Question 1

When units sold exceed units produced, income under absorption costing is higher than income under variable costing.

Accepted Answer

A) True 
 B)False

Question 2

Use the following information for questions 
Nielson Corp. sells its product for $6,600 per unit. Variable costs per unit are: manufacturing, $3,600, and selling and administrative, $75. Fixed costs are: $18,000 manufacturing overhead, and $24,000 selling and administrative. There was no beginning inventory at 1/1/15. Production was 20 units per year in 2018-2020. Sales were 20 units in 2018, 16 units in 2019, and 24 units in 2020.
-Income under absorption costing for 2020 is

Accepted Answer

A)  $19,800. 
B)  $23,400. 
C)  $24,600. 
D)  $28,200. 
A)  $19,800. 
B)  $23,400. 
C)  $24,600. 
D)  $28,200.

Question 3

For Sanborn Co., sales is $1,000,000, fixed expenses are $300,000, and the contribution margin per unit is $60. What is the break-even point?

Accepted Answer

A)  $1,666,667 sales dollars 
B)  $500,000 sales dollars 
C)  16,667 units 
D)  5,000 units 
A)  $1,666,667 sales dollars 
B)  $500,000 sales dollars 
C)  16,667 units 
D)  5,000 units

Question 4

The contribution margin ratio is

Accepted Answer

A)  sales divided by contribution margin. 
B)  sales divided by fixed expenses. 
C)  sales divided by variable expenses. 
D)  contribution margin divided by sales. 
A)  sales divided by contribution margin. 
B)  sales divided by fixed expenses. 
C)  sales divided by variable expenses. 
D)  contribution margin divided by sales.

Question 5

If a company has limited machine hours available for production, it is generally more profitable to produce and sell the product with the highest contribution margin per machine hour.

Accepted Answer

A) True 
 B)False

Question 6

When a company assigns the costs of direct materials, direct labor, and both variable and fixed manufacturing overhead to products, that company is using

Accepted Answer

A)  operations costing. 
B)  absorption costing. 
C)  variable costing. 
D)  product costing. 
A)  operations costing. 
B)  absorption costing. 
C)  variable costing. 
D)  product costing.

Question 7

Use the following information for questions 
Nielson Corp. sells its product for $6,600 per unit. Variable costs per unit are: manufacturing, $3,600, and selling and administrative, $75. Fixed costs are: $18,000 manufacturing overhead, and $24,000 selling and administrative. There was no beginning inventory at 1/1/15. Production was 20 units per year in 2018-2020. Sales were 20 units in 2018, 16 units in 2019, and 24 units in 2020.
-Income under absorption costing for 2019 is

Accepted Answer

A)  $4,800. 
B)  $8,400. 
C)  $9,600. 
D)  $13,200. 
A)  $4,800. 
B)  $8,400. 
C)  $9,600. 
D)  $13,200.

Question 8

Some fixed manufacturing overhead costs of the current period are deferred to future periods under

Accepted Answer

A)  absorption costing. 
B)  variable costing. 
C)  both absorption and variable costing. 
D)  neither absorption nor variable costing. 
A)  absorption costing. 
B)  variable costing. 
C)  both absorption and variable costing. 
D)  neither absorption nor variable costing.

Question 9

The degree of operating leverage

Accepted Answer

A)  does not provide a reliable measure of a company's earnings volatility. 
B)  cannot be used to compare companies. 
C)  is computed by dividing total contribution margin by net income. 
D)  measures how much of each sales dollar is available to cover fixed expenses. 
A)  does not provide a reliable measure of a company's earnings volatility. 
B)  cannot be used to compare companies. 
C)  is computed by dividing total contribution margin by net income. 
D)  measures how much of each sales dollar is available to cover fixed expenses.

Question 10

For Wickham Co., sales is $3,000,000, fixed expenses are $900,000, and the contribution margin ratio is 36%. What is required sales in dollars to earn a target net income of $600,000?

Accepted Answer

A)  $1,666,667 
B)  $2,500,000 
C)  $4,166,667 
D)  $8,333,333 
A)  $1,666,667 
B)  $2,500,000 
C)  $4,166,667 
D)  $8,333,333

Question 11

In CVP analysis, cost includes manufacturing costs but not selling and administrative expenses.

Accepted Answer

A) True 
 B)False

Question 12

Use the following information for questions 
Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Swanson incurs $6,660,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%.
-The break-even point in dollars is

Accepted Answer

A)  $2,464,200. 
B)  $15,488,373. 
C)  $16,650,000. 
D)  $18,000,000. 
A)  $2,464,200. 
B)  $15,488,373. 
C)  $16,650,000. 
D)  $18,000,000.

Question 13

In a CVP income statement, cost of goods sold is generally

Accepted Answer

A)  completely a variable cost. 
B)  completely a fixed cost. 
C)  neither a variable cost nor a fixed cost. 
D)  partly a variable cost and partly a fixed cost. 
A)  completely a variable cost. 
B)  completely a fixed cost. 
C)  neither a variable cost nor a fixed cost. 
D)  partly a variable cost and partly a fixed cost.

Question 14

The margin of safety ratio

Accepted Answer

A)  is computed as actual sales divided by break-even sales. 
B)  indicates what percent decline in sales could be sustained before the company would operate at a loss. 
C)  measures the ratio of fixed costs to variable costs. 
D)  is used to determine the break-even point. 
A)  is computed as actual sales divided by break-even sales. 
B)  indicates what percent decline in sales could be sustained before the company would operate at a loss. 
C)  measures the ratio of fixed costs to variable costs. 
D)  is used to determine the break-even point.

When units sold exceed units produced, income under absorption costing is higher than income under variable costing.

For Sanborn Co., sales is $1,000,000, fixed expenses are $300,000, and the contribution margin per unit is $60. What is the break-even point?

The contribution margin ratio is

If a company has limited machine hours available for production, it is generally more profitable to produce and sell the product with the highest contribution margin per machine hour.

When a company assigns the costs of direct materials, direct labor, and both variable and fixed manufacturing overhead to products, that company is using

Some fixed manufacturing overhead costs of the current period are deferred to future periods under

The degree of operating leverage

For Wickham Co., sales is $3,000,000, fixed expenses are $900,000, and the contribution margin ratio is 36%. What is required sales in dollars to earn a target net income of $600,000?

In CVP analysis, cost includes manufacturing costs but not selling and administrative expenses.

In a CVP income statement, cost of goods sold is generally

The margin of safety ratio

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Statement of Cash Flows

Financial Statement Analysis

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Exam 6: Cost-Volume-Profit Analysis: Additional Issues

When units sold exceed units produced, income under absorption costing is higher than income under variable costing.

For Sanborn Co., sales is $1,000,000, fixed expenses are $300,000, and the contribution margin per unit is $60. What is the break-even point?

The contribution margin ratio is

If a company has limited machine hours available for production, it is generally more profitable to produce and sell the product with the highest contribution margin per machine hour.

When a company assigns the costs of direct materials, direct labor, and both variable and fixed manufacturing overhead to products, that company is using

Some fixed manufacturing overhead costs of the current period are deferred to future periods under

The degree of operating leverage

For Wickham Co., sales is $3,000,000, fixed expenses are $900,000, and the contribution margin ratio is 36%. What is required sales in dollars to earn a target net income of $600,000?

In CVP analysis, cost includes manufacturing costs but not selling and administrative expenses.

In a CVP income statement, cost of goods sold is generally

The margin of safety ratio

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Statement of Cash Flows

Financial Statement Analysis

Filters