Question 1

The equation which reflects a CVP income statement is

Accepted Answer

A)  Sales = Cost of goods sold + Operating expenses + Net income. 
B)  Sales + Fixed costs = Variable costs + Net income. 
C)  Sales - Variable costs + Fixed costs = Net income. 
D)  Sales - Variable costs - Fixed costs = Net income. 
A)  Sales = Cost of goods sold + Operating expenses + Net income. 
B)  Sales + Fixed costs = Variable costs + Net income. 
C)  Sales - Variable costs + Fixed costs = Net income. 
D)  Sales - Variable costs - Fixed costs = Net income.

Question 2

If Qualls Quality Airline cuts its domestic fares by 30%

Accepted Answer

A)  its fixed costs will decrease. 
B)  profit will increase by 30%. 
C)  a profit can only be earned by decreasing the number of flights. 
D)  a profit can be earned either by increasing the number of passengers or by decreasing variable costs. 
A)  its fixed costs will decrease. 
B)  profit will increase by 30%. 
C)  a profit can only be earned by decreasing the number of flights. 
D)  a profit can be earned either by increasing the number of passengers or by decreasing variable costs.

Question 3

A company desires to sell a sufficient quantity of products to earn a profit of $400000. If the unit sales price is $20 unit variable cost is $12 and total fixed costs are $800000 how many units must be sold to earn net income of $400000?

Accepted Answer

A)  225000 units 
B)  150000 units 
C)  120000 units 
D)  90000 units 
A)  225000 units 
B)  150000 units 
C)  120000 units 
D)  90000 units

Question 4

Contribution margin is

Accepted Answer

A)  the amount of revenue remaining after deducting fixed costs. 
B)  available to cover fixed costs and contribute to income for the company. 
C)  sales less fixed costs. 
D)  unit selling price less unit fixed costs. 
A)  the amount of revenue remaining after deducting fixed costs. 
B)  available to cover fixed costs and contribute to income for the company. 
C)  sales less fixed costs. 
D)  unit selling price less unit fixed costs.

Question 5

Sales are $500000 and variable costs are $330000. What is the contribution margin ratio?

Accepted Answer

A)  52% 
B)  34% 
C)  66% 
D)  Cannot be determined because amounts are not expressed per unit. 
A)  52% 
B)  34% 
C)  66% 
D)  Cannot be determined because amounts are not expressed per unit.

Question 6

Jane Botosan operates a bed and breakfast hotel in a resort area near Lake Michigan. Depreciation on the hotel is $60000 per year. Jane employs a maintenance person at an annual salary of $41000 and a cleaning person at an annual salary of $24000. Real estate taxes are $10000 per year. The rooms rent at an average price of $60 per person per night including breakfast. Other costs are laundry and cleaning service at a cost of $10 per person per night and the cost of food which is $5 per person per night.
Instructions
(a) Determine the number of rentals and the sales revenue Jane needs to break even using the contribution margin technique.
(b) If the current level of rentals is 4000 by what percentage can rentals decrease before Jane has to worry about having a net loss?
(c) Jane is considering upgrading the breakfast service to attract more business and increase prices. This will cost an additional $3 for food costs per person per night. Jane feels she can increase the room rate to $68 per person per night. Determine the number of rentals and the sales revenue Jane needs to break even if the changes are made.

Accepted Answer

(a) 
  Break-even po

Question 7

Montoya Manufacturing has fixed costs of $3000000 and variable costs are 40% of sales. What are the required sales if Montoya desires net income of $300000?

Accepted Answer

A)  $5500000 
B)  $5000000 
C)  $8250000 
D)  $7500000 
A)  $5500000 
B)  $5000000 
C)  $8250000 
D)  $7500000

Question 8

The CVP income statement

Accepted Answer

A)  is distributed internally and externally. 
B)  classifies costs by functions. 
C)  discloses contribution margin in the body of the statement. 
D)  will reflect a different net income than the traditional income statement. 
A)  is distributed internally and externally. 
B)  classifies costs by functions. 
C)  discloses contribution margin in the body of the statement. 
D)  will reflect a different net income than the traditional income statement.

Question 9

In the month of September Matlock Industries sold 800 units of product. The average sales price was $30. During the month fixed costs were $6300 and variable costs were 70% 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.

Accepted Answer

None

Question 10

If more units are sold than are produced in a period variable costing income will be greater than absorption costing income.

Accepted Answer

A) True 
 B)False

Question 11

If more units are produced than are sold during a period variable costing income

Accepted Answer

A)  will be greater than absorption costing income. 
B)  will be less than absorption costing income. 
C)  will be the same as absorption costing income. 
D)  may be either greater or less than absorption costing income. 
A)  will be greater than absorption costing income. 
B)  will be less than absorption costing income. 
C)  will be the same as absorption costing income. 
D)  may be either greater or less than absorption costing income.

Question 12

Malone Company had sales in 2014 of $1600000 on 80000 units. Variable costs totaled $960000 and fixed costs totaled $400000.
A new raw material is available that will decrease the variable costs per unit by 20% (or $2.40). However to process the new raw material fixed operating costs will increase by $40000. Management feels that one-half of the decline in the variable costs per unit should be passed on to customers in the form of a sales price reduction. The marketing department expects that this sales price reduction will result in a 5% increase in the number of units sold.
Instructions
Prepare a CVP income statement for 2014 assuming the changes are made as described.

Accepted Answer

The answer of Malone Company had sales in 2014 of...

Question 13

Which of the following is not a mixed cost?

Accepted Answer

A)  Car rental fee 
B)  Electricity 
C)  Depreciation 
D)  Telephone Expense 
A)  Car rental fee 
B)  Electricity 
C)  Depreciation 
D)  Telephone Expense

Question 14

Danny's Lawn Equipment has actual sales of $800000 and a break-even point of $520000. How much is its margin of safety ratio?

Accepted Answer

A)  35% 
B)  46% 
C)  54% 
D)  65% 
A)  35% 
B)  46% 
C)  54% 
D)  65%

Question 15

Under variable costing fixed manufacturing costs are

Accepted Answer

A)  charged to the product. 
B)  not reported in the income statement. 
C)  considered to be a period cost. 
D)  reported on the balance sheet as a prepayment. 
A)  charged to the product. 
B)  not reported in the income statement. 
C)  considered to be a period cost. 
D)  reported on the balance sheet as a prepayment.

Question 16

Under variable costing ____________________ manufacturing costs are considered to be period costs.

Accepted Answer

The answer of Under variable costing ____________________ manufacturing costs are...

Question 17

How much sales are required to earn a target income of $240000 if total fixed costs are $300000 and the contribution margin ratio is 40%?

Accepted Answer

A)  $900000 
B)  $600000 
C)  $1350000 
D)  $990000 
A)  $900000 
B)  $600000 
C)  $1350000 
D)  $990000

Question 18

In the Restin Company maintenance costs are a mixed cost. At the low level of activity (80 direct labor hours) maintenance costs are $600. At the high level of activity (200 direct labor hours) maintenance costs are $1100. Using the high-low method what is the variable maintenance cost per unit and the total fixed maintenance cost? $\begin{array}{cc}
 \text { Variable Cost Per Unit } & \text { Total Fixed Cost } \\end{array}$
A) $\begin{array}{cc}&&\$ 4.17&&&&&& & \$ 267 \\end{array}$
B)$\begin{array}{cc} &&\$ 4.17 &&&&&&& \$ 500\\end{array}$
C)$\begin{array}{cc} &&\$ 5.50 &&&&&&&\$ 220 \\end{array}$
D)$\begin{array}{cc}&&\$ 5.50&&&&&& &\$ 400
\end{array}$

Accepted Answer

The answer of In the Restin Company maintenance costs are...

Question 19

Sandburg Manufacturing manufactures a single product. Annual production costs incurred in the manufacturing process are shown below for the production of 2000 units. The Utilities and Maintenance are mixed costs. The fixed portions of these costs are $300 and $200 respectively. $$\begin{array} { l r r } 
&  { \text { Costs Incurred } } \
 \text { Production in Units } & 2,000 & 4,000 \
 \text { Production Costs } & &  \
\hline \text { a. Direct Materials } & \$ 6,000 & ? \
\text { b. Direct Labor } & 16,000 & ? \
\text { c. Utilities } & 1,000 & ? \
\text { d. Rent } & 3,000 & ? \
\text { e. Indirect Labor } & 4,200 & ? \
\text { f. Supervisory Salaries } & 1,500 & ? \
\text { g. Maintenance } & 1,000 & ? \
\text { h. Depreciation } & 2,500 & ?
\end{array}$$ Instructions
Calculate the expected costs to be incurred when production is 4000 units. Use your knowledge of cost behavior to determine which of the other costs are fixed or variable.

Accepted Answer

None

Question 20

The Bradshaw Law Office has the following monthly telephone records and costs: $$\begin{array} { l r } 
\text { Calls } & \text { Costs } \
\hline 2,000 & \$ 2,400 \
1,500 & 2,000 \
2,200 & 2,600 \
2,500 & 2,800 \
2,300 & 2,700 \
1,700 & 2,200
\end{array}$$ Instructions
Identify the fixed and variable cost elements using the high-low method.

Accepted Answer

High calls minus low calls: @#LAT-DLM&

Change in

Exam 22: Cost-Volume-Profit

The equation which reflects a CVP income statement is

If Qualls Quality Airline cuts its domestic fares by 30%

A company desires to sell a sufficient quantity of products to earn a profit of $400000. If the unit sales price is $20 unit variable cost is $12 and total fixed costs are $800000 how many units must be sold to earn net income of $400000?

Contribution margin is

Sales are $500000 and variable costs are $330000. What is the contribution margin ratio?

Montoya Manufacturing has fixed costs of $3000000 and variable costs are 40% of sales. What are the required sales if Montoya desires net income of $300000?

The CVP income statement

If more units are sold than are produced in a period variable costing income will be greater than absorption costing income.

If more units are produced than are sold during a period variable costing income

Which of the following is not a mixed cost?

Danny's Lawn Equipment has actual sales of $800000 and a break-even point of $520000. How much is its margin of safety ratio?

Under variable costing fixed manufacturing costs are

Under variable costing ____________________ manufacturing costs are considered to be period costs.

How much sales are required to earn a target income of $240000 if total fixed costs are $300000 and the contribution margin ratio is 40%?

The Bradshaw Law Office has the following monthly telephone records and costs: Calls Costs 2,000 \ 2,400 1,500 2,000 2,200 2,600 2,500 2,800 2,300 2,700 1,700 2,200 Instructions Identify the fixed and variable cost elements using the high-low method.

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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