Question 1

Bolton Industries had actual sales of $1,000,000 when break-even sales were $600,000. What is the margin of safety ratio?

Accepted Answer

A) 40% 
B) 33% 
C) 60% 
D) 67% 
A) 40% 
B) 33% 
C) 60% 
D) 67%

Question 2

A company sells a product which has a unit sales price of $5, unit variable cost of $3 and total fixed costs of $240,000. The number of units the company must sell to break even is

Accepted Answer

A) 120,000 units. 
B) 48,000 units. 
C) 480,000 units. 
D) 80,000 units. 
A) 120,000 units. 
B) 48,000 units. 
C) 480,000 units. 
D) 80,000 units.

Question 3

Danny's Lawn Equipment has actual sales of $800,000 and a break-even point of $520,000. How much is its margin of safety ratio?

Accepted Answer

A) 35% 
B) 46% 
C) 54% 
D) 65% 
A) 35% 
B) 46% 
C) 54% 
D) 65%

Question 4

The relevant range of activity is the activity level where the firm will earn income.

Accepted Answer

A) True 
 B)False

Question 5

For purposes of CVP analysis, mixed costs must be classified into their fixed and variable elements.

Accepted Answer

A) True 
 B)False

Question 6

An activity index identifies the activity that has a causal relationship with a particular cost.

Accepted Answer

A) True 
 B)False

Question 7

The following monthly data are available for Lumberyard Company. which produces only one product: Selling price per unit, $42; Unit variable expenses, $14; Total fixed expenses, $42,000; Actual sales for the month of June, 3,000 units. How much is the margin of safety for the company for June?

Accepted Answer

A) $42,000 
B) $63,000 
C) $84,000 
D) $1,500 
A) $42,000 
B) $63,000 
C) $84,000 
D) $1,500

Question 8

If a company had a contribution margin of $1,000,000 and a contribution margin ratio of 40%, total variable costs must have been

Accepted Answer

A) $1,500,000. 
B) $600,000. 
C) $2,500,000. 
D) $400,000. 
A) $1,500,000. 
B) $600,000. 
C) $2,500,000. 
D) $400,000.

Question 9

In evaluating the margin of safety, the

Accepted Answer

A) break-even point is not relevant. 
B) higher the margin of safety ratio, the greater the margin of safety. 
C) higher the dollar amount, the lower the margin of safety. 
D) higher the margin of safety ratio, the lower the fixed costs. 
A) break-even point is not relevant. 
B) higher the margin of safety ratio, the greater the margin of safety. 
C) higher the dollar amount, the lower the margin of safety. 
D) higher the margin of safety ratio, the lower the fixed costs.

Question 10

April Industries sells a product with a contribution margin of $12 per unit, fixed costs of $223,200, and sales for the current year of $300,000. How much is April's break-even point?

Accepted Answer

A) 13,800 units 
B) $76,800 
C) 18,600 units 
D) 6,400 units 
A) 13,800 units 
B) $76,800 
C) 18,600 units 
D) 6,400 units

Question 11

Which one of the following is a name for the range over which a company expects to operate?

Accepted Answer

A) Mixed range 
B) Fixed range 
C) Variable range 
D) Relevant range 
A) Mixed range 
B) Fixed range 
C) Variable range 
D) Relevant range

Question 12

Which of the following is not a cost classification?

Accepted Answer

A) Mixed 
B) Multiple 
C) Variable 
D) Fixed 
A) Mixed 
B) Multiple 
C) Variable 
D) Fixed

Question 13

The relevant range of activity refers to the

Accepted Answer

A) geographical areas where the company plans to operate. 
B) activity level where all costs are curvilinear. 
C) levels of activity over which the company expects to operate. 
D) level of activity where all costs are constant. 
A) geographical areas where the company plans to operate. 
B) activity level where all costs are curvilinear. 
C) levels of activity over which the company expects to operate. 
D) level of activity where all costs are constant.

Question 14

Both variable and fixed costs are included in calculating the contribution margin.

Accepted Answer

A) True 
 B)False

Question 15

A fixed cost is a cost which

Accepted Answer

A) varies in total with changes in the level of activity. 
B) remains constant per unit with changes in the level of activity. 
C) varies inversely in total with changes in the level of activity. 
D) remains constant in total with changes in the level of activity. 
A) varies in total with changes in the level of activity. 
B) remains constant per unit with changes in the level of activity. 
C) varies inversely in total with changes in the level of activity. 
D) remains constant in total with changes in the level of activity.

Question 16

If the activity index decreases, total variable costs will decrease proportionately.

Accepted Answer

A) True 
 B)False

Question 17

Variable costs for Abbey, Inc. are 25% of sales. Its selling price is $100 per unit. If Abbey sells one unit more than break-even units, how much will profit increase?

Accepted Answer

A) $75 
B) $25 
C) $50 
D) $400 
A) $75 
B) $25 
C) $50 
D) $400

Question 18

A division sold 200,000 calculators during 2017: $\begin{array}{lr}\text { Sales }&&\$2,000,000\
\text { Variable costs: }\
\text { Materials } & \$ 380,000 \
\text { Order processing } & 150,000 \
\text { Billing labor } & 110,000 \
\text { Selling expenses } & 60,000\
\text { Total variable costs }&&700,000\\text { Fixed costs }&&1,000,000
\end{array}$ How much is the unit contribution margin?

Accepted Answer

A) $1.00 
B) $3.50 
C) $8.50 
D) $6.50 
A) $1.00 
B) $3.50 
C) $8.50 
D) $6.50

Question 19

Walters Corporation sells radios for $50 per unit. The fixed costs are $525,000 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 $125,000 and variable costs will be 50% of the selling price. The new break-even point in units is:

Accepted Answer

A) 26,250 
B) 26,000 
C) 25,750 
D) 21,000 
A) 26,250 
B) 26,000 
C) 25,750 
D) 21,000

Question 20

Vintage Wines has fixed costs of $20,000 per year. Its warehouse sells wine with variable costs of 80% of its unit selling price. How much in sales does Vintage need to break even per year?

Accepted Answer

A) $16,000 
B) $4,000 
C) $25,000 
D) $100,000 
A) $16,000 
B) $4,000 
C) $25,000 
D) $100,000

Exam 17: Cost-Volume-Profit

Bolton Industries had actual sales of $1,000,000 when break-even sales were $600,000. What is the margin of safety ratio?

A company sells a product which has a unit sales price of $5, unit variable cost of $3 and total fixed costs of $240,000. The number of units the company must sell to break even is

Danny's Lawn Equipment has actual sales of $800,000 and a break-even point of $520,000. How much is its margin of safety ratio?

The relevant range of activity is the activity level where the firm will earn income.

For purposes of CVP analysis, mixed costs must be classified into their fixed and variable elements.

An activity index identifies the activity that has a causal relationship with a particular cost.

The following monthly data are available for Lumberyard Company. which produces only one product: Selling price per unit, $42; Unit variable expenses, $14; Total fixed expenses, $42,000; Actual sales for the month of June, 3,000 units. How much is the margin of safety for the company for June?

If a company had a contribution margin of $1,000,000 and a contribution margin ratio of 40%, total variable costs must have been

In evaluating the margin of safety, the

April Industries sells a product with a contribution margin of $12 per unit, fixed costs of $223,200, and sales for the current year of $300,000. How much is April's break-even point?

Which one of the following is a name for the range over which a company expects to operate?

Which of the following is not a cost classification?

The relevant range of activity refers to the

Both variable and fixed costs are included in calculating the contribution margin.

A fixed cost is a cost which

If the activity index decreases, total variable costs will decrease proportionately.

Variable costs for Abbey, Inc. are 25% of sales. Its selling price is $100 per unit. If Abbey sells one unit more than break-even units, how much will profit increase?

A division sold 200,000 calculators during 2017: Sales \2 ,000,000 Variable costs: Materials \ 380,000 Order processing 150,000 Billing labor 110,000 Selling expenses 60,000 Total variable costs 700,000 Fixed costs 1,000,000 How much is the unit contribution margin?

Vintage Wines has fixed costs of $20,000 per year. Its warehouse sells wine with variable costs of 80% of its unit selling price. How much in sales does Vintage need to break even per year?

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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