Question 1

The difference between budgeted sales revenue and break-even sales revenue is the:

Accepted Answer

A)  contribution margin. 
B)  contribution-margin ratio. 
C)  safety margin. 
D)  target net profit. 
E)  operating leverage. 
A)  contribution margin. 
B)  contribution-margin ratio. 
C)  safety margin. 
D)  target net profit. 
E)  operating leverage.

Question 2

The break-even point is that level of activity where:

Accepted Answer

A)  variable cost equals fixed cost. 
B)  contribution margin equals fixed cost. 
C)  total contribution margin equals the sum of variable cost plus fixed cost. 
D)  sales revenue equals total variable cost. 
E)  sales revenue equals fixed cost. 
A)  variable cost equals fixed cost. 
B)  contribution margin equals fixed cost. 
C)  total contribution margin equals the sum of variable cost plus fixed cost. 
D)  sales revenue equals total variable cost. 
E)  sales revenue equals fixed cost.

Question 3

Activity-based costing systems should not be used in conjunction with cost-volume-profit analyses.

Accepted Answer

A) True 
 B)False

Question 4

Partner Industries sells a single product for $50 that has a variable cost of $30. Fixed costs amount to $5 per unit when anticipated sales targets are met. If the company sells one unit in excess of its break-even volume, profit will be:

Accepted Answer

A)  $15. 
B)  $20. 
C)  $50. 
D)  an amount that cannot be derived based on the information presented. 
E)  an amount other than $15, $20, or $50 and one that can be derived based on the information presented. 
A)  $15. 
B)  $20. 
C)  $50. 
D)  an amount that cannot be derived based on the information presented. 
E)  an amount other than $15, $20, or $50 and one that can be derived based on the information presented.

Question 5

Downtown Industries recently sold 70,000 units, generating sales revenue of $4,900,000. The company's variable cost per unit and total fixed cost amounted to $20 and $2,800,000, respectively. Management is in the process of studying the dollar impact of various transactions and events, and desires answers to the following independent cases:
Case no. 1: Management wants to lower the firm's break-even point to 52,000 units. If all other costs remain constant, what must happen to fixed costs to achieve this objective?
Case no. 2: The company anticipates a $2 hike in the variable cost per unit. If all other costs remain constant and management desires to maintain the firm's current break-even point, what must happen to Downtown's selling price? If selling price remains constant, what must happen to the firm's total fixed costs?
A. Answer the two cases raised by management.
B. Determine the impact (increase, decrease, or no effect) of the following operating changes on the items cited:
1. An increase in variable selling costs on income.
2. A decrease in direct material cost on the unit contribution margin.
3. A decrease in the number of units sold on the break-even point.

Accepted Answer

A. Case no. 1:
Selling price per unit: $

Question 6

Starlight Co. makes and sells only one product. The unit contribution margin is $6 and the break-even point in unit sales is 24,000. The company's fixed costs are:

Accepted Answer

A)  $4,000. 
B)  $14,400. 
C)  $40,000. 
D)  $144,000. 
E)  None of the answers is correct. 
A)  $4,000. 
B)  $14,400. 
C)  $40,000. 
D)  $144,000. 
E)  None of the answers is correct.

Question 7

A manager who wants to determine the percentage impact on income of a given percentage change in sales would multiply the percentage increase/decrease in sales revenue by the:

Accepted Answer

A)  contribution margin. 
B)  gross margin. 
C)  operating leverage factor. 
D)  safety margin. 
E)  contribution-margin ratio. 
A)  contribution margin. 
B)  gross margin. 
C)  operating leverage factor. 
D)  safety margin. 
E)  contribution-margin ratio.

Question 8

Use the following information to answer the following Questions
 
-Refer to the figure above. At a given sales volume, the vertical distance between the fixed cost line and the total cost line represents:

Accepted Answer

A)  fixed cost. 
B)  variable cost. 
C)  profit or loss at that volume. 
D)  semivariable cost. 
E)  the safety margin. 
A)  fixed cost. 
B)  variable cost. 
C)  profit or loss at that volume. 
D)  semivariable cost. 
E)  the safety margin.

Question 9

Use the following information to answer the following Questions
 
-Refer to the figure above. Line A is the:

Accepted Answer

A)  total revenue line. 
B)  fixed cost line. 
C)  variable cost line. 
D)  total cost line. 
E)  profit line. 
A)  total revenue line. 
B)  fixed cost line. 
C)  variable cost line. 
D)  total cost line. 
E)  profit line.

Question 10

The unit contribution margin is calculated as the difference between:

Accepted Answer

A)  selling price and fixed cost per unit. 
B)  selling price and variable cost per unit. 
C)  selling price and product cost per unit. 
D)  fixed cost per unit and variable cost per unit. 
E)  fixed cost per unit and product cost per unit. 
A)  selling price and fixed cost per unit. 
B)  selling price and variable cost per unit. 
C)  selling price and product cost per unit. 
D)  fixed cost per unit and variable cost per unit. 
E)  fixed cost per unit and product cost per unit.

Question 11

Assuming no change in sales volume, an increase in company's per-unit contribution margin would:

Accepted Answer

A)  increase income. 
B)  decrease income. 
C)  have no effect on income. 
D)  increase fixed costs. 
E)  decrease fixed costs. 
A)  increase income. 
B)  decrease income. 
C)  have no effect on income. 
D)  increase fixed costs. 
E)  decrease fixed costs.

Question 12

Cost-volume-profit analysis is based on certain general assumptions. One of these assumptions is that product prices will remain constant as volume varies within the relevant range.

Accepted Answer

A) True 
 B)False

Question 13

CVP analysis can be used to study the effect of:

Accepted Answer

A)  changes in selling prices on a company's profitability. 
B)  changes in variable costs on a company's profitability. 
C)  changes in fixed costs on a company's profitability. 
D)  changes in product sales mix on a company's profitability. 
E)  All of the answers are correct. 
A)  changes in selling prices on a company's profitability. 
B)  changes in variable costs on a company's profitability. 
C)  changes in fixed costs on a company's profitability. 
D)  changes in product sales mix on a company's profitability. 
E)  All of the answers are correct.

Question 14

Which of the following would produce the largest increase in the contribution margin per unit?

Accepted Answer

A)  A 7% increase in selling price. 
B)  A 15% decrease in selling price. 
C)  A 14% increase in variable cost. 
D)  A 17% decrease in fixed cost. 
E)  A 23% increase in the number of units sold. 
A)  A 7% increase in selling price. 
B)  A 15% decrease in selling price. 
C)  A 14% increase in variable cost. 
D)  A 17% decrease in fixed cost. 
E)  A 23% increase in the number of units sold.

Question 15

Flower Depot, Inc. sells a single product for $10. Variable costs are $4 per unit and fixed costs total $120,000 at a volume level of 10,000 units. What dollar sales level would Flower Depot have to achieve to earn a target profit of $240,000?

Accepted Answer

A)  $400,000. 
B)  $500,000. 
C)  $600,000. 
D)  $750,000. 
E)  $900,000. 
A)  $400,000. 
B)  $500,000. 
C)  $600,000. 
D)  $750,000. 
E)  $900,000.

Question 16

Use the following information to answer the following Questions
Edmonco Company produced and sold 45,000 units of a single product last year, with the following results: 
-If Edmonco's sales revenues increase 15%, what will be the percentage increase in income before income taxes?

Accepted Answer

A)  15%. 
B)  45%. 
C)  60%. 
D)  75%. 
E)  None of the other answers is correct. 
A)  15%. 
B)  45%. 
C)  60%. 
D)  75%. 
E)  None of the other answers is correct.

Question 17

Use the following information to answer the following Questions
Edmonco Company produced and sold 45,000 units of a single product last year, with the following results: 
-Edmonco's operating leverage factor was:

Accepted Answer

A)  4. 
B)  5. 
C)  6. 
D)  7. 
E)  8. 
A)  4. 
B)  5. 
C)  6. 
D)  7. 
E)  8.

Question 18

Operating leverage is an important concept for many companies.
A. Define operating leverage.
B. Assume that a firm pays no income taxes and is planning to increase its selling price. If sales volume in units does not change, what will be the effect on the operating leverage factor? Explain.
C. Assume that another firm that pays no income taxes is planning to increase total fixed manufacturing costs and decrease variable manufacturing costs per unit. At the present volume of production, the total manufacturing costs will be unchanged. What will this change do to the operating leverage factor? Explain.

Accepted Answer

A. Mathematically, operating leverage is

Question 19

A recent income statement of Safety Corporation reported the following data:
 
If these data are based on the sale of 20,000 units, the break-even point would be:

Accepted Answer

A)  7,500 units. 
B)  11,628 units. 
C)  12,500 units. 
D)  33,333 units. 
E)  None of the answers is correct. 
A)  7,500 units. 
B)  11,628 units. 
C)  12,500 units. 
D)  33,333 units. 
E)  None of the answers is correct.

Question 20

Santa Fe Production sells a single product to wholesalers. The company's budget for the upcoming year revealed anticipated unit sales of 31,600, a selling price of $20, variable cost per unit of $8, and total fixed costs of $360,000. If Santa Fe's unit sales are 300 units more than anticipated, its break-even point will:

Accepted Answer

A)  increase by $12 per unit sold. 
B)  decrease by $12 per unit sold. 
C)  increase by $8 per unit sold. 
D)  decrease by $8 per unit sold. 
E)  not change. 
A)  increase by $12 per unit sold. 
B)  decrease by $12 per unit sold. 
C)  increase by $8 per unit sold. 
D)  decrease by $8 per unit sold. 
E)  not change.

The difference between budgeted sales revenue and break-even sales revenue is the:

The break-even point is that level of activity where:

Activity-based costing systems should not be used in conjunction with cost-volume-profit analyses.

Partner Industries sells a single product for $50 that has a variable cost of $30. Fixed costs amount to $5 per unit when anticipated sales targets are met. If the company sells one unit in excess of its break-even volume, profit will be:

Starlight Co. makes and sells only one product. The unit contribution margin is $6 and the break-even point in unit sales is 24,000. The company's fixed costs are:

A manager who wants to determine the percentage impact on income of a given percentage change in sales would multiply the percentage increase/decrease in sales revenue by the:

Use the following information to answer the following Questions -Refer to the figure above. At a given sales volume, the vertical distance between the fixed cost line and the total cost line represents:

Use the following information to answer the following Questions -Refer to the figure above. Line A is the:

The unit contribution margin is calculated as the difference between:

Assuming no change in sales volume, an increase in company's per-unit contribution margin would:

Cost-volume-profit analysis is based on certain general assumptions. One of these assumptions is that product prices will remain constant as volume varies within the relevant range.

CVP analysis can be used to study the effect of:

Which of the following would produce the largest increase in the contribution margin per unit?

Flower Depot, Inc. sells a single product for $10. Variable costs are $4 per unit and fixed costs total $120,000 at a volume level of 10,000 units. What dollar sales level would Flower Depot have to achieve to earn a target profit of $240,000?

Use the following information to answer the following Questions Edmonco Company produced and sold 45,000 units of a single product last year, with the following results: -If Edmonco's sales revenues increase 15%, what will be the percentage increase in income before income taxes?

Use the following information to answer the following Questions Edmonco Company produced and sold 45,000 units of a single product last year, with the following results: -Edmonco's operating leverage factor was:

A recent income statement of Safety Corporation reported the following data: If these data are based on the sale of 20,000 units, the break-even point would be:

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behavior, and Cost Estimation

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Standard Costing and Analysis of Direct Costs

Flexible Budgeting and Analysis of Overhead Costs

Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Investment Centers and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Compound Interest and the Concept of Present Value

Inventory Management

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Exam 7: Cost-Volume-Profit Analysis

The difference between budgeted sales revenue and break-even sales revenue is the:

The break-even point is that level of activity where:

Activity-based costing systems should not be used in conjunction with cost-volume-profit analyses.

Partner Industries sells a single product for $50 that has a variable cost of $30. Fixed costs amount to $5 per unit when anticipated sales targets are met. If the company sells one unit in excess of its break-even volume, profit will be:

Starlight Co. makes and sells only one product. The unit contribution margin is $6 and the break-even point in unit sales is 24,000. The company's fixed costs are:

A manager who wants to determine the percentage impact on income of a given percentage change in sales would multiply the percentage increase/decrease in sales revenue by the:

Use the following information to answer the following Questions -Refer to the figure above. At a given sales volume, the vertical distance between the fixed cost line and the total cost line represents:

Use the following information to answer the following Questions -Refer to the figure above. Line A is the:

The unit contribution margin is calculated as the difference between:

Assuming no change in sales volume, an increase in company's per-unit contribution margin would:

Cost-volume-profit analysis is based on certain general assumptions. One of these assumptions is that product prices will remain constant as volume varies within the relevant range.

CVP analysis can be used to study the effect of:

Which of the following would produce the largest increase in the contribution margin per unit?

Flower Depot, Inc. sells a single product for $10. Variable costs are $4 per unit and fixed costs total $120,000 at a volume level of 10,000 units. What dollar sales level would Flower Depot have to achieve to earn a target profit of $240,000?

Use the following information to answer the following Questions Edmonco Company produced and sold 45,000 units of a single product last year, with the following results: -If Edmonco's sales revenues increase 15%, what will be the percentage increase in income before income taxes?

Use the following information to answer the following Questions Edmonco Company produced and sold 45,000 units of a single product last year, with the following results: -Edmonco's operating leverage factor was:

A recent income statement of Safety Corporation reported the following data: If these data are based on the sale of 20,000 units, the break-even point would be:

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behavior, and Cost Estimation

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Standard Costing and Analysis of Direct Costs

Flexible Budgeting and Analysis of Overhead Costs

Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Investment Centers and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Compound Interest and the Concept of Present Value

Inventory Management

Filters