Question 1

Unit contribution margin is the amount that each unit sold contributes towards the recovery of fixed costs and to income.

Accepted Answer

A) True 
 B)False  True

Question 2

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

Accepted Answer

A) True 
 B)False  False

Question 3

Within the relevant range, the variable cost per unit

Accepted Answer

A)  differs at each activity level. 
B)  remains constant at each activity level. 
C)  increases as production increases. 
D)  decreases as production increases. 
A)  differs at each activity level. 
B)  remains constant at each activity level. 
C)  increases as production increases. 
D)  decreases as production increases. B

Question 4

Wilton Co. reported the following results from the sale of 5,000 hammers in May: sales $200,000, variable costs $120,000, fixed costs $60,000, and net income $20,000. Assume that Wilton increases the selling price of hammers by 10% on June 1. How many hammers will have to be sold in June to maintain the same level of net income?

Accepted Answer

A)  4,000 
B)  4,300 
C)  4,500 
D)  5,000 
A)  4,000 
B)  4,300 
C)  4,500 
D)  5,000

Question 5

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 6

Which one of the following is not an assumption of CVP analysis?

Accepted Answer

A)  All units produced are sold. 
B)  All costs are variable costs. 
C)  Sales mix remains constant. 
D)  The behavior of costs and revenues are linear within the relevant range. 
A)  All units produced are sold. 
B)  All costs are variable costs. 
C)  Sales mix remains constant. 
D)  The behavior of costs and revenues are linear within the relevant range.

Question 7

A mixed cost contains

Accepted Answer

A)  a variable element and a fixed element. 
B)  both selling and administrative costs. 
C)  both retailing and manufacturing costs. 
D)  both operating and nonoperating costs. 
A)  a variable element and a fixed element. 
B)  both selling and administrative costs. 
C)  both retailing and manufacturing costs. 
D)  both operating and nonoperating costs.

Question 8

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 9

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 10

Hollis Industries produces flash drives for computers, which it sells for $20 each. Each flash drive costs $13 of variable costs to make. During April, 1,000 drives were sold. Fixed costs for March were $2 per unit for a total of $1,000 for the month. How much is the contribution margin ratio?

Accepted Answer

A)  25% 
B)  35% 
C)  65% 
D)  75% 
A)  25% 
B)  35% 
C)  65% 
D)  75%

Question 11

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 $300,000. 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 12

The break-even point is where total sales equal total fixed costs.

Accepted Answer

A) True 
 B)False

Question 13

A variable cost remains constant per unit at various levels of activity.

Accepted Answer

A) True 
 B)False

Question 14

For CVP analysis, both variable and fixed costs are assumed to have a linear relationship within the relevant range of activity.

Accepted Answer

A) True 
 B)False

Question 15

Montoya Manufacturing has fixed costs of $3,000,000 and variable costs are 40% of sales. What are the required sales if Montoya desires net income of $300,000?

Accepted Answer

A)  $5,500,000 
B)  $5,000,000 
C)  $8,250,000 
D)  $7,500,000 
A)  $5,500,000 
B)  $5,000,000 
C)  $8,250,000 
D)  $7,500,000

Question 16

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 17

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 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 variable cost is a cost that

Accepted Answer

A)  varies per unit at every level of activity. 
B)  occurs at various times during the year. 
C)  varies in total in proportion to changes in the level of activity. 
D)  may or may not be incurred, depending on management's discretion. 
A)  varies per unit at every level of activity. 
B)  occurs at various times during the year. 
C)  varies in total in proportion to changes in the level of activity. 
D)  may or may not be incurred, depending on management's discretion.

Question 20

The contribution margin ratio of 40% means that 60 cents of each sales dollar is available to cover fixed costs and to produce a profit.

Accepted Answer

A) True 
 B)False

Unit contribution margin is the amount that each unit sold contributes towards the recovery of fixed costs and to income.

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

Within the relevant range, the variable cost per unit

Firms operating at 100% capacity

Which one of the following is not an assumption of CVP analysis?

A mixed cost contains

Cost activity indexes might help classify costs as

The CVP income statement

Hollis Industries produces flash drives for computers, which it sells for $20 each. Each flash drive costs $13 of variable costs to make. During April, 1,000 drives were sold. Fixed costs for March were $2 per unit for a total of $1,000 for the month. How much is the contribution margin ratio?

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 $300,000. How much is Weatherspoon's contribution margin ratio?

The break-even point is where total sales equal total fixed costs.

A variable cost remains constant per unit at various levels of activity.

For CVP analysis, both variable and fixed costs are assumed to have a linear relationship within the relevant range of activity.

Montoya Manufacturing has fixed costs of $3,000,000 and variable costs are 40% of sales. What are the required sales if Montoya desires net income of $300,000?

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?

If Qualls Quality Airline cuts its domestic fares by 30%,

In CVP analysis, the term "cost"

A variable cost is a cost that

The contribution margin ratio of 40% means that 60 cents of each sales dollar is available to cover fixed costs and to produce a profit.

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit Analysis: Additional Issues

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 5: Cost-Volume-Profit

Unit contribution margin is the amount that each unit sold contributes towards the recovery of fixed costs and to income.

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

Within the relevant range, the variable cost per unit

Firms operating at 100% capacity

Which one of the following is not an assumption of CVP analysis?

A mixed cost contains

Cost activity indexes might help classify costs as

The CVP income statement

Hollis Industries produces flash drives for computers, which it sells for $20 each. Each flash drive costs $13 of variable costs to make. During April, 1,000 drives were sold. Fixed costs for March were $2 per unit for a total of $1,000 for the month. How much is the contribution margin ratio?

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 $300,000. How much is Weatherspoon's contribution margin ratio?

The break-even point is where total sales equal total fixed costs.

A variable cost remains constant per unit at various levels of activity.

For CVP analysis, both variable and fixed costs are assumed to have a linear relationship within the relevant range of activity.

Montoya Manufacturing has fixed costs of $3,000,000 and variable costs are 40% of sales. What are the required sales if Montoya desires net income of $300,000?

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?

If Qualls Quality Airline cuts its domestic fares by 30%,

In CVP analysis, the term "cost"

A variable cost is a cost that

The contribution margin ratio of 40% means that 60 cents of each sales dollar is available to cover fixed costs and to produce a profit.

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit Analysis: Additional Issues

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