Reference: 08-04 The following data relate to a company that produces and sells a travel guide that is updated monthly: \[\begin{array} { | l | l | } \hline \text { Fixed costs: } & \\ \hline \text { Copy editing } & \$ 6,000 \\ \hline \text { Art work } & 2,000 \\ \hline \text { Typesetting } & 72,000 \\ \hline & \\ \hline \text { Variable costs: } & \\ \hline \text { Printing and binding } & \$ 3.20 \text { per copy } \\ \hline \text { Bookstore discounts } & 4.00 \text { per copy } \\ \hline \text { Salespersons' commissions } & 0.50 \text { per copy } \\ \hline \text { Author's royalties } & 2.00 \text { per copy } \\ \hline \end{array}\] Each book sells for $20.00. The company sold 8,000 books in June and 10,000 books in July. -The contribution margin ratio for the book is (round your final answer to the nearest tenth of a percent.)

A) 51.5%. B) 71.5%. C) 54.0%. D) 51.9%. A) 51.5%. B) 71.5%. C) 54.0%. D) 51.9%.

\[\begin{array} { | l | l | l | } \hline & \text { Contribution margin } & \text { Break-even point } \\ \hline \text { A. } & \text { Increase } & \text { Decrease } \\ \hline \text { B. } & \text { Decrease } & \text { Increase } \\ \hline \text { C. } & \text { Unchanged } & \text { Increase } \\ \hline \text { D. } & \text { Unchanged } & \text { Unchanged } \\ \hline \end{array}\]

A) Choice A. B) Choice B. C) Choice C. D) Choice D. A) Choice A. B) Choice B. C) Choice C. D) Choice D.

Reference: 08-13 Hooper Corporation produces and sells two models of vacuum cleaners, Standard and Deluxe. The company records show the following monthly data relating to these two products: \[\begin{array} { | l | l | l | l | } \hline & \text { Standard } & & \text { Deluxe } \\ \hline \text { Selling price per unit } & \$ 150 & & \$ 165 \\ \hline \text { Variable production costs } & 120 & & 126 \\ \hline \text { Variable selling expense per unit } & 16& & 13 \\ \hline \text { Expected monthly sales in units } & 600 && 1,200 \\ \hline \text { Total monthly fixed cost } & & \$ 15,000 & \\ \hline \end{array}\] -The break-even in sales dollars for the expected sales mix is closest to:

A) $160,772. B) $175,644. C) $109,091. D) $95,178. A) $160,772. B) $175,644. C) $109,091. D) $95,178.

Reference: 08-01 The following is Addison Corporation's contribution format income statement for last month: \[\begin{array} { | l | c | } \hline \text { Sales } & \$ 1,000,000 \\ \hline \text { Less variable expenses } & 700,000 \\ \hline \text { Contribution margin } & 300,000 \\ \hline \text { Less fixed expenses } & 180,000 \\ \hline \text { Net income } & \$ 120,000 \\ \hline \end{array}\] The company has no beginning or ending inventories. A total of 20,000 units were produced and sold last month. -What is the company's degree of operating leverage

A) 0.12. B) 2.50. C) 3.30. D) 0.40. A) 0.12. B) 2.50. C) 3.30. D) 0.40.

Reference: 08-06 Arthur Company had the following data for the year just ended: \[\begin{array} { | l | l | } \hline \text { Sales } & 4,000 \text { units } \\ \hline \text { Sales price } & \$ 60 \text { per unit } \\ \hline \text { Variable cost } & \$ 18 \text { per unit } \\ \hline \text { Fixed costs } & \$ 42,000 \\ \hline \end{array}\] -If the company's sales volume increases by 30% next year, all other factors remaining the same, its net income will increase by:

A) $37,800. B) $72,000. C) $50,400. D) $92,400. A) $37,800. B) $72,000. C) $50,400. D) $92,400.

Reference: 08-15 Jimbob Co.'s records include the following information for the month of January: \[\begin{array} { | l | l | l | } \hline \text { Units manufactured } && 5,000 \\ \hline \text { Units sold } & & 4,000 \\ \hline \text { Selling price per unit } && \$ 50 \\ \hline \text { Variable manufacturing costs per unit: } & & \\ \hline \text { Direct materials } && \$ 5 \\ \hline \text { Direct labour } & & \$ 2 \\ \hline \text { Manufacturing overhead } && \$ 1 \\ \hline \begin{array} { l } \text { Variable selling and administrative expenses per } \\ \text { unit sold } \end{array} && \$ 1 \\ \hline \text { Total fixed costs: } & & \\ \hline \text { Manufacturing overhead } && \$ 10,000 \\ \hline \text { Selling and administrative expenses } && \$ 20,000 \\ \hline \end{array}\] There were no beginning inventories. -Using variable costing, what is the net income for January?

A) $136,000. B) $134,000. C) $158,000. D) $185,000. A) $136,000. B) $134,000. C) $158,000. D) $185,000.

Reference: 08-06 Arthur Company had the following data for the year just ended: \[\begin{array} { | l | l | } \hline \text { Sales } & 4,000 \text { units } \\ \hline \text { Sales price } & \$ 60 \text { per unit } \\ \hline \text { Variable cost } & \$ 18 \text { per unit } \\ \hline \text { Fixed costs } & \$ 42,000 \\ \hline \end{array}\] -If the company's fixed costs decrease by 20% next year, all other factors remaining the same, the break-even level will change from that of the current year by (rounded your final answer to the nearest whole unit):

A) 200 unit decrease. B) no change in the break-even point in units. C) 200 unit increase. D) 440 unit decrease. A) 200 unit decrease. B) no change in the break-even point in units. C) 200 unit increase. D) 440 unit decrease.

Exam 8: Cost-Volume-Profit Relationships

Reference: 08-04 The following data relate to a company that produces and sells a travel guide that is updated monthly: Fixed costs: Copy editing \ 6,000 Art work 2,000 Typesetting 72,000 Variable costs: Printing and binding \ 3.20 per copy Bookstore discounts 4.00 per copy Salespersons' commissions 0.50 per copy Author's royalties 2.00 per copy Each book sells for $20.00. The company sold 8,000 books in June and 10,000 books in July. -The contribution margin ratio for the book is (round your final answer to the nearest tenth of a percent.)

(Multiple Choice)

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Question 21

Contribution margin Break-even point A. Increase Decrease B. Decrease Increase C. Unchanged Increase D. Unchanged Unchanged

(Multiple Choice)

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(84)

Question 22

North Company sells a single product. The product has a selling price of $30 per unit and variable expenses of 70% of sales. If the company's fixed expenses total $60,000 per year, then it will have a break-even in sales dollars of:

(Multiple Choice)

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Question 23

If the fixed expenses increase in a company, and all other factors remain unchanged, then one would expect the margin of safety to decrease.

(True/False)

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Question 24

At a break-even point of 400 units sold, variable expenses were $4,000 and fixed expenses were $2,000. What will the 401st unit sold contribute to profit?

(Multiple Choice)

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(73)

Question 25

Reference: 08-13 Hooper Corporation produces and sells two models of vacuum cleaners, Standard and Deluxe. The company records show the following monthly data relating to these two products: Standard Deluxe Selling price per unit \ 150 \ 165 Variable production costs 120 126 Variable selling expense per unit 16 13 Expected monthly sales in units 600 1,200 Total monthly fixed cost \ 15,000 -The break-even in sales dollars for the expected sales mix is closest to:

(Multiple Choice)

4.8/5

(86)

Question 26

Reference: 08-01 The following is Addison Corporation's contribution format income statement for last month: Sales \ 1,000,000 Less variable expenses 700,000 Contribution margin 300,000 Less fixed expenses 180,000 Net income \ 120,000 The company has no beginning or ending inventories. A total of 20,000 units were produced and sold last month. -What is the company's degree of operating leverage

(Multiple Choice)

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Question 27

The operating leverage is?

(Multiple Choice)

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Question 28

Reference: 08-06 Arthur Company had the following data for the year just ended: Sales 4,000 units Sales price \ 60 per unit Variable cost \ 18 per unit Fixed costs \ 42,000 -If the company's sales volume increases by 30% next year, all other factors remaining the same, its net income will increase by:

(Multiple Choice)

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(77)

Question 29

At the break-even point: Sales - Variable expenses = Fixed expenses.

(True/False)

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Question 30

The contribution margin income statement format is used by many businesses for external reporting purposes.

(True/False)

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Question 31

Reference: 08-15 Jimbob Co.'s records include the following information for the month of January: Units manufactured 5,000 Units sold 4,000 Selling price per unit \ 50 Variable manufacturing costs per unit: Direct materials \ 5 Direct labour \ 2 Manufacturing overhead \ 1 Variable selling and administrative expenses per unit sold \ 1 Total fixed costs: Manufacturing overhead \ 10,000 Selling and administrative expenses \ 20,000 There were no beginning inventories. -Using variable costing, what is the net income for January?

(Multiple Choice)

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(78)

Question 32

Once the break-even point is reached, which of the following statements is true

(Multiple Choice)

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Question 33

The degree of operating leverage can be calculated as:

(Multiple Choice)

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Question 34

Reference: 08-06 Arthur Company had the following data for the year just ended: Sales 4,000 units Sales price \ 60 per unit Variable cost \ 18 per unit Fixed costs \ 42,000 -If the company's fixed costs decrease by 20% next year, all other factors remaining the same, the break-even level will change from that of the current year by (rounded your final answer to the nearest whole unit):

(Multiple Choice)

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(60)

Question 35

A shift in the sales mix from products with a low contribution margin ratio toward products with a high contribution margin ratio will lower the break-even point in the company as a whole.

(True/False)

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Question 36

A company with a degree of operating leverage of 4 would expect net income to increase by 200% if sales increased from $100,000 to $150,000.

(True/False)

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Question 37

A sales manager has projected that an increase in the monthly advertising budget to $25,000 will increase monthly sales from 10,000 units to 12,000 units. Each unit sells for $50 with total variable costs per unit of $40. Monthly fixed expenses, including the current advertising costs of $5,000, total $20,000. Given the above data, what will be the expected impact on net income?

(Multiple Choice)

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(85)

Question 38

The margin of safety in the Flaherty Company is $24,000. If the company's sales are $120,000 and its variable expenses are $80,000, its fixed expenses must be:

(Multiple Choice)

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Question 39

Scott Company's variable expenses are 72% of sales. sales is $2,450,000. If sales are $60,000 below the break-even point, the company would report a:

(Multiple Choice)

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(73)

Question 40

Contribution margin Break-even point A. Increase Decrease B. Decrease Increase C. Unchanged Increase D. Unchanged Unchanged

North Company sells a single product. The product has a selling price of $30 per unit and variable expenses of 70% of sales. If the company's fixed expenses total $60,000 per year, then it will have a break-even in sales dollars of:

If the fixed expenses increase in a company, and all other factors remain unchanged, then one would expect the margin of safety to decrease.

At a break-even point of 400 units sold, variable expenses were $4,000 and fixed expenses were $2,000. What will the 401st unit sold contribute to profit?

The operating leverage is?

At the break-even point: Sales - Variable expenses = Fixed expenses.

The contribution margin income statement format is used by many businesses for external reporting purposes.

Once the break-even point is reached, which of the following statements is true

The degree of operating leverage can be calculated as:

A shift in the sales mix from products with a low contribution margin ratio toward products with a high contribution margin ratio will lower the break-even point in the company as a whole.

A company with a degree of operating leverage of 4 would expect net income to increase by 200% if sales increased from $100,000 to $150,000.

The margin of safety in the Flaherty Company is $24,000. If the company's sales are $120,000 and its variable expenses are $80,000, its fixed expenses must be:

Scott Company's variable expenses are 72% of sales. sales is $2,450,000. If sales are $60,000 below the break-even point, the company would report a:

An Introduction to Managerial Accounting

Cost Concepts

Systems Design: Job-Order Costing

Process Costing

Activity-Based Costing

Cost Behaviour: Analysis and Use

Budgeting

Relevant Costs: the Key to Decision Making

Capital Budgeting Decisions

Standard Costs and Variance Analysis

Organizational Structure and Performance Measurement

How Well Am I Doing Financial Statement Analysis Online

How Well Am I Doing Cash Flow Statement Online

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