

CVP analysis is a management tool that examines changes in profits in response to changes in sales, costs and prices.

Accepted Answer

A) True 
 B)False

Question 11

Contribution margin ratio can be described as the percentage by which the selling price exceeds the variable cost per unit.

Accepted Answer

A) True 
 B)False

Question 12

A small margin of safety gives managers greater confidence in making plans such as incurring additional fixed costs.

Accepted Answer

A) True 
 B)False

Question 13

Kaitlyn's Cakes had the following activity for December: 
Total cakes sold 23,000
Total revenues $500,000
Total fixed costs 99,000
Total variable costs 350,000
What was Kaitlyn's margin of safety, in dollars?

Accepted Answer

A)  $330,000 
B)  $247,500 
C)  $347,500 
D)  $170,000 
A)  $330,000 
B)  $247,500 
C)  $347,500 
D)  $170,000

Question 14

Use the following information for following questions

Bijoux Ltd manufactures and sells a single product. This product has the following operational data:

$\begin{array}{lr}
\text { Unit sales price } & 50 \
\text { Variable manufacturing cost per unit } & 25 \
\text { Fixed manufacturing costs } & 72,000 \
\text { Variable selling cost per unit } & 2 \
\text { Fixed selling costs } & 57,000 \
\text { Marginal tax rate } & 20 \%
\end{array}$
-Calculate the number of units required to break even.

Accepted Answer

A)  5609 units 
B)  5160 units 
C)  2880 
D)  2280 
A)  5609 units 
B)  5160 units 
C)  2880 
D)  2280

Question 15

Managers can use the degree of operating leverage to explicitly calculate the sensitivity of profits to changes in sales.

Accepted Answer

A) True 
 B)False

Question 16

A firm with fixed costs of $161,500 per month sells three products with the following characteristics: $\begin{array}{ccc}
&\text { Sales Mix}&\text { Contribution }\ 
\underline{\text { Product }} & \underline{\text { Percentage }} & \underline{\text { Margin } }\
\text {  P }& 25 \% & \$ 48 \
\text { Q} & 50 \% & 50 \
\text { R }& 25 \% & 52
\end{array}$
 How many total units must be sold to breakeven?

Accepted Answer

A)  3,230 
B)  1,230 
C)  2,153 
D)  1,077 
A)  3,230 
B)  1,230 
C)  2,153 
D)  1,077

Question 17

CVP analysis can be used to help managers assess the risk associated with a business venture by comparing breakeven point to sales forecasted.

Accepted Answer

A) True 
 B)False

Question 18

Endeavour Ltd. is a management consulting firm specialising in pension plans. Its billing rate to clients is $120 per hour, and variable costs average $80 per hour. Fixed costs are $38,000 per month. The income tax rate is 20%. If fixed costs increase by 5% and management increases its billing rate by 20%, what is the effect on the breakeven point, in billable hours?

Accepted Answer

A)  It increases the breakeven point. 
B)  The breakeven point will not change. 
C)  It decreases the breakeven point. 
D)  Cannot be determined. 
A)  It increases the breakeven point. 
B)  The breakeven point will not change. 
C)  It decreases the breakeven point. 
D)  Cannot be determined.

Question 19

The degree of operating leverage and margin of safety are reciprocals.

Accepted Answer

A) True 
 B)False

Question 20

A company can produce and sell 500 units at $10 each; its variable costs are $6 per unit; fixed costs total $1000. Its expected profit using the profit equation will be $1, 000.

Accepted Answer

A) True 
 B)False

Which of the measures the extent to which the entity's cost function is made up of fixed costs?

Breakeven point is the point at which the entity achieves zero profit.

At a breakeven point of 20,000 units, the variable costs were $30,000 and the fixed costs were $80,000. What will the next (i.e., 20,001^st) unit sold contribute to profit before income taxes?

The Madison Co produces a single product. Its cost structure is: Fixd Cast Variable Cast per Unit Manufacturing Casts \ 60,000 \ 35 Nan-Manufacturing Casts \ 35,000 \ 10 If the firm sells 15,000 units per period, what price should be charged to earn $65,000?

Kingsbrae Company produces a single product. Following is cost information: Variable Cost Manufacturing costs \ 35,000 \ 15 Non-manufacturing costs 60,000 10 If the product sells for $100, how many units must be sold to break even?

If the total contribution margin increases and fixed costs do not change, pre-tax profit:

If the relevant range changes due to expanding operations the CVP analysis should be restated.

CVP analysis is a management tool that examines changes in profits in response to changes in sales, costs and prices.

Contribution margin ratio can be described as the percentage by which the selling price exceeds the variable cost per unit.

A small margin of safety gives managers greater confidence in making plans such as incurring additional fixed costs.

Kaitlyn's Cakes had the following activity for December: Total cakes sold 23,000 Total revenues $500,000 Total fixed costs 99,000 Total variable costs 350,000 What was Kaitlyn's margin of safety, in dollars?

Managers can use the degree of operating leverage to explicitly calculate the sensitivity of profits to changes in sales.

A firm with fixed costs of $161,500 per month sells three products with the following characteristics: Sales Mix Contribution P 25\% \ 48 Q 50\% 50 R 25\% 52 How many total units must be sold to breakeven?

CVP analysis can be used to help managers assess the risk associated with a business venture by comparing breakeven point to sales forecasted.

The degree of operating leverage and margin of safety are reciprocals.

A company can produce and sell 500 units at $10 each; its variable costs are $6 per unit; fixed costs total $1000. Its expected profit using the profit equation will be $1, 000.

The Role of Accounting Information in Management Decision Making

Cost Concepts, Behaviour and Estimation

A Costing Framework and Cost Allocation

Planning Budgeting and Behaviour

Operational Budgets

Job and Process Costing Systems

Flexible Budgets, Standard Costs and Variance Analysis

Variance Analysis: Revenue and Cost

Activity Analysis: Costing and Management

Relevant Costs for Decision Making

Strategy and Control

Capital Budgeting and Strategic Investment Decisions

The Strategic Management of Costs and Revenues

Strategic Management Control: a Lean Perspective

Responsibility Accounting, Performance Evaluation and Transfer Pricing

The Balanced Scorecard and Strategy Maps

Rewards, Incentives and Risk Management

Sustainability Management Accounting

Filters

Exam 4: Costvolumeprofit Cvp Analysis

Which of the measures the extent to which the entity's cost function is made up of fixed costs?

Breakeven point is the point at which the entity achieves zero profit.

At a breakeven point of 20,000 units, the variable costs were $30,000 and the fixed costs were $80,000. What will the next (i.e., 20,001st) unit sold contribute to profit before income taxes?

The Madison Co produces a single product. Its cost structure is: Fixd Cast Variable Cast per Unit Manufacturing Casts \ 60,000 \ 35 Nan-Manufacturing Casts \ 35,000 \ 10 If the firm sells 15,000 units per period, what price should be charged to earn $65,000?

Kingsbrae Company produces a single product. Following is cost information: Variable Cost Manufacturing costs \ 35,000 \ 15 Non-manufacturing costs 60,000 10 If the product sells for $100, how many units must be sold to break even?

If the total contribution margin increases and fixed costs do not change, pre-tax profit:

If the relevant range changes due to expanding operations the CVP analysis should be restated.

CVP analysis is a management tool that examines changes in profits in response to changes in sales, costs and prices.

Contribution margin ratio can be described as the percentage by which the selling price exceeds the variable cost per unit.

A small margin of safety gives managers greater confidence in making plans such as incurring additional fixed costs.

Kaitlyn's Cakes had the following activity for December: Total cakes sold 23,000 Total revenues $500,000 Total fixed costs 99,000 Total variable costs 350,000 What was Kaitlyn's margin of safety, in dollars?

Managers can use the degree of operating leverage to explicitly calculate the sensitivity of profits to changes in sales.

A firm with fixed costs of $161,500 per month sells three products with the following characteristics: Sales Mix Contribution P 25\% \ 48 Q 50\% 50 R 25\% 52 How many total units must be sold to breakeven?

CVP analysis can be used to help managers assess the risk associated with a business venture by comparing breakeven point to sales forecasted.

The degree of operating leverage and margin of safety are reciprocals.

A company can produce and sell 500 units at $10 each; its variable costs are $6 per unit; fixed costs total $1000. Its expected profit using the profit equation will be $1, 000.

The Role of Accounting Information in Management Decision Making

Cost Concepts, Behaviour and Estimation

A Costing Framework and Cost Allocation

Planning Budgeting and Behaviour

Operational Budgets

Job and Process Costing Systems

Flexible Budgets, Standard Costs and Variance Analysis

Variance Analysis: Revenue and Cost

Activity Analysis: Costing and Management

Relevant Costs for Decision Making

Strategy and Control

Capital Budgeting and Strategic Investment Decisions

The Strategic Management of Costs and Revenues

Strategic Management Control: a Lean Perspective

Responsibility Accounting, Performance Evaluation and Transfer Pricing

The Balanced Scorecard and Strategy Maps

Rewards, Incentives and Risk Management

Sustainability Management Accounting

Filters

At a breakeven point of 20,000 units, the variable costs were $30,000 and the fixed costs were $80,000. What will the next (i.e., 20,001^st) unit sold contribute to profit before income taxes?