Question 1

Contribution margin is the amount of revenues remaining after deducting cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 2

Norton Inc. has the following information available for September 2016. $\begin{array}{lr}
\text { Unit selling price of video game consoles } & \$ 400 \
\text { Unit variable costs } & \$ 280 \
\text { Total fixed costs } & \$ 48,000 \
\text { Units sold } & 500
\end{array}$  Instructions
(a) Prepare a CVP income statement that shows both total and per unit amounts.
(b) Compute Norton's breakeven in units.

Accepted Answer

(a)
 (b) Sales = Var

Question 3

CVP analysis does not consider

Accepted Answer

A)  level of activity. 
B)  fixed cost per unit. 
C)  variable cost per unit. 
D)  sales mix. 
A)  level of activity. 
B)  fixed cost per unit. 
C)  variable cost per unit. 
D)  sales mix.

Question 4

Marvin Co. had a net loss of $150000 in 2015 when the selling price per unit was $20 the variable costs per unit were $15 and the fixed costs were $600000. Management expects per unit data and total fixed costs to be the same in 2016. Management has set a goal of earning net income of $75000 in 2016.
Instructions
(a) Compute the units sold in 2015.
(b) Compute the number of units that would have to be sold in 2016 to reach management's desired net income level.
(c) Assume that Marvin Co. sells the same number of units in 2016 as it did in 2015. What would the selling price have to be in order to reach the target net income? Use the mathematical equation.

Accepted Answer

(a) Units sold in @#LAT-DLM&
@#LAT-DLM&
@#LAT-DLM& units

(b) Units s

Question 5

A cost which remains constant per unit at various levels of activity is a

Accepted Answer

A)  variable cost. 
B)  fixed cost. 
C)  mixed cost. 
D)  manufacturing cost. 
A)  variable cost. 
B)  fixed cost. 
C)  mixed cost. 
D)  manufacturing cost.

Question 6

Farmers' Industries has fixed costs of $600000 and variable costs are 60% of sales. How much will Farmers report as sales when its net income equals $60000?

Accepted Answer

A)  $1650000 
B)  $1100000 
C)  $1560000 
D)  $396000 
A)  $1650000 
B)  $1100000 
C)  $1560000 
D)  $396000

Question 7

Which one of the following is a name for the range over which a company expects to operate?

Accepted Answer

A)  Mixed range 
B)  Fixed range 
C)  Variable range 
D)  Relevant range 
A)  Mixed range 
B)  Fixed range 
C)  Variable range 
D)  Relevant range

Question 8

The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

Accepted Answer

A) True 
 B)False

Question 9

An assumption of CVP analysis is that variable and fixed costs have a _______________ relationship with an activity base.

Accepted Answer

The answer of An assumption of CVP analysis is that...

Question 10

Murphy Company produces flash drives for computers which it sells for $20 each. Each flash drive costs $6 of variable costs to make. During April 700 drives were sold. Fixed costs for April were $4 per unit for a total of $2800 for the month. How much does Murphy's operating income increase for each $1000 increase in revenue per month?

Accepted Answer

A)  $700 
B)  $500 
C)  $14000 
D)  Not enough information to determine the answer. 
A)  $700 
B)  $500 
C)  $14000 
D)  Not enough information to determine the answer.

Question 11

The high-low method is used in classifying a mixed cost into its variable and fixed elements.

Accepted Answer

A) True 
 B)False

Question 12

Firms operating at 100% capacity

Accepted Answer

A)  are common. 
B)  are the exception rather than the rule. 
C)  have no fixed costs. 
D)  have no variable costs. 
A)  are common. 
B)  are the exception rather than the rule. 
C)  have no fixed costs. 
D)  have no variable costs.

Question 13

The activity level is represented by an activity index such as direct labor hours units of output or sales dollars.

Accepted Answer

A) True 
 B)False

Question 14

Boswell company reported the following information for the current year: Sales (50000 units) $1000000 direct materials and direct labor $500000 other variable costs $50000 and fixed costs $360000. What is Boswell's contribution margin ratio?

Accepted Answer

A)  68%. 
B)  45%. 
C)  32%. 
D)  55%. 
A)  68%. 
B)  45%. 
C)  32%. 
D)  55%.

Question 15

Ferris Inc. has a unit selling price of $500 variable cost per unit of $300 and fixed costs of $260000.
Instructions
Compute the break-even point in units and in sales dollars.

Accepted Answer

$500X - $300X - $260000 = 0
Br

Question 16

How much sales are required to earn a target net income of $200000 if total fixed costs are $250000 and the contribution margin ratio is 40%?

Accepted Answer

A)  $625000 
B)  $1012500 
C)  $1125000 
D)  $500000 
A)  $625000 
B)  $1012500 
C)  $1125000 
D)  $500000

Question 17

Unit fixed costs __________________ with the changes in the level of activity.

Accepted Answer

The answer of Unit fixed costs __________________ with the changes...

Question 18

In CVP analysis the term "cost"

Accepted Answer

A)  includes only manufacturing costs. 
B)  means cost of goods sold. 
C)  includes manufacturing costs plus selling and administrative expenses. 
D)  excludes all fixed manufacturing costs. 
A)  includes only manufacturing costs. 
B)  means cost of goods sold. 
C)  includes manufacturing costs plus selling and administrative expenses. 
D)  excludes all fixed manufacturing costs.

Question 19

A company requires $1700000 in sales to meet its net income target. Its contribution margin is 30% and fixed costs are $300000. What is the target net income?

Accepted Answer

A)  $510000 
B)  $390000 
C)  $700000 
D)  $210000 
A)  $510000 
B)  $390000 
C)  $700000 
D)  $210000

Question 20

The trend in most companies is to have more variable costs and fewer fixed costs.

Accepted Answer

A) True 
 B)False

Exam 22: Cost-Volume-Profit

Contribution margin is the amount of revenues remaining after deducting cost of goods sold.

CVP analysis does not consider

A cost which remains constant per unit at various levels of activity is a

Farmers' Industries has fixed costs of $600000 and variable costs are 60% of sales. How much will Farmers report as sales when its net income equals $60000?

Which one of the following is a name for the range over which a company expects to operate?

The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

An assumption of CVP analysis is that variable and fixed costs have a _______________ relationship with an activity base.

The high-low method is used in classifying a mixed cost into its variable and fixed elements.

Firms operating at 100% capacity

The activity level is represented by an activity index such as direct labor hours units of output or sales dollars.

Boswell company reported the following information for the current year: Sales (50000 units) $1000000 direct materials and direct labor $500000 other variable costs $50000 and fixed costs $360000. What is Boswell's contribution margin ratio?

Ferris Inc. has a unit selling price of $500 variable cost per unit of $300 and fixed costs of $260000. Instructions Compute the break-even point in units and in sales dollars.

How much sales are required to earn a target net income of $200000 if total fixed costs are $250000 and the contribution margin ratio is 40%?

Unit fixed costs __________________ with the changes in the level of activity.

In CVP analysis the term "cost"

A company requires $1700000 in sales to meet its net income target. Its contribution margin is 30% and fixed costs are $300000. What is the target net income?

The trend in most companies is to have more variable costs and fewer fixed costs.

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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