Question 1

The cost-volume-profit graph portrays the relationship between profits and sales volume.

Accepted Answer

A) True 
 B)False  False

Question 2

The following diagram is a cost-volume-profit graph for a manufacturing company:   Select the answer that best describes the labeled item on the diagram.

Accepted Answer

A) Area CDE represents the area of net loss. 
B) Line AC graphs total fixed costs. 
C) Point D represents the point at which the contribution margin per unit increases. 
D) Line AC graphs total costs. 
A) Area CDE represents the area of net loss. 
B) Line AC graphs total fixed costs. 
C) Point D represents the point at which the contribution margin per unit increases. 
D) Line AC graphs total costs. D

Question 3

When a company sells more units than the break-even point,

Accepted Answer

A) it moves above the relevant range. 
B) profits are positive. 
C) there are no new variable costs incurred. 
D) profits are negative. 
A) it moves above the relevant range. 
B) profits are positive. 
C) there are no new variable costs incurred. 
D) profits are negative. B

Question 4

Income taxes are generally calculated as a percentage of income.

Accepted Answer

A) True 
 B)False

Question 5

A very high degree of operating leverage indicates a firm

Accepted Answer

A) has high fixed costs. 
B) has a high net income. 
C) has high variable costs. 
D) is operating close to its break-even point. 
A) has high fixed costs. 
B) has a high net income. 
C) has high variable costs. 
D) is operating close to its break-even point.

Question 6

Uncertainty regarding costs, prices, and sales mix affect the break-even point.

Accepted Answer

A) True 
 B)False

Question 7

Units to earn target profit equal total fixed costs plus target profit divided by the contribution margin ratio.

Accepted Answer

A) True 
 B)False

Question 8

Tiramisu Company projected the following information for next year: $\begin{array} { l  }
 \text {Selling price per unit }&\$60.00\
 \text {Contribution margin per unit }&\$30.00\
 \text {Total fixed costs }&\$100,000\
 \text {Tax rate }&20\%\
\end{array}$

How many units must be sold to obtain an after-tax profit of $40,000?

Accepted Answer

A) 3,750 units 
B) 5,625 units 
C) 5,000 units 
D) 5,167 units 
A) 3,750 units 
B) 5,625 units 
C) 5,000 units 
D) 5,167 units

Question 9

Assuming all other things are the same, if there was a decrease in the break-even point, selling price per unit must have:

Accepted Answer

A) decreased 
B) increased 
C) remained the same 
D) increased first, then decreased 
A) decreased 
B) increased 
C) remained the same 
D) increased first, then decreased

Question 10

In 2018, Samantha's Bath and Body Shop had variable costs of $27,000, fixed costs of $18,000, and a net loss of $4,500.
Samantha's 2018 break-even sales volume was

Accepted Answer

A) $36,000. 
B) $54,000. 
C) $49,500. 
D) $37,500. 
A) $36,000. 
B) $54,000. 
C) $49,500. 
D) $37,500.

Question 11

Nonesuch Company sells only one product at a regular price of $7.50 per unit. Variable expenses are 60 percent of sales and fixed expenses are $30,000. Management has decided to decrease the selling price to $6.00 in hopes of increasing its volume of sales.
What sales dollar level is needed to obtain a before-tax profit of $60,000 when the selling price is $6.00 per unit?

Accepted Answer

A) $90,000 
B) $120,000 
C) $72,000 
D) $360,000 
A) $90,000 
B) $120,000 
C) $72,000 
D) $360,000

Question 12

Bugatti, Inc. decided to institute an advertising campaign that would cost $75,000. Variable costs will remain at $15 per unit. Bugatti is currently selling 100,000 units of its product at $25 per unit. The marketing department is estimating that there will be a 10 percent increase in sales volume. With all else remaining the same, what will be the result of this decision?

Accepted Answer

A) An increase in sales of $25,000 
B) A decrease in operating income of $75,000 
C) An increase in operating income of $25,000 
D) none of the above 
A) An increase in sales of $25,000 
B) A decrease in operating income of $75,000 
C) An increase in operating income of $25,000 
D) none of the above

Question 13

Emerald Printing Company projected the following information for next year: $\begin{array} { l  }
 \text {Selling price per unit }&\$60.00\
 \text {Contribution margin per unit }&\$45.00\
 \text {Total fixed costs }&\$150,000\
 \text {Tax rate }&30\%\
\end{array}$

What is the break-even point in dollars?

Accepted Answer

A) $415,000 
B) $110,000 
C) $200,000 
D) $320,000 
A) $415,000 
B) $110,000 
C) $200,000 
D) $320,000

Question 14

Summersville Production Company had the following projected information for the current year: $$\begin{array} { l l r } 
\text { Selling price per unit } & \$  150 \
\text { Variable cost per unit } & \$  90 \
\text { Total fixed costs } & \$ 300,000
\end{array}$$
What level of sales dollars is needed to obtain a target before-tax profit of $75,000?

Accepted Answer

A) $375,000 
B) $625,000 
C) $750,000 
D) $937,500 
A) $375,000 
B) $625,000 
C) $750,000 
D) $937,500

Question 15

Under ABC, cost drivers are separated into unit-based and non-unit-based drivers.

Accepted Answer

A) True 
 B)False

Question 16

Randolph Plumbing Company has the following information for the current year: $\begin{array}{lr}
\text { Selling price per unit } & \$ 10 \
\text { Variable costs per unit } & \$ 7 \
\text { Fixed costs } & \$ 1,500
\end{array}$ Required:
Prepare a profit-volume graph identifying the following items: 
a.Profit line
b.Intersection of profit line and vertical axis
c.Break-even point
d.Profit area
e.Loss area

Accepted Answer

@#IMG-DLM& *The brea

Question 17

The Cumberland Company provides the following information: $\begin{array} { l  }
 \text {Sales (250,000 units) }&\$625,000\
 \text {Manufacturing costs: }&\
 \text {Variable }&212,500\
 \text { Fixed}&37,500\
 \text {Selling and administrative costs: }&\
 \text {Variable }&100,000\
 \text { Fixed}&25,000\
\end{array}$

What is the contribution margin per unit for Cumberland?

Accepted Answer

A) $1.25 
B) $0.85 
C) $2.50 
D) $1.65 
A) $1.25 
B) $0.85 
C) $2.50 
D) $1.65

Question 18

CVP analysis is a short-run decision-making tool since some costs are fixed.

Accepted Answer

A) True 
 B)False

Question 19

The income statement for Sapphire Manufacturing Company for 2018 is as follows: $\begin{array}{lr}
\text { Sales (20,000 units) } & \$ 150,000 \
\text { Variable expenses } & 50,000\
\text { Contribution margin } & \$ 100,000 \
\text { Fixed expenses } & 30,000\
\text { Operating income } & \$ 70,000
\end{array}$
If sales increase by 2,000 units, what will happen to profit?

Accepted Answer

A) Profit will increase by $13,000. 
B) Profit will increase by $10,000. 
C) Profit will decrease by $15,000. 
D) Profit will decrease by $18,000. 
A) Profit will increase by $13,000. 
B) Profit will increase by $10,000. 
C) Profit will decrease by $15,000. 
D) Profit will decrease by $18,000.

Question 20

The use of fixed costs to increase the percentage changes in profits as sales activities change is called the __________ leverage.

Accepted Answer

The answer of The use of fixed costs to increase...

The cost-volume-profit graph portrays the relationship between profits and sales volume.

The following diagram is a cost-volume-profit graph for a manufacturing company: Select the answer that best describes the labeled item on the diagram.

When a company sells more units than the break-even point,

Income taxes are generally calculated as a percentage of income.

A very high degree of operating leverage indicates a firm

Uncertainty regarding costs, prices, and sales mix affect the break-even point.

Units to earn target profit equal total fixed costs plus target profit divided by the contribution margin ratio.

Tiramisu Company projected the following information for next year: Selling price per unit \6 0.00 Contribution margin per unit \3 0.00 Total fixed costs \1 00,000 Tax rate 20\% How many units must be sold to obtain an after-tax profit of $40,000?

Assuming all other things are the same, if there was a decrease in the break-even point, selling price per unit must have:

In 2018, Samantha's Bath and Body Shop had variable costs of $27,000, fixed costs of $18,000, and a net loss of $4,500. Samantha's 2018 break-even sales volume was

Emerald Printing Company projected the following information for next year: Selling price per unit \6 0.00 Contribution margin per unit \4 5.00 Total fixed costs \1 50,000 Tax rate 30\% What is the break-even point in dollars?

Summersville Production Company had the following projected information for the current year: Selling price per unit \ 150 Variable cost per unit \ 90 Total fixed costs \ 300,000 What level of sales dollars is needed to obtain a target before-tax profit of $75,000?

Under ABC, cost drivers are separated into unit-based and non-unit-based drivers.

The Cumberland Company provides the following information: Sales (250,000 units) \6 25,000 Manufacturing costs: Variable 212,500 Fixed 37,500 Selling and administrative costs: Variable 100,000 Fixed 25,000 What is the contribution margin per unit for Cumberland?

CVP analysis is a short-run decision-making tool since some costs are fixed.

The income statement for Sapphire Manufacturing Company for 2018 is as follows: Sales (20,000 units) \ 150,000 Variable expenses 50,000 Contribution margin \ 100,000 Fixed expenses 30,000 Operating income \ 70,000 If sales increase by 2,000 units, what will happen to profit?

The use of fixed costs to increase the percentage changes in profits as sales activities change is called the __________ leverage.

Introduction to Cost Management

Basic Cost Management Concepts

Cost Behavior

Activity-Based Costing

Product and Service Costing: Job-Order System

Process Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Decentralization: Responsibility Accounting, Performance

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Activity Resource Usage Model and Tactical Decision Making

Pricing and Profitability Analysis

Capital Investment

Inventory Management: Economic Order Quantity, Jit, and the Theory of Constraints

Filters

Exam 16: Cost-Volume-Profit Analysis

The cost-volume-profit graph portrays the relationship between profits and sales volume.

The following diagram is a cost-volume-profit graph for a manufacturing company: Select the answer that best describes the labeled item on the diagram.

When a company sells more units than the break-even point,

Income taxes are generally calculated as a percentage of income.

A very high degree of operating leverage indicates a firm

Uncertainty regarding costs, prices, and sales mix affect the break-even point.

Units to earn target profit equal total fixed costs plus target profit divided by the contribution margin ratio.

Tiramisu Company projected the following information for next year: Selling price per unit \6 0.00 Contribution margin per unit \3 0.00 Total fixed costs \1 00,000 Tax rate 20\% How many units must be sold to obtain an after-tax profit of $40,000?

Assuming all other things are the same, if there was a decrease in the break-even point, selling price per unit must have:

In 2018, Samantha's Bath and Body Shop had variable costs of $27,000, fixed costs of $18,000, and a net loss of $4,500. Samantha's 2018 break-even sales volume was

Emerald Printing Company projected the following information for next year: Selling price per unit \6 0.00 Contribution margin per unit \4 5.00 Total fixed costs \1 50,000 Tax rate 30\% What is the break-even point in dollars?

Summersville Production Company had the following projected information for the current year: Selling price per unit \ 150 Variable cost per unit \ 90 Total fixed costs \ 300,000 What level of sales dollars is needed to obtain a target before-tax profit of $75,000?

Under ABC, cost drivers are separated into unit-based and non-unit-based drivers.

The Cumberland Company provides the following information: Sales (250,000 units) \6 25,000 Manufacturing costs: Variable 212,500 Fixed 37,500 Selling and administrative costs: Variable 100,000 Fixed 25,000 What is the contribution margin per unit for Cumberland?

CVP analysis is a short-run decision-making tool since some costs are fixed.

The income statement for Sapphire Manufacturing Company for 2018 is as follows: Sales (20,000 units) \ 150,000 Variable expenses 50,000 Contribution margin \ 100,000 Fixed expenses 30,000 Operating income \ 70,000 If sales increase by 2,000 units, what will happen to profit?

The use of fixed costs to increase the percentage changes in profits as sales activities change is called the __________ leverage.

Introduction to Cost Management

Basic Cost Management Concepts

Cost Behavior

Activity-Based Costing

Product and Service Costing: Job-Order System

Process Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Decentralization: Responsibility Accounting, Performance

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Activity Resource Usage Model and Tactical Decision Making

Pricing and Profitability Analysis

Capital Investment

Inventory Management: Economic Order Quantity, Jit, and the Theory of Constraints

Filters