Question 1

Total contribution margin is calculated by subtracting

Accepted Answer

A)  cost of goods sold from total revenues. 
B)  fixed costs from total revenues. 
C)  total manufacturing costs from total revenues. 
D)  total variable costs from total revenues. 
A)  cost of goods sold from total revenues. 
B)  fixed costs from total revenues. 
C)  total manufacturing costs from total revenues. 
D)  total variable costs from total revenues.

Question 2

Figure 8-7
The income statement for Thomas Manufacturing Company for 2011 is as follows:  
-Refer to Figure 8-7. What is the contribution margin per unit?

Accepted Answer

A)  £7.20 
B)  £1.20 
C)  £4.80 
D)  £120,000 
A)  £7.20 
B)  £1.20 
C)  £4.80 
D)  £120,000

Question 3

Anthony Industries developed the following income statement using a contribution margin approach:   The projected income statement was based on sales of 100,000 units. Anthony has the capacity to produce 120,000 units during the year.
Required: 
a.
Determine the break-even point in units.
b.
The sales manager believes the company could increase sales by 8,000 units if advertising expenditures were increased by £22,000. Determine the effect on income if the company increases advertising expenditures.
c.
What is the maximum amount the company could pay for advertising if the advertising would increase sales by 8,000 units?

Accepted Answer

The answer of Anthony Industries developed the following income statement...

Question 4

The break-even point is

Accepted Answer

A)  the volume of activity where all fixed costs are recovered. 
B)  where fixed costs equal total variable costs. 
C)  where total revenues equal total costs. 
D)  where total costs equal total contribution margin. 
A)  the volume of activity where all fixed costs are recovered. 
B)  where fixed costs equal total variable costs. 
C)  where total revenues equal total costs. 
D)  where total costs equal total contribution margin.

Question 5

Chopra Company developed the following income statement using a contribution margin approach:   The projected income statement was based on sales of 12,000 units. Chopra has the capacity to produce 15,000 units during the year.
Required: 
a.
Determine the break-even point in units.
b.
The sales manager believes the company could increase sales by 1,000 units if advertising expenditures were increased by £15,000. Determine the effect on income if the company increases advertising expenditures.
c.
What is the maximum amount the company could pay for advertising if the advertising would increase sales by 1,000 units?

Accepted Answer

The answer of Chopra Company developed the following income statement...

Question 6

Figure 8-2
Lewis Production Company had the following projected information for 2011:  
-Refer to Figure 8-2. What is the break-even point in units?

Accepted Answer

A)  2,000 units 
B)  5,000 units 
C)  3,333 units 
D)  60,000 units 
A)  2,000 units 
B)  5,000 units 
C)  3,333 units 
D)  60,000 units

Question 7

When a company sells more units than the break-even point,

Accepted Answer

A)  it moves above the relevant range. 
B)  profits are positive. 
C)  there are no new variable costs incurred. 
D)  profits are negative. 
A)  it moves above the relevant range. 
B)  profits are positive. 
C)  there are no new variable costs incurred. 
D)  profits are negative.

Question 8

The Valdez Mug Company manufactures plastic mugs that sell to wholesalers for £4.00 each. Variable and fixed costs are as follows:   Valdez Mug produced and sold 10,000 cups during April 2011. There were no beginning or ending inventories.
Required: 
a.
Determine Valdez Mug's monthly break-even point in units.
b.
If monthly sales increase by 500 cups, what will be the change in monthly profits?
c.
If Valdez Mug is now subject to an income tax of 40 per cent, what pound sales volume is required to earn a monthly after-tax net income of £12,000?

Accepted Answer

The answer of The Valdez Mug Company manufactures plastic mugs...

Question 9

Assuming all other things are the same, variable cost per unit must have ____ if there was an increase in the break-even point.

Accepted Answer

A)  remained the same 
B)  increased first, then decreased 
C)  increased 
D)  depends on the circumstances 
A)  remained the same 
B)  increased first, then decreased 
C)  increased 
D)  depends on the circumstances

Question 10

On a profit-volume graph, the profit line intersects the horizontal axis at

Accepted Answer

A)  the origin. 
B)  the break-even point. 
C)  a volume of 1,000 units. 
D)  a point where profit is greater than zero. 
A)  the origin. 
B)  the break-even point. 
C)  a volume of 1,000 units. 
D)  a point where profit is greater than zero.

Question 11

Which of the following assumptions does NOT pertain to cost-volume-profit analysis?

Accepted Answer

A)  The units produced will equal the units sold. 
B)  Inventories are constant. 
C)  All costs are classified as fixed or variable. 
D)  Sales mix may vary during the related period. 
A)  The units produced will equal the units sold. 
B)  Inventories are constant. 
C)  All costs are classified as fixed or variable. 
D)  Sales mix may vary during the related period.

Question 12

Cost-volume-profit models assume that

Accepted Answer

A)  the sales mix may vary among multiple products. 
B)  unit selling prices are constant. 
C)  inventories are dynamic and subject to change. 
D)  the total cost function is quadratic. 
A)  the sales mix may vary among multiple products. 
B)  unit selling prices are constant. 
C)  inventories are dynamic and subject to change. 
D)  the total cost function is quadratic.

Question 13

At a price of £32, the estimated monthly sales of a product are 12,000 units. Variable costs include manufacturing costs of £18 and distribution costs of £6. Fixed costs are £40,000 per month.
Required:
Determine each of the following values:
a.
Unit contribution margin
b.
Monthly break-even unit sales volume
c.
Before-tax monthly profit
d.
Monthly margin of safety in units

Accepted Answer

The answer of At a price of £32, the estimated...

Question 14

Explain the limitation of basic cost-volume-profit analysis as it relates to an organization's sales mix.

Accepted Answer

Sales mix refers to the relative portion

Question 15

The Barnes Company manufactures two products. Information about the two product lines is as follows:   The company expects fixed costs to be £189,000. The firm expects 60 per cent of its sales (in units) to be Product K (a sales mix of 3:2).
Required: 
a.
Calculate the contribution margin per package.
b.
Determine the break-even point in units for Product K and Product Y.
c.
Determine the level of sales (in pounds) necessary to generate a before-tax profit of £135,000.

Accepted Answer

The answer of The Barnes Company manufactures two products. Information...

Question 16

Camp Gordon has annual fixed operating costs of £150,000 and variable cost of £550 per camper. Total fees charged to campers amount to £500 each. The camp expects 350 campers next summer. Projected government grants are £95,000. How much must Camp Gordon raise from other sources to break even?

Accepted Answer

A)  £45,000 
B)  £37,500 
C)  £97,500 
D)  £72,500 
A)  £45,000 
B)  £37,500 
C)  £97,500 
D)  £72,500

Question 17

Figure 8-5
Information about the Harmon Company's two products includes:  
-Refer to Figure 8-5. If the sales mix in units is 50 per cent Product X and 50 per cent Product Y, the monthly break-even total monetary sales is

Accepted Answer

A)  £150,000. 
B)  £450,000. 
C)  £510,000. 
D)  £630,000. 
A)  £150,000. 
B)  £450,000. 
C)  £510,000. 
D)  £630,000.

Question 18

Figure 8-3
Sarah Smith, a sole proprietor, has the following projected figures for next year:  
-Refer to Figure 8-3. How many units must be sold to obtain a target before-tax profit of £270,000?

Accepted Answer

A)  6,000 units 
B)  20,000 units 
C)  8,572 units 
D)  14,000 units 
A)  6,000 units 
B)  20,000 units 
C)  8,572 units 
D)  14,000 units

Question 19

Which of the following assumptions is NOT necessary for cost-volume-profit analysis?

Accepted Answer

A)  Total variable costs are linear. 
B)  Total revenues increase when total costs increase. 
C)  Inventories are constant. 
D)  The product sales mix is constant. 
A)  Total variable costs are linear. 
B)  Total revenues increase when total costs increase. 
C)  Inventories are constant. 
D)  The product sales mix is constant.

Question 20

Supply the missing data in each independent case.

Accepted Answer

@#IMG-DLM& Case 1:
Price = £42,000 / 700 = £60;
Un

Total contribution margin is calculated by subtracting

Figure 8-7 The income statement for Thomas Manufacturing Company for 2011 is as follows: -Refer to Figure 8-7. What is the contribution margin per unit?

The break-even point is

Figure 8-2 Lewis Production Company had the following projected information for 2011: -Refer to Figure 8-2. What is the break-even point in units?

When a company sells more units than the break-even point,

Assuming all other things are the same, variable cost per unit must have ____ if there was an increase in the break-even point.

On a profit-volume graph, the profit line intersects the horizontal axis at

Which of the following assumptions does NOT pertain to cost-volume-profit analysis?

Cost-volume-profit models assume that

Explain the limitation of basic cost-volume-profit analysis as it relates to an organization's sales mix.

Camp Gordon has annual fixed operating costs of £150,000 and variable cost of £550 per camper. Total fees charged to campers amount to £500 each. The camp expects 350 campers next summer. Projected government grants are £95,000. How much must Camp Gordon raise from other sources to break even?

Figure 8-5 Information about the Harmon Company's two products includes: -Refer to Figure 8-5. If the sales mix in units is 50 per cent Product X and 50 per cent Product Y, the monthly break-even total monetary sales is

Figure 8-3 Sarah Smith, a sole proprietor, has the following projected figures for next year: -Refer to Figure 8-3. How many units must be sold to obtain a target before-tax profit of £270,000?

Which of the following assumptions is NOT necessary for cost-volume-profit analysis?

Supply the missing data in each independent case.

Introduction to Management Accounting

An Introduction to Cost Terms and Concepts

Cost Assignment

Accounting Entries for a Job Costing System

Process Costing

Joint and By-Product Costing

Income Effects of Alternative Cost Accumulation Systems

Measuring Relevant Costs and Revenues for Decision-Making

Activity-Based Costing

Pricing Decisions and Profitability Analysis

Decision-Making Under Conditions of Risk and Uncertainty

Capital Investment Decisions: Appraisal Methods

Capital Investment Decisions: the Impact of Capital Rationing, Taxation, Inflation and Risk

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis 1

Standard Costing and Variance Analysis 2: Further Aspects

Divisional Financial Performance Measures

Transfer Pricing in Divisionalized Companies

Cost Management

Strategic Management Accounting

Cost Estimation and Cost Behaviour

Quantitative Models for the Planning and Control of Stocks

The Application of Linear Programming to Management Accounting

Filters

Exam 8: Cost-Volume-Profit Analysis

Total contribution margin is calculated by subtracting

Figure 8-7 The income statement for Thomas Manufacturing Company for 2011 is as follows: -Refer to Figure 8-7. What is the contribution margin per unit?

The break-even point is

Figure 8-2 Lewis Production Company had the following projected information for 2011: -Refer to Figure 8-2. What is the break-even point in units?

When a company sells more units than the break-even point,

Assuming all other things are the same, variable cost per unit must have ____ if there was an increase in the break-even point.

On a profit-volume graph, the profit line intersects the horizontal axis at

Which of the following assumptions does NOT pertain to cost-volume-profit analysis?

Cost-volume-profit models assume that

Explain the limitation of basic cost-volume-profit analysis as it relates to an organization's sales mix.

Camp Gordon has annual fixed operating costs of £150,000 and variable cost of £550 per camper. Total fees charged to campers amount to £500 each. The camp expects 350 campers next summer. Projected government grants are £95,000. How much must Camp Gordon raise from other sources to break even?

Figure 8-5 Information about the Harmon Company's two products includes: -Refer to Figure 8-5. If the sales mix in units is 50 per cent Product X and 50 per cent Product Y, the monthly break-even total monetary sales is

Figure 8-3 Sarah Smith, a sole proprietor, has the following projected figures for next year: -Refer to Figure 8-3. How many units must be sold to obtain a target before-tax profit of £270,000?

Which of the following assumptions is NOT necessary for cost-volume-profit analysis?

Supply the missing data in each independent case.

Introduction to Management Accounting

An Introduction to Cost Terms and Concepts

Cost Assignment

Accounting Entries for a Job Costing System

Process Costing

Joint and By-Product Costing

Income Effects of Alternative Cost Accumulation Systems

Measuring Relevant Costs and Revenues for Decision-Making

Activity-Based Costing

Pricing Decisions and Profitability Analysis

Decision-Making Under Conditions of Risk and Uncertainty

Capital Investment Decisions: Appraisal Methods

Capital Investment Decisions: the Impact of Capital Rationing, Taxation, Inflation and Risk

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis 1

Standard Costing and Variance Analysis 2: Further Aspects

Divisional Financial Performance Measures

Transfer Pricing in Divisionalized Companies

Cost Management

Strategic Management Accounting

Cost Estimation and Cost Behaviour

Quantitative Models for the Planning and Control of Stocks

The Application of Linear Programming to Management Accounting

Filters