Question 1

Why is identification of a relevant range important?

Accepted Answer

A)  It is required under GAAP. 
B)  Cost behavior outside of the relevant range is not linear, which distorts CVP analysis. 
C)  It directly impacts the number of units of product a customer buys. 
D)  It is a cost that is incurred by a company that must be accounted for. 
A)  It is required under GAAP. 
B)  Cost behavior outside of the relevant range is not linear, which distorts CVP analysis. 
C)  It directly impacts the number of units of product a customer buys. 
D)  It is a cost that is incurred by a company that must be accounted for.

Question 2

An activity index identifies the activity that has a causal relationship with a particular cost.

Accepted Answer

A) True 
 B)False

Question 3

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

Question 4

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

Accepted Answer

A)  Changes in activity are the only factors that affect costs. 
B)  Cost classifications are reasonably accurate. 
C)  Beginning inventory is larger than ending inventory. 
D)  Sales mix is constant. 
A)  Changes in activity are the only factors that affect costs. 
B)  Cost classifications are reasonably accurate. 
C)  Beginning inventory is larger than ending inventory. 
D)  Sales mix is constant.

Question 5

Greg's Golf Carts produces two models: Model 24 has sales of 500 units with a contribution margin of $40 each; Model 26 has sales of 350 units with a contribution margin of $50 each. If sales of Model 26 increase by 100 units, how much will profit change?

Accepted Answer

A)  $5,000 increase 
B)  $17,500 increase 
C)  $22,500 increase 
D)  $35,000 increase 
A)  $5,000 increase 
B)  $17,500 increase 
C)  $22,500 increase 
D)  $35,000 increase

Question 6

The increased use of automation and less use of the work force in companies has caused a trend towards an increase in

Accepted Answer

A)  both variable and fixed costs. 
B)  fixed costs and a decrease in variable costs. 
C)  variable costs and a decrease in fixed costs. 
D)  variable costs and no change in fixed costs. 
A)  both variable and fixed costs. 
B)  fixed costs and a decrease in variable costs. 
C)  variable costs and a decrease in fixed costs. 
D)  variable costs and no change in fixed costs.

Question 7

If the activity index decreases, total variable costs will decrease proportionately.

Accepted Answer

A) True 
 B)False

Question 8

Two costs at Bradshaw Company appear below for specific months of operation. $\begin{array}{llrll}&\text { Month}&\text { Amount}&\text { Units Produced }\
\text { Delivery costs } & \text { September } & \$ 40,000 & 40,000 \
& \text { October } & 55,000 &  60,000 \
\text { Utilities } & \text { September } & \$ 84,000  & 40,000 \
& \text { October } & 126,000 &  60,000
\end{array}$ Which type of costs are these?

Accepted Answer

A)  Delivery costs and utilities are both variable. 
B)  Delivery costs and utilities are both mixed. 
C)  Utilities are mixed and delivery costs are variable. 
D)  Delivery costs are mixed and utilities are variable. 
A)  Delivery costs and utilities are both variable. 
B)  Delivery costs and utilities are both mixed. 
C)  Utilities are mixed and delivery costs are variable. 
D)  Delivery costs are mixed and utilities are variable.

Question 9

Target net income is the income objective for an individual product line.

Accepted Answer

A) True 
 B)False

Question 10

Fixed costs are $3,000,000 and the unit contribution margin is $150. What is the break-even point?

Accepted Answer

A)  $7,500,000 
B)  $20,000,000 
C)  7,500 units 
D)  20,000 units 
A)  $7,500,000 
B)  $20,000,000 
C)  7,500 units 
D)  20,000 units

Question 11

Changes in activity have a(n) _________ effect on fixed costs per unit.

Accepted Answer

A)  positive 
B)  negative 
C)  inverse 
D)  neutral 
A)  positive 
B)  negative 
C)  inverse 
D)  neutral

Question 12

Farmers' Industries has fixed costs of $600,000 and variable costs are 60% of sales. How much will Farmers report as sales when its net income equals $60,000?

Accepted Answer

A)  $1,650,000 
B)  $1,100,000 
C)  $1,560,000 
D)  $396,000 
A)  $1,650,000 
B)  $1,100,000 
C)  $1,560,000 
D)  $396,000

Question 13

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 14

A target net income is calculated by taking actual sales minus the margin of safety.

Accepted Answer

A) True 
 B)False

Question 15

Armstrong Industries has a contribution margin of $240,000 and a contribution margin ratio of 30%. How much are total variable costs?

Accepted Answer

A)  $72,000 
B)  $560,000 
C)  $168,000 
D)  $800,000 
A)  $72,000 
B)  $560,000 
C)  $168,000 
D)  $800,000

Question 16

A company requires $1,700,000 in sales to meet its net income target. Its contribution margin is 30%, and fixed costs are $300,000. What is the target net income?

Accepted Answer

A)  $510,000 
B)  $390,000 
C)  $700,000 
D)  $210,000 
A)  $510,000 
B)  $390,000 
C)  $700,000 
D)  $210,000

Question 17

Fixed costs are $900,000 and the variable costs are 75% of the unit selling price. What is the break-even point in dollars?

Accepted Answer

A)  $2,100,000 
B)  $2,700,000 
C)  $3,600,000 
D)  $1,200,000 
A)  $2,100,000 
B)  $2,700,000 
C)  $3,600,000 
D)  $1,200,000

Question 18

Contribution margin

Accepted Answer

A)  is always the same as gross profit margin. 
B)  excludes variable selling costs from its calculation. 
C)  is calculated by subtracting total manufacturing costs per unit from sales revenue per unit. 
D)  equals sales revenue minus variable costs. 
A)  is always the same as gross profit margin. 
B)  excludes variable selling costs from its calculation. 
C)  is calculated by subtracting total manufacturing costs per unit from sales revenue per unit. 
D)  equals sales revenue minus variable costs.

Question 19

A company desires to sell a sufficient quantity of products to earn a profit of $400,000. If the unit sales price is $20, unit variable cost is $12, and total fixed costs are $800,000, how many units must be sold to earn net income of $400,000?

Accepted Answer

A)  225,000 units 
B)  150,000 units 
C)  120,000 units 
D)  90,000 units 
A)  225,000 units 
B)  150,000 units 
C)  120,000 units 
D)  90,000 units

Question 20

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

Accepted Answer

A) True 
 B)False

Why is identification of a relevant range important?

An activity index identifies the activity that has a causal relationship with a particular cost.

To which function of management is CVP analysis most applicable?

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

Greg's Golf Carts produces two models: Model 24 has sales of 500 units with a contribution margin of $40 each; Model 26 has sales of 350 units with a contribution margin of $50 each. If sales of Model 26 increase by 100 units, how much will profit change?

The increased use of automation and less use of the work force in companies has caused a trend towards an increase in

If the activity index decreases, total variable costs will decrease proportionately.

Two costs at Bradshaw Company appear below for specific months of operation. Month Amount Units Produced Delivery costs September \ 40,000 40,000 October 55,000 60,000 Utilities September \ 84,000 40,000 October 126,000 60,000 Which type of costs are these?

Target net income is the income objective for an individual product line.

Fixed costs are $3,000,000 and the unit contribution margin is $150. What is the break-even point?

Changes in activity have a(n) _________ effect on fixed costs per unit.

Farmers' Industries has fixed costs of $600,000 and variable costs are 60% of sales. How much will Farmers report as sales when its net income equals $60,000?

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

A target net income is calculated by taking actual sales minus the margin of safety.

Armstrong Industries has a contribution margin of $240,000 and a contribution margin ratio of 30%. How much are total variable costs?

A company requires $1,700,000 in sales to meet its net income target. Its contribution margin is 30%, and fixed costs are $300,000. What is the target net income?

Fixed costs are $900,000 and the variable costs are 75% of the unit selling price. What is the break-even point in dollars?

Contribution margin

A company desires to sell a sufficient quantity of products to earn a profit of $400,000. If the unit sales price is $20, unit variable cost is $12, and total fixed costs are $800,000, how many units must be sold to earn net income of $400,000?

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

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

Why is identification of a relevant range important?

An activity index identifies the activity that has a causal relationship with a particular cost.

To which function of management is CVP analysis most applicable?

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

Greg's Golf Carts produces two models: Model 24 has sales of 500 units with a contribution margin of $40 each; Model 26 has sales of 350 units with a contribution margin of $50 each. If sales of Model 26 increase by 100 units, how much will profit change?

The increased use of automation and less use of the work force in companies has caused a trend towards an increase in

If the activity index decreases, total variable costs will decrease proportionately.

Two costs at Bradshaw Company appear below for specific months of operation. Month Amount Units Produced Delivery costs September \ 40,000 40,000 October 55,000 60,000 Utilities September \ 84,000 40,000 October 126,000 60,000 Which type of costs are these?

Target net income is the income objective for an individual product line.

Fixed costs are $3,000,000 and the unit contribution margin is $150. What is the break-even point?

Changes in activity have a(n) _________ effect on fixed costs per unit.

Farmers' Industries has fixed costs of $600,000 and variable costs are 60% of sales. How much will Farmers report as sales when its net income equals $60,000?

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

A target net income is calculated by taking actual sales minus the margin of safety.

Armstrong Industries has a contribution margin of $240,000 and a contribution margin ratio of 30%. How much are total variable costs?

A company requires $1,700,000 in sales to meet its net income target. Its contribution margin is 30%, and fixed costs are $300,000. What is the target net income?

Fixed costs are $900,000 and the variable costs are 75% of the unit selling price. What is the break-even point in dollars?

Contribution margin

A company desires to sell a sufficient quantity of products to earn a profit of $400,000. If the unit sales price is $20, unit variable cost is $12, and total fixed costs are $800,000, how many units must be sold to earn net income of $400,000?

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

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