Question 1

Degree of operating leverage is:

Accepted Answer

A)  The contribution margin divided by profit 
B)  The ratio of total variable costs to total revenues 
C)  The volume of revenue needed to breakeven 
D)  Only important when the organization is very profitable 
A)  The contribution margin divided by profit 
B)  The ratio of total variable costs to total revenues 
C)  The volume of revenue needed to breakeven 
D)  Only important when the organization is very profitable

Question 2

The margin of safety is the excess of a firm's profits above the breakeven point.

Accepted Answer

A) True 
 B)False

Question 3

Information from CVP analysis helps with all of the following decisions except:

Accepted Answer

A)  The appropriate volume of production 
B)  Which products to emphasize 
C)  Whether to lay off a specific employee 
D)  The most effective cost structure 
A)  The appropriate volume of production 
B)  Which products to emphasize 
C)  Whether to lay off a specific employee 
D)  The most effective cost structure

Question 4

Bhuyan Company's budgeted profit for next year is lower than this year's actual profit. The selling price, variable cost per unit, and total fixed costs did not change. Which of the following is false?

Accepted Answer

A)  Bhuyan's margin of safety next year will be lower than this year. 
B)  Bhuyan's breakeven point is the same last year as this year. 
C)  Bhuyan's degree of operating leverage will be higher this year than last year. 
D)  Bhuyan's contribution margin ratio this year will be lower than last year. 
A)  Bhuyan's margin of safety next year will be lower than this year. 
B)  Bhuyan's breakeven point is the same last year as this year. 
C)  Bhuyan's degree of operating leverage will be higher this year than last year. 
D)  Bhuyan's contribution margin ratio this year will be lower than last year.

Question 5

A cost function is used in CVP analysis to predict:

Accepted Answer

A)  Total revenue at the breakeven point 
B)  The volume of sales 
C)  The relevant range of operations 
D)  The number of sales needed for the next period 
A)  Total revenue at the breakeven point 
B)  The volume of sales 
C)  The relevant range of operations 
D)  The number of sales needed for the next period

Question 6

Stuart, Inc. produces one item which sells for $2.40 and costs $1.40 per unit to make. All manufacturing costs are variable. If fixed selling and administrative costs total $140,000, how many units must be sold in order to break even?

Accepted Answer

A)  100,000 
B)  140,000 
C)  58,333 
D)  None of the above 
A)  100,000 
B)  140,000 
C)  58,333 
D)  None of the above

Question 7

Before a company reaches the breakeven point:

Accepted Answer

A)  The total contribution margin is negative. 
B)  The contribution margin per unit is less than the fixed costs per unit. 
C)  Total fixed costs are increasing. 
D)  The contribution margin ratio is negative. 
A)  The total contribution margin is negative. 
B)  The contribution margin per unit is less than the fixed costs per unit. 
C)  Total fixed costs are increasing. 
D)  The contribution margin ratio is negative.

Question 8

MacLean Company produces a single product. Following is cost information: $\begin{array}{lll}&&\text { Variable Cost }\
&\text { Fixed Cost }&\text { Per Unit }\
\text { Manufacturing costs } & \$ 35,000 & \$ 15 \
\text { Non-manufacturing costs } & 60,000 & 10
\end{array}$ If the product sells for $60, how many units must be sold to break even?

Accepted Answer

A)  1,000 
B)  2,375 
C)  2,714 
D)  3,800 
A)  1,000 
B)  2,375 
C)  2,714 
D)  3,800

Question 9

Data extracted from the accounting information system of Turner Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x.   Which of the following terms best describes the graph?

Accepted Answer

A)  Learning curve graph 
B)  Operating leverage graph 
C)  Margin of safety graph 
D)  Cost-volume-profit graph 
A)  Learning curve graph 
B)  Operating leverage graph 
C)  Margin of safety graph 
D)  Cost-volume-profit graph

Question 10

Data extracted from the accounting information system of Turner Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x.   The horizontal ("x") axis shows:

Accepted Answer

A)  Fixed costs 
B)  Revenues 
C)  Units 
D)  Variable costs 
A)  Fixed costs 
B)  Revenues 
C)  Units 
D)  Variable costs

Question 11

Data extracted from the accounting information system of Turner Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x.   The dashed line represents:

Accepted Answer

A)  Total variable costs 
B)  Total fixed costs 
C)  Total costs 
D)  Total revenues 
A)  Total variable costs 
B)  Total fixed costs 
C)  Total costs 
D)  Total revenues

Question 12

Ramser Co. has total variable costs equal to 40% of sales. Fixed costs are $120,000. What is the breakeven point in units?

Accepted Answer

A)  300,000 
B)  200,000 
C)  480,000 
D)  Cannot be determined 
A)  300,000 
B)  200,000 
C)  480,000 
D)  Cannot be determined

Question 13

CVP calculations can only be used in companies that sell a single product.

Accepted Answer

A) True 
 B)False

Question 14

Data extracted from the accounting information system of Turner Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x.   The solid line represents:

Accepted Answer

A)  Total variable costs 
B)  Total fixed costs 
C)  Total costs 
D)  Total revenues 
A)  Total variable costs 
B)  Total fixed costs 
C)  Total costs 
D)  Total revenues

Question 15

Alpha Corporation's fixed costs total $10,000, while Beta Corporation's fixed costs total $12,000 for the same period of time. Therefore, Beta has a higher margin of safety than Alpha.

Accepted Answer

A) True 
 B)False

Question 16

Hangers Co. manufactures and sells a single product. This product has the following operational data: Unit sales price $\quad$$\$ 30$
Variable manufacturing cost per unit $\quad$17
Fixed manufacturing costs $\quad$72,000
Variable selling cost per unit $\quad$1
Fixed selling costs $\quad$27,000
Marginal tax rate $\quad 40 \%$ What amount of total revenue would be needed to meet an after-tax profit target of $48,000?

Accepted Answer

A)  $365,000 
B)  $547,500 
C)  $630,000 
D)  $447,500 
A)  $365,000 
B)  $547,500 
C)  $630,000 
D)  $447,500

Question 17

BETA sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows:
If BETA increases its volume of sales by 10%, what will happen to its degree of operating leverage?

Accepted Answer

A)  It will decrease 
B)  It will increase 
C)  It will stay the same 
D)  Cannot be determined 
A)  It will decrease 
B)  It will increase 
C)  It will stay the same 
D)  Cannot be determined

Question 18

FCS Corporation sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows:
 
Area D is best described as:

Accepted Answer

A)  Fixed cost 
B)  Margin of safety 
C)  Estimated profit at actual volume 
D)  Breakeven point 
A)  Fixed cost 
B)  Margin of safety 
C)  Estimated profit at actual volume 
D)  Breakeven point

Question 19

Data extracted from the accounting information system of Turner Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x.   The area to the right of the point where the two lines intersect, where the dashed line is above the solid line, shows where TXC:

Accepted Answer

A)  Operates at a loss 
B)  Operates at a profit 
C)  Breaks even if product mix remains constant 
D)  Cannot be determined 
A)  Operates at a loss 
B)  Operates at a profit 
C)  Breaks even if product mix remains constant 
D)  Cannot be determined

Question 20

If sales are $80,000, variable costs are $50,000, and fixed costs are $20,000, the contribution margin ratio is:

Accepted Answer

A)  37.5% 
B)  12.5% 
C)  62.5% 
D)  25.0% 
A)  37.5% 
B)  12.5% 
C)  62.5% 
D)  25.0%

Degree of operating leverage is:

The margin of safety is the excess of a firm's profits above the breakeven point.

Information from CVP analysis helps with all of the following decisions except:

Bhuyan Company's budgeted profit for next year is lower than this year's actual profit. The selling price, variable cost per unit, and total fixed costs did not change. Which of the following is false?

A cost function is used in CVP analysis to predict:

Stuart, Inc. produces one item which sells for $2.40 and costs $1.40 per unit to make. All manufacturing costs are variable. If fixed selling and administrative costs total $140,000, how many units must be sold in order to break even?

Before a company reaches the breakeven point:

MacLean Company produces a single product. Following is cost information: Variable Cost Fixed Cost Per Unit Manufacturing costs \ 35,000 \ 15 Non-manufacturing costs 60,000 10 If the product sells for $60, how many units must be sold to break even?

Data extracted from the accounting information system of Turner Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x. Which of the following terms best describes the graph?

Data extracted from the accounting information system of Turner Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x. The horizontal ("x") axis shows:

Data extracted from the accounting information system of Turner Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x. The dashed line represents:

Ramser Co. has total variable costs equal to 40% of sales. Fixed costs are $120,000. What is the breakeven point in units?

CVP calculations can only be used in companies that sell a single product.

Data extracted from the accounting information system of Turner Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x. The solid line represents:

Alpha Corporation's fixed costs total $10,000, while Beta Corporation's fixed costs total $12,000 for the same period of time. Therefore, Beta has a higher margin of safety than Alpha.

BETA sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows: If BETA increases its volume of sales by 10%, what will happen to its degree of operating leverage?

FCS Corporation sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows: Area D is best described as:

If sales are $80,000, variable costs are $50,000, and fixed costs are $20,000, the contribution margin ratio is:

The Role of Accounting Information in Ethical Management Decision Making

Cost Concepts, Behaviour, and Estimation

Relevant Information for Decision Making

Job Costing

Process Costing

Activity-Based Costing and Management

Measuring and Assigning Support Department Costs

Joint Product and By-Product Costing

Static and Flexible Budgets

Standard Costs and Variance Analysis

Strategic Investment Decisions

Pricing Decisions

Strategic Management of Costs

Measuring and Assigning Costs for Income Statements

Performance Evaluation and Compensation

Filters

Exam 3: Cost-Volume-Profit Analysis

Degree of operating leverage is:

The margin of safety is the excess of a firm's profits above the breakeven point.

Information from CVP analysis helps with all of the following decisions except:

Bhuyan Company's budgeted profit for next year is lower than this year's actual profit. The selling price, variable cost per unit, and total fixed costs did not change. Which of the following is false?

A cost function is used in CVP analysis to predict:

Stuart, Inc. produces one item which sells for $2.40 and costs $1.40 per unit to make. All manufacturing costs are variable. If fixed selling and administrative costs total $140,000, how many units must be sold in order to break even?

Before a company reaches the breakeven point:

MacLean Company produces a single product. Following is cost information: Variable Cost Fixed Cost Per Unit Manufacturing costs \ 35,000 \ 15 Non-manufacturing costs 60,000 10 If the product sells for $60, how many units must be sold to break even?

Data extracted from the accounting information system of Turner Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x. Which of the following terms best describes the graph?

Data extracted from the accounting information system of Turner Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x. The horizontal ("x") axis shows:

Data extracted from the accounting information system of Turner Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x. The dashed line represents:

Ramser Co. has total variable costs equal to 40% of sales. Fixed costs are $120,000. What is the breakeven point in units?

CVP calculations can only be used in companies that sell a single product.

Data extracted from the accounting information system of Turner Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x. The solid line represents:

Alpha Corporation's fixed costs total $10,000, while Beta Corporation's fixed costs total $12,000 for the same period of time. Therefore, Beta has a higher margin of safety than Alpha.

BETA sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows: If BETA increases its volume of sales by 10%, what will happen to its degree of operating leverage?

FCS Corporation sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows: Area D is best described as:

If sales are $80,000, variable costs are $50,000, and fixed costs are $20,000, the contribution margin ratio is:

The Role of Accounting Information in Ethical Management Decision Making

Cost Concepts, Behaviour, and Estimation

Relevant Information for Decision Making

Job Costing

Process Costing

Activity-Based Costing and Management

Measuring and Assigning Support Department Costs

Joint Product and By-Product Costing

Static and Flexible Budgets

Standard Costs and Variance Analysis

Strategic Investment Decisions

Pricing Decisions

Strategic Management of Costs

Measuring and Assigning Costs for Income Statements

Performance Evaluation and Compensation

Filters