Question 1

The breakeven point can either be calculated in terms of number of units or in terms of sales revenue.

Accepted Answer

A) True 
 B)False

Question 2

I Scream For Ice Cream sells specialty ice cream in three flavors: Rocky Road, Peanut Butter, and Fruity Tooty. It sold 15,000 gallons last year. For every five gallons of ice cream sold, one pound is Fruity Tooty and the remainder is split evenly between Peanut Butter and Rocky Road. Fixed costs for I Scream For Ice Cream are $27,000 and additional information follows:   The weighted average contribution margin per pound for the three products of I Scream For Ice Cream is

Accepted Answer

A) $50.00. 
B) $ 0.65. 
C) $ 7.00. 
D) $ 2.00. 
A) $50.00. 
B) $ 0.65. 
C) $ 7.00. 
D) $ 2.00.

Question 3

The contribution margin ratio is the unit contribution margin divided by the variable cost per unit.

Accepted Answer

A) True 
 B)False

Question 4

Contribution margin less fixed costs yields

Accepted Answer

A) sales. 
B) operating income. 
C) variable costs. 
D) none of the above. 
A) sales. 
B) operating income. 
C) variable costs. 
D) none of the above.

Question 5

The following information for the past year for the Blaine Corporation has been provided:   During the year, the company produced and sold 30,000 units of product at a selling price of $15.00 per unit. There was no beginning inventory of product at the beginning of the year.
What is the operating income (loss)for the year?

Accepted Answer

A) $281,000 
B) $450,000 
C) $262,000 
D) $93,000 
A) $281,000 
B) $450,000 
C) $262,000 
D) $93,000

Question 6

Prince Paper has budgeted the following amounts for its next fiscal year:   If Price Paper spends an additional $12,500 on advertising, sales volume should increase by 2,300 units. What effect will this have on operating income?

Accepted Answer

A) Increase of $102,500 
B) Increase of $115,000 
C) Decrease of $115,000 
D) Decrease of $102,500 
A) Increase of $102,500 
B) Increase of $115,000 
C) Decrease of $115,000 
D) Decrease of $102,500

Question 7

Yellow Company's variable expenses are 40% of sales and have monthly fixed expenses of $15,000. The monthly target operating income is $3,750. What is the monthly margin of safety as a percentage of target sales in dollars?

Accepted Answer

A) 20.00% 
B) 180.00% 
C) 60.00% 
D) 25.00% 
A) 20.00% 
B) 180.00% 
C) 60.00% 
D) 25.00%

Question 8

Electric Jet Skis operates a jet ski rental business. Assume the jet skis rent for $55 per 6 hours. The variable costs are $33 per 6 hours rental, and its fixed costs are $80,000 each month. What is the contribution margin ratio?

Accepted Answer

A) 40% 
B) 60% 
C) 250% 
D) 22% 
A) 40% 
B) 60% 
C) 250% 
D) 22%

Question 9

CVP analysis assumes all of the following except

Accepted Answer

A) the mix of products will not change. 
B) revenues are linear throughout the relevant range. 
C) inventory levels will increase. 
D) a change in volume is the only factor that affect costs. 
A) the mix of products will not change. 
B) revenues are linear throughout the relevant range. 
C) inventory levels will increase. 
D) a change in volume is the only factor that affect costs.

Question 10

Managers can quickly forecast the total contribution margin by dividing the

Accepted Answer

A) projected sales units by the variable cost ratio. 
B) projected sales units by the contribution margin ratio. 
C) projected sales revenue by the unit contribution margin. 
D) projected sales revenue by the contribution margin ratio. 
A) projected sales units by the variable cost ratio. 
B) projected sales units by the contribution margin ratio. 
C) projected sales revenue by the unit contribution margin. 
D) projected sales revenue by the contribution margin ratio.

Question 11

Tom's Taxidermy has a monthly target operating income of $25,000. Variable expenses are 75% of sales and monthly fixed expenses are $15,000. What is the monthly margin of safety in dollars if the business achieves its operating income goal?

Accepted Answer

A) $220,000 
B) $160,000 
C) $40,000 
D) $100,000 
A) $220,000 
B) $160,000 
C) $40,000 
D) $100,000

Question 12

Tom's Taxidermy has a monthly target operating income of $25,000. Variable expenses are 75% of sales and monthly fixed expenses are $15,000. What is the monthly margin of safety as a percentage of target sales in dollars?

Accepted Answer

A) 62.50% 
B) 137.50% 
C) 25.00% 
D) 167.67% 
A) 62.50% 
B) 137.50% 
C) 25.00% 
D) 167.67%

Question 13

If the fixed costs increase while the sales price per unit and variable costs per unit remain constant, which of the following statements is true?

Accepted Answer

A) The contribution margin stays the same and the breakeven point increases. 
B) The contribution margin decreases and the breakeven point increases. 
C) The contribution margin stays the same and the breakeven point decreases. 
D) The contribution margin increases and the breakeven point decreases. 
A) The contribution margin stays the same and the breakeven point increases. 
B) The contribution margin decreases and the breakeven point increases. 
C) The contribution margin stays the same and the breakeven point decreases. 
D) The contribution margin increases and the breakeven point decreases.

Question 14

The addition of a specified target operating income to contribution margin analysis has the same effect on required sales in units as increasing fixed expenses.

Accepted Answer

A) True 
 B)False

Question 15

A product is sold at $6 per unit, the unit contribution margin is $5, and total fixed expenses are $5,000, what are the breakeven sales in units?

Accepted Answer

A) 30,000 
B) 1,000 
C) 833 
D) 25,000 
A) 30,000 
B) 1,000 
C) 833 
D) 25,000

Question 16

To calculate the weighted-average contribution margin, divide the sum of the individual product contribution margins by the sales mix in units.

Accepted Answer

A) True 
 B)False

Question 17

Cedar Mills Incorporated has a predicted operating income of $72,000. Its variable expenses are $20,000 and its total fixed expenses have increased from $32,000 to $60,000. Its unit contribution margin is $10. Its breakeven sales in units is

Accepted Answer

A) 15,200. 
B) 1,200. 
C) 13,200. 
D) 11,200. 
A) 15,200. 
B) 1,200. 
C) 13,200. 
D) 11,200.

Question 18

I Scream For Ice Cream sells specialty ice cream in three flavors: Rocky Road, Peanut Butter, and Fruity Tooty. It sold 15,000 gallons last year. For every five gallons of ice cream sold, one pound is Fruity Tooty and the remainder is split evenly between Peanut Butter and Rocky Road. Fixed costs for I Scream For Ice Cream are $27,000 and additional information follows:   The breakeven sales volume in gallons for I Scream For Ice Cream is

Accepted Answer

A) 5,400. 
B) 7,500. 
C) 3,857. 
D) 13,500. 
A) 5,400. 
B) 7,500. 
C) 3,857. 
D) 13,500.

Question 19

When a company sells more than one product, it does not have a unique breakeven point.

Accepted Answer

A) True 
 B)False

Question 20

Garfield Corporation is considering building a new plant in Canada. It predicts sales at the new plant to be 50,000 units at $5.00/unit. Below is a listing of estimated expenses:   A Canadian firm was contracted to sell the product and will receive a commission of 10% of the sales price. No U.S. home office expenses will be allocated to the new facility.
The margin of safety percentage for Duncan Enterprises is

Accepted Answer

A) 89.53%. 
B) 35.71%. 
C) 164.29%. 
D) 64.29%. 
A) 89.53%. 
B) 35.71%. 
C) 164.29%. 
D) 64.29%.

The breakeven point can either be calculated in terms of number of units or in terms of sales revenue.

The contribution margin ratio is the unit contribution margin divided by the variable cost per unit.

Contribution margin less fixed costs yields

Prince Paper has budgeted the following amounts for its next fiscal year: If Price Paper spends an additional $12,500 on advertising, sales volume should increase by 2,300 units. What effect will this have on operating income?

Yellow Company's variable expenses are 40% of sales and have monthly fixed expenses of $15,000. The monthly target operating income is $3,750. What is the monthly margin of safety as a percentage of target sales in dollars?

Electric Jet Skis operates a jet ski rental business. Assume the jet skis rent for $55 per 6 hours. The variable costs are $33 per 6 hours rental, and its fixed costs are $80,000 each month. What is the contribution margin ratio?

CVP analysis assumes all of the following except

Managers can quickly forecast the total contribution margin by dividing the

Tom's Taxidermy has a monthly target operating income of $25,000. Variable expenses are 75% of sales and monthly fixed expenses are $15,000. What is the monthly margin of safety in dollars if the business achieves its operating income goal?

Tom's Taxidermy has a monthly target operating income of $25,000. Variable expenses are 75% of sales and monthly fixed expenses are $15,000. What is the monthly margin of safety as a percentage of target sales in dollars?

If the fixed costs increase while the sales price per unit and variable costs per unit remain constant, which of the following statements is true?

The addition of a specified target operating income to contribution margin analysis has the same effect on required sales in units as increasing fixed expenses.

A product is sold at $6 per unit, the unit contribution margin is $5, and total fixed expenses are $5,000, what are the breakeven sales in units?

To calculate the weighted-average contribution margin, divide the sum of the individual product contribution margins by the sales mix in units.

Cedar Mills Incorporated has a predicted operating income of $72,000. Its variable expenses are $20,000 and its total fixed expenses have increased from $32,000 to $60,000. Its unit contribution margin is $10. Its breakeven sales in units is

When a company sells more than one product, it does not have a unique breakeven point.

Introduction to Managerial Accounting

Building Blocks of Managerial Accounting

Job Costing

Activity-Based Costing, Lean Operations, and the Costs of Quality

Process Costing

Cost Behavior

Relevant Costs for Short-Term Decisions

The Master Budget

Performance Evaluation

Standard Costs and Variances

Capital Investment Decisions and the Time Value of Money

Statement of Cash Flows

Financial Statement Analysis

Sustainability

Filters

Exam 7: Cost-Volume-Profit Analysis

The breakeven point can either be calculated in terms of number of units or in terms of sales revenue.

The contribution margin ratio is the unit contribution margin divided by the variable cost per unit.

Contribution margin less fixed costs yields

Prince Paper has budgeted the following amounts for its next fiscal year: If Price Paper spends an additional $12,500 on advertising, sales volume should increase by 2,300 units. What effect will this have on operating income?

Yellow Company's variable expenses are 40% of sales and have monthly fixed expenses of $15,000. The monthly target operating income is $3,750. What is the monthly margin of safety as a percentage of target sales in dollars?

Electric Jet Skis operates a jet ski rental business. Assume the jet skis rent for $55 per 6 hours. The variable costs are $33 per 6 hours rental, and its fixed costs are $80,000 each month. What is the contribution margin ratio?

CVP analysis assumes all of the following except

Managers can quickly forecast the total contribution margin by dividing the

Tom's Taxidermy has a monthly target operating income of $25,000. Variable expenses are 75% of sales and monthly fixed expenses are $15,000. What is the monthly margin of safety in dollars if the business achieves its operating income goal?

Tom's Taxidermy has a monthly target operating income of $25,000. Variable expenses are 75% of sales and monthly fixed expenses are $15,000. What is the monthly margin of safety as a percentage of target sales in dollars?

If the fixed costs increase while the sales price per unit and variable costs per unit remain constant, which of the following statements is true?

The addition of a specified target operating income to contribution margin analysis has the same effect on required sales in units as increasing fixed expenses.

A product is sold at $6 per unit, the unit contribution margin is $5, and total fixed expenses are $5,000, what are the breakeven sales in units?

To calculate the weighted-average contribution margin, divide the sum of the individual product contribution margins by the sales mix in units.

Cedar Mills Incorporated has a predicted operating income of $72,000. Its variable expenses are $20,000 and its total fixed expenses have increased from $32,000 to $60,000. Its unit contribution margin is $10. Its breakeven sales in units is

When a company sells more than one product, it does not have a unique breakeven point.

Introduction to Managerial Accounting

Building Blocks of Managerial Accounting

Job Costing

Activity-Based Costing, Lean Operations, and the Costs of Quality

Process Costing

Cost Behavior

Relevant Costs for Short-Term Decisions

The Master Budget

Performance Evaluation

Standard Costs and Variances

Capital Investment Decisions and the Time Value of Money

Statement of Cash Flows

Financial Statement Analysis

Sustainability

Filters