Question 1

When a company has limited resources, management must decide which products to make and sell in order to maximize net income.

Accepted Answer

A) True 
 B)False

Question 2

Brooks Corporation can sell all the units it can produce of either Plain or Fancy but not both. Plain has a unit contribution margin of $72 and takes two machine hours to make and Fancy has a unit contribution margin of $90 and takes three machine hours to make. There are 2,400 machine hours available to manufacture a product. What should Brooks do?

Accepted Answer

A) Make Fancy which creates $18 more profit per unit than Plain does. 
B) Make Plain which creates $6 more profit per machine hour than Fancy does. 
C) Make Plain because more units can be made and sold than Fancy. 
D) The same total profits exist regardless of which product is made. 
A) Make Fancy which creates $18 more profit per unit than Plain does. 
B) Make Plain which creates $6 more profit per machine hour than Fancy does. 
C) Make Plain because more units can be made and sold than Fancy. 
D) The same total profits exist regardless of which product is made.

Question 3

In a sales mix situation, at any level of units sold, net income will be higher if

Accepted Answer

A) more higher contribution margin units are sold than lower contribution margin units. 
B) more lower contribution margin units are sold than higher contribution margin units. 
C) more fixed expenses are incurred. 
D) weighted-average unit contribution margin decreases. 
A) more higher contribution margin units are sold than lower contribution margin units. 
B) more lower contribution margin units are sold than higher contribution margin units. 
C) more fixed expenses are incurred. 
D) weighted-average unit contribution margin decreases.

Question 4

In 2016, Carow sold 3,000 units at $500 each. Variable expenses were $250 per unit, and fixed expenses were $500,000. The same selling price is expected for 2017. Carow is tentatively planning to invest in equipment that would increase fixed costs by 20%, while decreasing variable costs per unit by 20%. What is Carow's break-even point in units for 2017?

Accepted Answer

A) 2,000 
B) 2,400 
C) 2,500 
D) 3,000 
A) 2,000 
B) 2,400 
C) 2,500 
D) 3,000

Question 5

Outsourcing production will

Accepted Answer

A) reduce fixed costs and increase variable costs. 
B) reduce variable costs and increase fixed costs. 
C) have no effect on the relative proportion of fixed and variable costs. 
D) make the company more susceptible to economic swings. 
A) reduce fixed costs and increase variable costs. 
B) reduce variable costs and increase fixed costs. 
C) have no effect on the relative proportion of fixed and variable costs. 
D) make the company more susceptible to economic swings.

Question 6

For Franklin, Inc., sales is $2,000,000, fixed expenses are $600,000, and the contribution margin ratio is 36%. What are the total variable expenses?

Accepted Answer

A) $384,000 
B) $720,000 
C) $1,280,000 
D) $2,000,000 
A) $384,000 
B) $720,000 
C) $1,280,000 
D) $2,000,000

Question 7

The sales mix percentages for Novotna's Boston and Seattle Divisions are 70% and 30%. The contribution margin ratios are: Boston (40%) and Seattle (30%). Fixed costs are $2,220,000. What is Novotna's break-even point in dollars?

Accepted Answer

A) $777,000 
B) $6,000,000 
C) $6,342,856 
D) $6,727,272 
A) $777,000 
B) $6,000,000 
C) $6,342,856 
D) $6,727,272

Question 8

Woolford's CVP income statement included sales of 5,000 units, a selling price of $50, variable expenses of $30 per unit, and net income of $25,000. Fixed expenses are

Accepted Answer

A) $75,000. 
B) $100,000. 
C) $150,000. 
D) $250,000. 
A) $75,000. 
B) $100,000. 
C) $150,000. 
D) $250,000.

Question 9

Ramirez Corporation sells two types of computer hard drives. The sales mix is 30% (Q-Drive) and 70% (Q-Drive Plus). Q-Drive has variable costs per unit of $90 and a selling price of $150. Q-Drive Plus has variable costs per unit of $105 and a selling price of $195. The weighted-average unit contribution margin for Ramirez is

Accepted Answer

A) $69. 
B) $75. 
C) $81. 
D) $150. 
A) $69. 
B) $75. 
C) $81. 
D) $150.

Question 10

The weighted-average contribution margin of all the products is computed when determining the break-even sales for a multi-product firm.

Accepted Answer

A) True 
 B)False

Question 11

If a company has limited machine hours available for production, it is generally more profitable to produce and sell the product with the highest contribution margin per machine hour.

Accepted Answer

A) True 
 B)False

Question 12

In CVP analysis, cost includes manufacturing costs but not selling and administrative expenses.

Accepted Answer

A) True 
 B)False

Question 13

For Buffalo Co., at a sales level of 4,000 units, sales is $75,000, variable expenses total $50,000, and fixed expenses are $21,000. What is the contribution margin per unit?

Accepted Answer

A) $5.25 
B) $6.25 
C) $12.50 
D) $18.75 
A) $5.25 
B) $6.25 
C) $12.50 
D) $18.75

Question 14

The CVP income statement classifies costs

Accepted Answer

A) as variable or fixed and computes contribution margin. 
B) by function and computes a contribution margin. 
C) as variable or fixed and computes gross margin. 
D) by function and computes a gross margin. 
A) as variable or fixed and computes contribution margin. 
B) by function and computes a contribution margin. 
C) as variable or fixed and computes gross margin. 
D) by function and computes a gross margin.

Question 15

Capitol Manufacturing sells 4,000 units of Product A annually, and 6,000 units of Product B annually. The sales mix for Product A is

Accepted Answer

A) 40%. 
B) 60%. 
C) 67%. 
D) Cannot determine from information given. 
A) 40%. 
B) 60%. 
C) 67%. 
D) Cannot determine from information given.

Question 16

Contribution margin is the amount of revenue remaining after deducting

Accepted Answer

A) cost of goods sold. 
B) fixed costs. 
C) variable costs. 
D) contra-revenue. 
A) cost of goods sold. 
B) fixed costs. 
C) variable costs. 
D) contra-revenue.

Question 17

A cost structure which relies more heavily on fixed costs makes the company

Accepted Answer

A) more sensitive to changes in sales revenue. 
B) less sensitive to changes in sales revenue. 
C) either more or less sensitive to changes in sales revenue, depending on other factors. 
D) have a lower break-even point. 
A) more sensitive to changes in sales revenue. 
B) less sensitive to changes in sales revenue. 
C) either more or less sensitive to changes in sales revenue, depending on other factors. 
D) have a lower break-even point.

Question 18

A company with a higher contribution margin ratio is

Accepted Answer

A) more sensitive to changes in sales revenue. 
B) less sensitive to changes in sales revenue. 
C) either more or less sensitive to changes in sales revenue, depending on other factors. 
D) likely to have a lower breakeven point. 
A) more sensitive to changes in sales revenue. 
B) less sensitive to changes in sales revenue. 
C) either more or less sensitive to changes in sales revenue, depending on other factors. 
D) likely to have a lower breakeven point.

Question 19

For Pierce Company, sales is $500,000, variable expenses are $340,000, and fixed expenses are $140,000. Pierce's contribution margin ratio is

Accepted Answer

A) 4%. 
B) 28%. 
C) 32%. 
D) 68%. 
A) 4%. 
B) 28%. 
C) 32%. 
D) 68%.

Question 20

Which of the following statements is not true?

Accepted Answer

A) Operating leverage refers to the extent to which a company's net income reacts to a given change in sales. 
B) Companies that have higher fixed costs relative to variable costs have higher operating leverage. 
C) When a company's sales revenue is increasing, high operating leverage is good because it means that profits will increase rapidly. 
D) When a company's sales revenue is decreasing, high operating leverage is good because it means that profits will decrease at a slower pace than revenues decrease. 
A) Operating leverage refers to the extent to which a company's net income reacts to a given change in sales. 
B) Companies that have higher fixed costs relative to variable costs have higher operating leverage. 
C) When a company's sales revenue is increasing, high operating leverage is good because it means that profits will increase rapidly. 
D) When a company's sales revenue is decreasing, high operating leverage is good because it means that profits will decrease at a slower pace than revenues decrease.

When a company has limited resources, management must decide which products to make and sell in order to maximize net income.

In a sales mix situation, at any level of units sold, net income will be higher if

Outsourcing production will

For Franklin, Inc., sales is $2,000,000, fixed expenses are $600,000, and the contribution margin ratio is 36%. What are the total variable expenses?

The sales mix percentages for Novotna's Boston and Seattle Divisions are 70% and 30%. The contribution margin ratios are: Boston (40%) and Seattle (30%). Fixed costs are $2,220,000. What is Novotna's break-even point in dollars?

Woolford's CVP income statement included sales of 5,000 units, a selling price of $50, variable expenses of $30 per unit, and net income of $25,000. Fixed expenses are

The weighted-average contribution margin of all the products is computed when determining the break-even sales for a multi-product firm.

If a company has limited machine hours available for production, it is generally more profitable to produce and sell the product with the highest contribution margin per machine hour.

In CVP analysis, cost includes manufacturing costs but not selling and administrative expenses.

For Buffalo Co., at a sales level of 4,000 units, sales is $75,000, variable expenses total $50,000, and fixed expenses are $21,000. What is the contribution margin per unit?

The CVP income statement classifies costs

Capitol Manufacturing sells 4,000 units of Product A annually, and 6,000 units of Product B annually. The sales mix for Product A is

Contribution margin is the amount of revenue remaining after deducting

A cost structure which relies more heavily on fixed costs makes the company

A company with a higher contribution margin ratio is

For Pierce Company, sales is $500,000, variable expenses are $340,000, and fixed expenses are $140,000. Pierce's contribution margin ratio is

Which of the following statements is not true?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters

Exam 18: Cost-Volume-Profit Analysis: Additional Issues

When a company has limited resources, management must decide which products to make and sell in order to maximize net income.

In a sales mix situation, at any level of units sold, net income will be higher if

Outsourcing production will

For Franklin, Inc., sales is $2,000,000, fixed expenses are $600,000, and the contribution margin ratio is 36%. What are the total variable expenses?

The sales mix percentages for Novotna's Boston and Seattle Divisions are 70% and 30%. The contribution margin ratios are: Boston (40%) and Seattle (30%). Fixed costs are $2,220,000. What is Novotna's break-even point in dollars?

Woolford's CVP income statement included sales of 5,000 units, a selling price of $50, variable expenses of $30 per unit, and net income of $25,000. Fixed expenses are

The weighted-average contribution margin of all the products is computed when determining the break-even sales for a multi-product firm.

If a company has limited machine hours available for production, it is generally more profitable to produce and sell the product with the highest contribution margin per machine hour.

In CVP analysis, cost includes manufacturing costs but not selling and administrative expenses.

For Buffalo Co., at a sales level of 4,000 units, sales is $75,000, variable expenses total $50,000, and fixed expenses are $21,000. What is the contribution margin per unit?

The CVP income statement classifies costs

Capitol Manufacturing sells 4,000 units of Product A annually, and 6,000 units of Product B annually. The sales mix for Product A is

Contribution margin is the amount of revenue remaining after deducting

A cost structure which relies more heavily on fixed costs makes the company

A company with a higher contribution margin ratio is

For Pierce Company, sales is $500,000, variable expenses are $340,000, and fixed expenses are $140,000. Pierce's contribution margin ratio is

Which of the following statements is not true?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters