Question 1

If the unit contribution margin is $1 and unit sales are 10,000 units above the break-even volume, then net income will be $10,000.

Accepted Answer

A) True 
 B)False

Question 2

CVP analysis is not important in

Accepted Answer

A)  calculating depreciation expense. 
B)  setting selling prices. 
C)  determining the product mix. 
D)  utilizing production facilities. 
A)  calculating depreciation expense. 
B)  setting selling prices. 
C)  determining the product mix. 
D)  utilizing production facilities.

Question 3

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 4

Sales (50,000 units) $1,000,000, direct materials and direct labor $500,000, other variable costs $50,000, and fixed costs $180,000. What is Boswell contribution margin ratio?

Accepted Answer

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

Question 5

Determine the missing amounts.

Accepted Answer

A. $300 - $195 = $105
B. $105

Question 6

If Whisper Wings Airlines 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 7

Which is the true statement?

Accepted Answer

A)  In a CVP income statement, costs and expenses are classified only by function. 
B)  The CVP income statement is prepared for both internal and external use. 
C)  The CVP income statement shows contribution margin instead of gross profit. 
D)  In a traditional income statement, costs and expenses are classified as either variable or fixed. 
A)  In a CVP income statement, costs and expenses are classified only by function. 
B)  The CVP income statement is prepared for both internal and external use. 
C)  The CVP income statement shows contribution margin instead of gross profit. 
D)  In a traditional income statement, costs and expenses are classified as either variable or fixed.

Question 8

Which of the following is not a plausible explanation of why variable costs often behave in a curvilinear fashion?

Accepted Answer

A)  Labor specialization 
B)  Overtime wages 
C)  Total variable costs are constant within the relevant range 
D)  Availability of quantity discounts 
A)  Labor specialization 
B)  Overtime wages 
C)  Total variable costs are constant within the relevant range 
D)  Availability of quantity discounts

Question 9

Hess, Inc. sells a product with a contribution margin of $12 per unit, fixed costs of $74,400, and sales for the current year of $100,000. How much is Hess's break-even point?

Accepted Answer

A)  4,600 units 
B)  $25,600 
C)  6,200 units 
D)  2,133 units 
A)  4,600 units 
B)  $25,600 
C)  6,200 units 
D)  2,133 units

Question 10

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 11

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 12

The margin of safety is the difference between contribution margin and fixed costs.

Accepted Answer

A) True 
 B)False

Question 13

The contribution margin ratio increases when

Accepted Answer

A)  fixed costs increase. 
B)  fixed costs decrease. 
C)  variable costs as a percentage of sales decrease. 
D)  variable costs as a percentage of sales increase. 
A)  fixed costs increase. 
B)  fixed costs decrease. 
C)  variable costs as a percentage of sales decrease. 
D)  variable costs as a percentage of sales increase.

Question 14

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 15

If a company had a contribution margin of $500,000 and a contribution margin ratio of 40%, total variable costs must have been

Accepted Answer

A)  $750,000. 
B)  $300,000. 
C)  $1,250,000. 
D)  $200,000. 
A)  $750,000. 
B)  $300,000. 
C)  $1,250,000. 
D)  $200,000.

Question 16

A CVP income statement classifies expenses by function rather than by cost behavior.

Accepted Answer

A) True 
 B)False

Question 17

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 18

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 19

Partridge Company reported actual sales of $2,000,000, and fixed costs of $450,000. The contribution margin ratio is 30%.
Instructions
Compute the margin of safety in dollars and the margin of safety ratio.

Accepted Answer

Break-even point in dollars: $

Question 20

Fixed costs are $1,500,000 and the contribution margin per unit is $150. What is the break-even point?

Accepted Answer

A)  $3,750,000 
B)  $10,000,000 
C)  3,750 units 
D)  10,000 units 
A)  $3,750,000 
B)  $10,000,000 
C)  3,750 units 
D)  10,000 units

Exam 22: Cost-Volume-Profit

If the unit contribution margin is $1 and unit sales are 10,000 units above the break-even volume, then net income will be $10,000.

CVP analysis is not important in

Cost activity indexes might help classify costs as

Sales (50,000 units) $1,000,000, direct materials and direct labor $500,000, other variable costs $50,000, and fixed costs $180,000. What is Boswell contribution margin ratio?

Determine the missing amounts.

If Whisper Wings Airlines cuts its domestic fares by 30%,

Which is the true statement?

Which of the following is not a plausible explanation of why variable costs often behave in a curvilinear fashion?

Hess, Inc. sells a product with a contribution margin of $12 per unit, fixed costs of $74,400, and sales for the current year of $100,000. How much is Hess's break-even point?

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

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

The margin of safety is the difference between contribution margin and fixed costs.

The contribution margin ratio increases when

Why is identification of a relevant range important?

If a company had a contribution margin of $500,000 and a contribution margin ratio of 40%, total variable costs must have been

A CVP income statement classifies expenses by function rather than by cost behavior.

To which function of management is CVP analysis most applicable?

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

Partridge Company reported actual sales of $2,000,000, and fixed costs of $450,000. The contribution margin ratio is 30%. Instructions Compute the margin of safety in dollars and the margin of safety ratio.

Fixed costs are $1,500,000 and the contribution margin per unit is $150. What is the break-even point?

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 Analysis: the Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Filters