Question 1

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 2

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

Accepted Answer

A) True 
 B)False

Question 3

Salem Bakery sells boxes of donuts each with a variable cost percentage of 35%. Its fixed costs are $54600 per year.
Instructions
Determine the sales dollars Salem needs to break even per year.

Accepted Answer

Contribution margin

Question 4

Cost activity indexes might help classify costs as

Accepted Answer

A)  temporary. 
B)  permanent. 
C)  variable. 
D)  transient. 
A)  temporary. 
B)  permanent. 
C)  variable. 
D)  transient.

Question 5

Weatherspoon Company has a product with a selling price per unit of $200 the unit variable cost is $110 and the total monthly fixed costs are $300000. How much is Weatherspoon's contribution margin ratio?

Accepted Answer

A)  45% 
B)  55% 
C)  150% 
D)  182% 
A)  45% 
B)  55% 
C)  150% 
D)  182%

Question 6

A company sells a product which has a unit sales price of $5 unit variable cost of $3 and total fixed costs of $240000. The number of units the company must sell to break even is

Accepted Answer

A)  120000 units. 
B)  48000 units. 
C)  480000 units. 
D)  80000 units. 
A)  120000 units. 
B)  48000 units. 
C)  480000 units. 
D)  80000 units.

Question 7

Armstrong Industries has a contribution margin of $240000 and a contribution margin ratio of 30%. How much are total variable costs?

Accepted Answer

A)  $72000 
B)  $560000 
C)  $168000 
D)  $800000 
A)  $72000 
B)  $560000 
C)  $168000 
D)  $800000

Question 8

Which of the following would not be an acceptable way to express contribution margin?

Accepted Answer

A)  Sales minus variable costs 
B)  Sales minus unit costs 
C)  Unit selling price minus unit variable costs 
D)  Unit contribution margin divided by unit selling price 
A)  Sales minus variable costs 
B)  Sales minus unit costs 
C)  Unit selling price minus unit variable costs 
D)  Unit contribution margin divided by unit selling price

Question 9

In using the high-low method the fixed cost

Accepted Answer

A)  is determined by subtracting the total cost at the high level of activity from the total cost at the low activity level. 
B)  is determined by adding the total variable cost to the total cost at the low activity level. 
C)  is determined before the total variable cost. 
D)  may be determined by subtracting the total variable cost from either the total cost at the low or high activity level. 
A)  is determined by subtracting the total cost at the high level of activity from the total cost at the low activity level. 
B)  is determined by adding the total variable cost to the total cost at the low activity level. 
C)  is determined before the total variable cost. 
D)  may be determined by subtracting the total variable cost from either the total cost at the low or high activity level.

Question 10

Cunningham Inc. sells MP3 players for $60 each. Variable costs are $40 per unit and fixed costs total $120000. How many MP3 players must Cunningham sell to earn net income of $280000?

Accepted Answer

A)  20000. 
B)  7000. 
C)  5000. 
D)  6000. 
A)  20000. 
B)  7000. 
C)  5000. 
D)  6000.

Question 11

Melody Manufacturing produces a hip-hop CD that is sold for $20. The contribution margin ratio is 40%. Fixed expenses total $9200.
Instructions
(a) Compute the variable cost per unit.
(b) Compute how many CDs Melody Manufacturing will have to sell in order to break even.
(c) Compute how many CDs Melody Manufacturing will have to sell in order to make a target net income of $16200.

Accepted Answer

(a) Variable cost per unit: $2

Question 12

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 13

If variable costs per unit are 70% of sales fixed costs are $290000 and target net income is $70000 required sales are $1200000.

Accepted Answer

A) True 
 B)False

Question 14

Henning Co. estimates that variable costs will be 70% of sales and fixed costs will total $2160000. The selling price of the product is $10 and 750000 units will be sold.
Instructions
Using the mathematical equation
(a) Compute the break-even point in units and dollars.
(b) Compute the margin of safety in dollars and as a ratio.
(c) Compute net income.

Accepted Answer

(a)
Break-

Question 15

Fixed costs are $3000000 and the unit contribution margin is $150. What is the break-even point?

Accepted Answer

A)  $7500000 
B)  $20000000 
C)  7500 units 
D)  20000 units 
A)  $7500000 
B)  $20000000 
C)  7500 units 
D)  20000 units

Question 16

In the month of April Avante Salon gave 2500 haircuts shampoos and permanents at an average price of $40. During the month fixed costs were $20000 and variable costs were 75% of sales.
Instructions
(a) Determine the contribution margin in dollars per unit and as a ratio.
(b) Using the contribution margin technique compute the break-even point in dollars and in units.
(c) Compute the margin of safety dollars and as a ratio.

Accepted Answer

None

Question 17

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 18

Bruno & Court is a nonprofit organization that captures stray deer bewildered within residential communities. Fixed costs are $20000. The variable cost of capturing each deer is $10 each. Bruno & Court is funded by a local philanthropy in the amount of $64000 for 2016. How many deer can Bruno & Court capture during 2016?

Accepted Answer

A)  4400 
B)  6400 
C)  8400 
D)  4000 
A)  4400 
B)  6400 
C)  8400 
D)  4000

Question 19

Taveras Industries developed the following information for the product it sells: $\begin{array}{ll}
\text { Sales price } & \$ 50 \text { per unit } \
\text { Variable cost of goods sold } & \$ 28 \text { per unit } \
\text { Fixed cost of goods sold } & \$ 650,000 \
\text { Variable selling expense } & 10 \% \text { of sales price } \
\text { Variable administrative expense } & \$ 2.00 \text { per unit } \
\text { Fixed selling expense } & \$ 400,000 \
\text { Fixed administrative expense } & \$ 300,000
\end{array}$ For the year ended December 31 2016 Taveras produced and sold 100000 units of product.
Instructions
(a) Prepare a CVP income statement using the contribution margin format for Taveras Industries for 2016.
(b) What was the company's break-even point in units in 2016? Use the contribution margin technique.
(c) What was the company's margin of safety in dollars in 2016?

Accepted Answer

The answer of Taveras Industries developed the following information for...

Question 20

To which function of management is CVP analysis most applicable?

Accepted Answer

A)  Planning 
B)  Motivating 
C)  Directing 
D)  Controlling 
A)  Planning 
B)  Motivating 
C)  Directing 
D)  Controlling

Exam 22: Cost-Volume-Profit

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?

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

Salem Bakery sells boxes of donuts each with a variable cost percentage of 35%. Its fixed costs are $54600 per year. Instructions Determine the sales dollars Salem needs to break even per year.

Cost activity indexes might help classify costs as

Weatherspoon Company has a product with a selling price per unit of $200 the unit variable cost is $110 and the total monthly fixed costs are $300000. How much is Weatherspoon's contribution margin ratio?

A company sells a product which has a unit sales price of $5 unit variable cost of $3 and total fixed costs of $240000. The number of units the company must sell to break even is

Armstrong Industries has a contribution margin of $240000 and a contribution margin ratio of 30%. How much are total variable costs?

Which of the following would not be an acceptable way to express contribution margin?

In using the high-low method the fixed cost

Cunningham Inc. sells MP3 players for $60 each. Variable costs are $40 per unit and fixed costs total $120000. How many MP3 players must Cunningham sell to earn net income of $280000?

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

If variable costs per unit are 70% of sales fixed costs are $290000 and target net income is $70000 required sales are $1200000.

Fixed costs are $3000000 and the unit contribution margin is $150. What is the break-even point?

A fixed cost is a cost which

To which function of management is CVP analysis most applicable?

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Incremental Analysis and Capital Budgeting

Time Value of Money

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