Question 1

Which of the following is not true about the graph of a mixed cost?

Accepted Answer

A) It is possible to determine the amount of the fixed cost from the graph. 
B) There is a total cost line on the graph. 
C) The fixed cost portion of the graph is the same amount at all levels of activity. 
D) The variable cost portion of the graph is rectangular in shape. 
A) It is possible to determine the amount of the fixed cost from the graph. 
B) There is a total cost line on the graph. 
C) The fixed cost portion of the graph is the same amount at all levels of activity. 
D) The variable cost portion of the graph is rectangular in shape.

Question 2

Zehms, Inc. has a unit contribution margin of $30 and a contribution margin ratio of 60%. How much is the selling price of each unit?

Accepted Answer

A) $50 
B) $75 
C) $18 
D) Cannot be determined without more information. 
A) $50 
B) $75 
C) $18 
D) Cannot be determined without more information.

Question 3

A variable cost is a cost that

Accepted Answer

A) varies per unit at every level of activity. 
B) occurs at various times during the year. 
C) varies in total in proportion to changes in the level of activity. 
D) may or may not be incurred, depending on management's discretion. 
A) varies per unit at every level of activity. 
B) occurs at various times during the year. 
C) varies in total in proportion to changes in the level of activity. 
D) may or may not be incurred, depending on management's discretion.

Question 4

A CVP income statement shows contribution margin instead of gross profit.

Accepted Answer

A) True 
 B)False

Question 5

Dunbar Manufacturing's variable costs are 30% of sales. The company is contemplating an advertising campaign that will cost $55,000. If sales are expected to increase $100,000, by how much will the company's net income increase?

Accepted Answer

A) $45,000 
B) $70,000 
C) $30,000 
D) $15,000 
A) $45,000 
B) $70,000 
C) $30,000 
D) $15,000

Question 6

Chung, Inc. sells 100,000 wrenches for $24 per unit. Fixed costs are $700,000 and net income is $500,000. What should be reported as variable expenses in the CVP income statement?

Accepted Answer

A) $1,080,000 
B) $1,200,000 
C) $1,900,000 
D) $1,700,000 
A) $1,080,000 
B) $1,200,000 
C) $1,900,000 
D) $1,700,000

Question 7

Armstrong Industries has a contribution margin of $240,000 and a contribution margin ratio of 30%. How much are total variable costs?

Accepted Answer

A) $72,000 
B) $560,000 
C) $168,000 
D) $800,000 
A) $72,000 
B) $560,000 
C) $168,000 
D) $800,000

Question 8

Hayduke Corporation reported the following results from the sale of 5,000 units in May: sales $300,000, variable costs $180,000, fixed costs $90,000, and net income $30,000. Assume that Hayduke increases the selling price by 5% on June 1. How many units will have to be sold in June to maintain the same level of net income?

Accepted Answer

A) 4,444. 
B) 4,600. 
C) 4,750. 
D) 5,000. 
A) 4,444. 
B) 4,600. 
C) 4,750. 
D) 5,000.

Question 9

Farmers' Industries has fixed costs of $600,000 and variable costs are 60% of sales. How much will Farmers report as sales when its net income equals $60,000?

Accepted Answer

A) $1,650,000 
B) $1,100,000 
C) $1,560,000 
D) $396,000 
A) $1,650,000 
B) $1,100,000 
C) $1,560,000 
D) $396,000

Question 10

A company has a unit contribution margin of $120 and a contribution margin ratio of 40%. What is the unit selling price?

Accepted Answer

A) $200 
B) $300 
C) $48 
D) Cannot be determined. 
A) $200 
B) $300 
C) $48 
D) Cannot be determined.

Question 11

An example of a mixed cost is

Accepted Answer

A) direct materials. 
B) supervisory salaries. 
C) utility costs. 
D) property taxes. 
A) direct materials. 
B) supervisory salaries. 
C) utility costs. 
D) property taxes.

Question 12

The following information is available for Wade Corp.: $$\begin{array} { l r l r } 
\text { Sales } & \$ 580,000 & \text { Total fixed expenses } & \$ 150,000 \
\text { Cost of goods sold } & 390,000 & \text { Total variable expenses } & 360,000
\end{array}$$ A CVP income statement would report

Accepted Answer

A) gross profit of $190,000. 
B) contribution margin of $430,000. 
C) gross profit of $220,000. 
D) contribution margin of $220,000. 
A) gross profit of $190,000. 
B) contribution margin of $430,000. 
C) gross profit of $220,000. 
D) contribution margin of $220,000.

Question 13

Why is identification of a relevant range important?

Accepted Answer

A) It is required under GAAP. 
B) Cost behavior outside of the relevant range is not linear, which distorts CVP analysis. 
C) It directly impacts the number of units of product a customer buys. 
D) It is a cost that is incurred by a company that must be accounted for. 
A) It is required under GAAP. 
B) Cost behavior outside of the relevant range is not linear, which distorts CVP analysis. 
C) It directly impacts the number of units of product a customer buys. 
D) It is a cost that is incurred by a company that must be accounted for.

Question 14

Keene, Inc. produces flash drives for computers, which it sells for $20 each. Each flash drive costs $6 of variable costs to make. During March, 1,000 drives were sold. Fixed costs for March were $5.60 per unit for a total of $5,600 for the month. If variable costs decrease by 10%, what happens to the break-even level of units per month for Keene?

Accepted Answer

A) It is 10% higher than the original break-even point. 
B) It decreases about 16 units. 
C) It decreases about 40 units. 
D) It depends on the number of units the company expects to produce and sell. 
A) It is 10% higher than the original break-even point. 
B) It decreases about 16 units. 
C) It decreases about 40 units. 
D) It depends on the number of units the company expects to produce and sell.

Question 15

Murphy Company produces flash drives for computers, which it sells for $20 each. Each flash drive costs $6 of variable costs to make. During April, 700 drives were sold. Fixed costs for April were $4 per unit for a total of $2,800 for the month. How much does Murphy's operating income increase for each $1,000 increase in revenue per month?

Accepted Answer

A) $700 
B) $500 
C) $14,000 
D) Not enough information to determine the answer. 
A) $700 
B) $500 
C) $14,000 
D) Not enough information to determine the answer.

Question 16

Which is the true statement?

Accepted Answer

A) In a CVP income statement, costs and expenses are classified only by function. 
B) The CVP income statement is prepared for both internal and external use. 
C) The CVP income statement shows contribution margin instead of gross profit. 
D) In a traditional income statement, costs and expenses are classified as either variable or fixed. 
A) In a CVP income statement, costs and expenses are classified only by function. 
B) The CVP income statement is prepared for both internal and external use. 
C) The CVP income statement shows contribution margin instead of gross profit. 
D) In a traditional income statement, costs and expenses are classified as either variable or fixed.

Question 17

Reliable Manufacturing wants to sell a sufficient quantity of products to earn a profit of $100,000. If the unit sales price is $10, unit variable cost is $8, and total fixed costs are $200,000, how many units must be sold to earn income of $100,000?

Accepted Answer

A) 150,000 units 
B) 100,000 units 
C) 37,500 units 
D) 1,500,000 units 
A) 150,000 units 
B) 100,000 units 
C) 37,500 units 
D) 1,500,000 units

Question 18

Which of the following is not a fixed cost?

Accepted Answer

A) Direct materials 
B) Depreciation 
C) Lease charge 
D) Property taxes 
A) Direct materials 
B) Depreciation 
C) Lease charge 
D) Property taxes

Question 19

Aero, Inc. requires sales of $2,000,000 to cover its fixed costs of $600,000 and to earn net income of $500,000. What percent are variable costs of sales?

Accepted Answer

A) 25% 
B) 45% 
C) 30% 
D) 55% 
A) 25% 
B) 45% 
C) 30% 
D) 55%

Question 20

The contribution margin ratio increases when

Accepted Answer

A) fixed costs increase. 
B) fixed costs decrease. 
C) variable costs as a percentage of sales decrease. 
D) variable costs as a percentage of sales increase. 
A) fixed costs increase. 
B) fixed costs decrease. 
C) variable costs as a percentage of sales decrease. 
D) variable costs as a percentage of sales increase.

Which of the following is not true about the graph of a mixed cost?

Zehms, Inc. has a unit contribution margin of $30 and a contribution margin ratio of 60%. How much is the selling price of each unit?

A variable cost is a cost that

A CVP income statement shows contribution margin instead of gross profit.

Dunbar Manufacturing's variable costs are 30% of sales. The company is contemplating an advertising campaign that will cost $55,000. If sales are expected to increase $100,000, by how much will the company's net income increase?

Chung, Inc. sells 100,000 wrenches for $24 per unit. Fixed costs are $700,000 and net income is $500,000. What should be reported as variable expenses in the CVP income statement?

Armstrong Industries has a contribution margin of $240,000 and a contribution margin ratio of 30%. How much are total variable costs?

Farmers' Industries has fixed costs of $600,000 and variable costs are 60% of sales. How much will Farmers report as sales when its net income equals $60,000?

A company has a unit contribution margin of $120 and a contribution margin ratio of 40%. What is the unit selling price?

An example of a mixed cost is

The following information is available for Wade Corp.: Sales \ 580,000 Total fixed expenses \ 150,000 Cost of goods sold 390,000 Total variable expenses 360,000 A CVP income statement would report

Why is identification of a relevant range important?

Which is the true statement?

Reliable Manufacturing wants to sell a sufficient quantity of products to earn a profit of $100,000. If the unit sales price is $10, unit variable cost is $8, and total fixed costs are $200,000, how many units must be sold to earn income of $100,000?

Which of the following is not a fixed cost?

Aero, Inc. requires sales of $2,000,000 to cover its fixed costs of $600,000 and to earn net income of $500,000. What percent are variable costs of sales?

The contribution margin ratio increases when

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

Filters

Exam 17: Cost-Volume-Profit

Which of the following is not true about the graph of a mixed cost?

Zehms, Inc. has a unit contribution margin of $30 and a contribution margin ratio of 60%. How much is the selling price of each unit?

A variable cost is a cost that

A CVP income statement shows contribution margin instead of gross profit.

Dunbar Manufacturing's variable costs are 30% of sales. The company is contemplating an advertising campaign that will cost $55,000. If sales are expected to increase $100,000, by how much will the company's net income increase?

Chung, Inc. sells 100,000 wrenches for $24 per unit. Fixed costs are $700,000 and net income is $500,000. What should be reported as variable expenses in the CVP income statement?

Armstrong Industries has a contribution margin of $240,000 and a contribution margin ratio of 30%. How much are total variable costs?

Farmers' Industries has fixed costs of $600,000 and variable costs are 60% of sales. How much will Farmers report as sales when its net income equals $60,000?

A company has a unit contribution margin of $120 and a contribution margin ratio of 40%. What is the unit selling price?

An example of a mixed cost is

The following information is available for Wade Corp.: Sales \ 580,000 Total fixed expenses \ 150,000 Cost of goods sold 390,000 Total variable expenses 360,000 A CVP income statement would report

Why is identification of a relevant range important?

Which is the true statement?

Reliable Manufacturing wants to sell a sufficient quantity of products to earn a profit of $100,000. If the unit sales price is $10, unit variable cost is $8, and total fixed costs are $200,000, how many units must be sold to earn income of $100,000?

Which of the following is not a fixed cost?

Aero, Inc. requires sales of $2,000,000 to cover its fixed costs of $600,000 and to earn net income of $500,000. What percent are variable costs of sales?

The contribution margin ratio increases when

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

Filters