Question 1

In applying the high-low method, what is the fixed cost? $\begin{array}{llr}\text { Month}& \text {  Miles }& \text { Total Cost }\\hline
\text { January } & 80,000 & \$ 192,000 \
\text { February } & 50,000 & 160,000 \
\text { March } & 70,000 & 188,000 \
\text { April } & 90,000 & 260,000
\end{array}$

Accepted Answer

A) $35,000 
B) $72,000 
C) $28,000 
D) $100,000 
A) $35,000 
B) $72,000 
C) $28,000 
D) $100,000 A

Question 2

Contribution margin

Accepted Answer

A) is always the same as gross profit margin. 
B) excludes variable selling costs from its calculation. 
C) is calculated by subtracting total manufacturing costs per unit from sales revenue per unit. 
D) equals sales revenue minus variable costs. 
A) is always the same as gross profit margin. 
B) excludes variable selling costs from its calculation. 
C) is calculated by subtracting total manufacturing costs per unit from sales revenue per unit. 
D) equals sales revenue minus variable costs. D

Question 3

Frazier Manufacturing Company collected the following production data for the past month: $\begin{array}{rr}\text { Units Produced } &\text { Total Cost }\
1,600 & \$ 66,000 \
1,300 & 57,000 \
1,500 & 67,500 \
1,100 & 49,500
\end{array}$ If the high-low method is used, what is the monthly total cost equation?

Accepted Answer

A) Total cost = $13,200 + $33/unit 
B) Total cost = $16,500 + $30/unit 
C) Total cost = $0 + $45/unit 
D) Total cost = $9,900 + $36/unit 
A) Total cost = $13,200 + $33/unit 
B) Total cost = $16,500 + $30/unit 
C) Total cost = $0 + $45/unit 
D) Total cost = $9,900 + $36/unit A

Question 4

A variable cost remains constant per unit at various levels of activity.

Accepted Answer

A) True 
 B)False

Question 5

If variable costs per unit are 70% of sales, fixed costs are $290,000 and target net income is $70,000, required sales are $1,200,000.

Accepted Answer

A) True 
 B)False

Question 6

Cunningham, Inc. sells MP3 players for $60 each. Variable costs are $40 per unit, and fixed costs total $120,000. What sales are needed by Cunningham to break even?

Accepted Answer

A) $160,000. 
B) $300,000. 
C) $360,000. 
D) $480,000. 
A) $160,000. 
B) $300,000. 
C) $360,000. 
D) $480,000.

Question 7

Required sales in dollars to meet a target net income is computed by dividing

Accepted Answer

A) fixed costs plus target net income by unit contribution margin. 
B) variable costs plus target net income by unit contribution margin. 
C) fixed costs plus target net income by contribution margin ratio. 
D) total costs plus target net income by contribution margin ratio. 
A) fixed costs plus target net income by unit contribution margin. 
B) variable costs plus target net income by unit contribution margin. 
C) fixed costs plus target net income by contribution margin ratio. 
D) total costs plus target net income by contribution margin ratio.

Question 8

Which of the following would not be an acceptable way to express contribution margin?

Accepted Answer

A) Sales minus variable costs 
B) Sales minus unit costs 
C) Unit selling price minus unit variable costs 
D) Unit contribution margin divided by unit selling price 
A) Sales minus variable costs 
B) Sales minus unit costs 
C) Unit selling price minus unit variable costs 
D) Unit contribution margin divided by unit selling price

Question 9

The break-even point is where total sales equal total fixed costs.

Accepted Answer

A) True 
 B)False

Question 10

A mixed cost has both selling and administrative cost elements.

Accepted Answer

A) True 
 B)False

Question 11

Nelson Manufacturing has the following data:
Variable costs are 60% of the unit selling price.
The contribution margin ratio is 40%.
The unit contribution margin is $500.
The fixed costs are $500,000.
Which of the following does not express the break-even point?

Accepted Answer

A) $500,000 + .60X = X 
B) $500,000 + .40X = X 
C) $500,000 ÷ $500 = X 
D) $500,000 ÷ .40 = X 
A) $500,000 + .60X = X 
B) $500,000 + .40X = X 
C) $500,000 ÷ $500 = X 
D) $500,000 ÷ .40 = X

Question 12

Fixed costs are $900,000 and the variable costs are 75% of the unit selling price. What is the break-even point in dollars?

Accepted Answer

A) $2,100,000 
B) $2,700,000 
C) $3,600,000 
D) $1,200,000 
A) $2,100,000 
B) $2,700,000 
C) $3,600,000 
D) $1,200,000

Question 13

Greg's Golf Carts produces two models: Model 24 has sales of 500 units with a contribution margin of $40 each; Model 26 has sales of 350 units with a contribution margin of $50 each. If sales of Model 26 increase by 100 units, how much will profit change?

Accepted Answer

A) $5,000 increase 
B) $17,500 increase 
C) $22,500 increase 
D) $35,000 increase 
A) $5,000 increase 
B) $17,500 increase 
C) $22,500 increase 
D) $35,000 increase

Question 14

Kaplan, Inc. produces flash drives for computers, which it sells for $27 each. The variable cost to make each flash drive is $13. During April, 700 drives were sold. Fixed costs for April were $2 per unit for a total of $1,400 for the month. How much is the monthly break-even level of sales in dollars for Kaplan?

Accepted Answer

A) $100 
B) $2,700 
C) $14,000 
D) $8,400 
A) $100 
B) $2,700 
C) $14,000 
D) $8,400

Question 15

Gall Manufacturing sells a product for $50 per unit. The fixed costs are $840,000 and the variable costs are 60% of the selling price. As a result of new automated equipment, it is anticipated that fixed costs will increase by $200,000 and variable costs will be 50% of the selling price. The new break-even point in units is:

Accepted Answer

A) 42,000. 
B) 41,600. 
C) 41,200. 
D) 33,600. 
A) 42,000. 
B) 41,600. 
C) 41,200. 
D) 33,600.

Question 16

A CVP graph does not include a

Accepted Answer

A) variable cost line. 
B) fixed cost line. 
C) sales line. 
D) total cost line. 
A) variable cost line. 
B) fixed cost line. 
C) sales line. 
D) total cost line.

Question 17

CVP analysis does not consider

Accepted Answer

A) level of activity. 
B) fixed cost per unit. 
C) variable cost per unit. 
D) sales mix. 
A) level of activity. 
B) fixed cost per unit. 
C) variable cost per unit. 
D) sales mix.

Question 18

Pascal, Inc. is planning to sell 900,000 units for $1.50 per unit. The contribution margin ratio is 20%. If Pascal will break even at this level of sales, what are the fixed costs?

Accepted Answer

A) $270,000. 
B) $630,000. 
C) $900,000. 
D) $1,020,000. 
A) $270,000. 
B) $630,000. 
C) $900,000. 
D) $1,020,000.

Question 19

Cost-volume-profit analysis includes all of the following assumptions except

Accepted Answer

A) the behavior of costs is curvilinear throughout the relevant range. 
B) costs can be classified accurately as either variable or fixed. 
C) changes in activity are the only factors that affect costs. 
D) all units produced are sold. 
A) the behavior of costs is curvilinear throughout the relevant range. 
B) costs can be classified accurately as either variable or fixed. 
C) changes in activity are the only factors that affect costs. 
D) all units produced are sold.

Question 20

In applying the high-low method, what is the unit variable cost? $\begin{array}{llr}\text { Month}& \text {  Miles }& \text { Total Cost }\\hline
\text { January } & 80,000 & \$ 192,000 \
\text { February } & 50,000 & 160,000 \
\text { March } & 70,000 & 188,000 \
\text { April } & 90,000 & 260,000
\end{array}$

Accepted Answer

A) $2.88 
B) $2.50 
C) $3.20 
D) Cannot be determined from the information given. 
A) $2.88 
B) $2.50 
C) $3.20 
D) Cannot be determined from the information given.

Exam 17: Cost-Volume-Profit

In applying the high-low method, what is the fixed cost? Month Miles Total Cost January 80,000 \ 192,000 February 50,000 160,000 March 70,000 188,000 April 90,000 260,000

Contribution margin

Frazier Manufacturing Company collected the following production data for the past month: Units Produced Total Cost 1,600 \ 66,000 1,300 57,000 1,500 67,500 1,100 49,500 If the high-low method is used, what is the monthly total cost equation?

A variable cost remains constant per unit at various levels of activity.

If variable costs per unit are 70% of sales, fixed costs are $290,000 and target net income is $70,000, required sales are $1,200,000.

Cunningham, Inc. sells MP3 players for $60 each. Variable costs are $40 per unit, and fixed costs total $120,000. What sales are needed by Cunningham to break even?

Required sales in dollars to meet a target net income is computed by dividing

Which of the following would not be an acceptable way to express contribution margin?

The break-even point is where total sales equal total fixed costs.

A mixed cost has both selling and administrative cost elements.

Nelson Manufacturing has the following data: Variable costs are 60% of the unit selling price. The contribution margin ratio is 40%. The unit contribution margin is $500. The fixed costs are $500,000. Which of the following does not express the break-even point?

Fixed costs are $900,000 and the variable costs are 75% of the unit selling price. What is the break-even point in dollars?

Greg's Golf Carts produces two models: Model 24 has sales of 500 units with a contribution margin of $40 each; Model 26 has sales of 350 units with a contribution margin of $50 each. If sales of Model 26 increase by 100 units, how much will profit change?

A CVP graph does not include a

CVP analysis does not consider

Pascal, Inc. is planning to sell 900,000 units for $1.50 per unit. The contribution margin ratio is 20%. If Pascal will break even at this level of sales, what are the fixed costs?

Cost-volume-profit analysis includes all of the following assumptions except

In applying the high-low method, what is the unit variable cost? Month Miles Total Cost January 80,000 \ 192,000 February 50,000 160,000 March 70,000 188,000 April 90,000 260,000

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 Analysis: Additional Issues

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

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