Question 1

The margin of safety is an effective measure of risk for a company.

Accepted Answer

A) True 
 B)False

Question 2

Daybreak Corporation
Daybreak Corporation manufactures and sells two products: A and B.The operating results of the company are as follows:
                                              $\text {\underline{ Product $ A $} }$ $\text {\underline{ Procluct B} }$
$\begin{array}{lll}
\text { Sales in units } & 3,000 & 4,000 \
\text { Sales price per unit } & \$ 12 & \$ 7 \
\text { Variable costs per unit } & 6 & 4
\end{array}$

In addition,the company incurred total fixed costs in the amount of $10,000.

Accepted Answer

A) 6,000 
B) 6,250 
C) 6,923 
D) 7,000 
A) 6,000 
B) 6,250 
C) 6,923 
D) 7,000

Question 3

Break-even analysis assumes over the relevant range that

Accepted Answer

A) total variable costs are linear. 
B) fixed costs per unit are constant. 
C) total variable costs are nonlinear. 
D) total revenue is nonlinear. 
A) total variable costs are linear. 
B) fixed costs per unit are constant. 
C) total variable costs are nonlinear. 
D) total revenue is nonlinear.

Question 4

A firm's break-even point in dollars can be found in one calculation using which of the following formulas?

Accepted Answer

A) FC/CM per unit 
B) VC/CM 
C) FC/CM ratio 
D) VC/CM ratio 
A) FC/CM per unit 
B) VC/CM 
C) FC/CM ratio 
D) VC/CM ratio

Question 5

A managerial preference for a very low degree of operating leverage might indicate that

Accepted Answer

A) an increase in sales volume is expected. 
B) a decrease in sales volume is expected. 
C) the firm is very unprofitable. 
D) the firm has very high fixed costs. 
A) an increase in sales volume is expected. 
B) a decrease in sales volume is expected. 
C) the firm is very unprofitable. 
D) the firm has very high fixed costs.

Question 6

On a CVP graph,the total fixed cost line parallels the x-axis.

Accepted Answer

A) True 
 B)False

Question 7

The contribution margin ratio always increases when the

Accepted Answer

A) variable costs as a percentage of net sales increase. 
B) variable costs as a percentage of net sales decrease. 
C) break-even point increases. 
D) break-even point decreases. 
A) variable costs as a percentage of net sales increase. 
B) variable costs as a percentage of net sales decrease. 
C) break-even point increases. 
D) break-even point decreases.

Question 8

Carson Company produces and sells two products: A and B in the ratio of 3A to 5B.Selling prices for A and B are,respectively,$1,200 and $240;respective variable costs are $480 and $160.The company's fixed costs are $1,800,000 per year.
Compute the volume of sales in units of each product needed to:
Required:
a.	break even.
b.	earn $800,000 of income before income taxes.
c.	earn $800,000 of income after income taxes, assuming a 30 percent tax rate.
d.	earn 12 percent on sales revenue in before-tax income.
e.	earn 12 percent on sales revenue in after-tax income, assuming a 30 percent tax rate.

Accepted Answer

b. @#LAT-DLM& 
 c. @#LAT-DLM& 
 d. @#LAT-DLM& 
 e.

Question 9

Stewart Company
The following information relates to financial projections of Stewart Company:
Projected sales                                                        60,000 units
Projected variable costs                                           $ \$ 2.00 $ per unit
Projectedfixed costs                                                $ \$ 50,000 $ per year
Projected unit sales price                                        $ \$ 7.00 $

Refer to Stewart Company.How many units would Stewart Company need to sell to earn a profit before taxes of $10,000?

Accepted Answer

A) 25,714 
B) 10,000 
C) 8,571 
D) 12,000 
A) 25,714 
B) 10,000 
C) 8,571 
D) 12,000

Question 10

Dividing total fixed costs by the contribution margin ratio yields break-even point in units.

Accepted Answer

A) True 
 B)False

Question 11

Harris Manufacturing incurs annual fixed costs of $250,000 in producing and selling a single product.Estimated unit sales are 125,000.An after-tax income of $75,000 is desired by management.The company projects its income tax rate at 40 percent.What is the maximum amount that Harris can expend for variable costs per unit and still meet its profit objective if the sales price per unit is estimated at $6?

Accepted Answer

A) $3.37 
B) $3.59 
C) $3.00 
D) $3.70 
A) $3.37 
B) $3.59 
C) $3.00 
D) $3.70

Question 12

Management is considering replacing an existing sales commission compensation plan with a fixed salary plan.If the change is adopted,the company's

Accepted Answer

A) break-even point must increase. 
B) margin of safety must decrease. 
C) operating leverage must increase. 
D) profit must increase. 
A) break-even point must increase. 
B) margin of safety must decrease. 
C) operating leverage must increase. 
D) profit must increase.

Question 13

Which of the following will decrease the break-even point?
Decrease in                   Increase in                         directIncrease in
$\text {\underline{ fixed cost} }$              $\text {\underline{ labor cost} }$                    $\text {\underline{ selling price} }$

Accepted Answer

A) yes yes yes 
B) yes no yes 
C) yes no no 
D) no yes no 
A) yes yes yes 
B) yes no yes 
C) yes no no 
D) no yes no

Question 14

On a CVP graph,the total variable cost line intersects the y-axis at zero.

Accepted Answer

A) True 
 B)False

Question 15

Real Products Company
Real Products Company produces and sells a single product.Information on its costs follow:
$\begin{array}{l}
\text { Variable costs: }\
\begin{array}{lr}
\text { SG\&A } & \$ 2 \text { per unit } \
\text { Prochuction } & \$ 4 \text { per unit } \
\text { Fixed costs: } & \
\text { SG\&A } & \$ 12,000 \text { per year } \
\text { Prochuction } & \$ 15,000 \text { per year }
\end{array}
\end{array}$
Refer to Real Products Company.Assume Real Products Company produced and sold 5,000 units.At this level of activity,it produced a profit of $18,000.What was Real Products Company's sales price per unit?

Accepted Answer

A) $15.00 
B) $11.40 
C) $9.60 
D) $10.00 
A) $15.00 
B) $11.40 
C) $9.60 
D) $10.00

Question 16

In CVP analysis,sales and production are assumed to be equal.

Accepted Answer

A) True 
 B)False

Question 17

After the break-even point is reached,each dollar of contribution margin is a dollar of before-tax profit.

Accepted Answer

A) True 
 B)False

Question 18

The O'Brien Company sells two products,A and B,with contribution margin ratios of 40 and 30 percent and selling prices of $5 and $2.50 a unit.Fixed costs amount to $72,000 a month.Monthly sales average 30,000 units of product A and 40,000 units of product B.
Required:
 a. Assuming that three unts of product $ A $ are sold for every four unins of product $ B $, calculate the dollar sales volume necessary to break even.
b. As part of its cost accounting routine, O'Brien Company assigns $ \$ 36,000 $ in fixed costs to each prochuct each month. Calculat the break-even dollar sales volume for each product.
c. O'Brien Company is considering spending an additional $ \$ 9,700 $ a month on advertising, giving more emphasisto product $ A $ andless emphasis to prochuct $ \mathrm{B} $. If its analysisis correct, sales of prochuct $ \mathrm{A} $ will increase to 40,000 units a month, but sale of product B will fall to 32,000 units a month Recalculate the break-even sales volume, in dollars, at this new product mix. Should the proposal to spend the additional $ \$ 9,700 $ a month be accepted?

Accepted Answer

@#IMG-DLM& At curren

Question 19

____ focuses only on factors that change from one course of action to another.

Accepted Answer

A) Incremental analysis 
B) Margin of safety 
C) Operating leverage 
D) A break-even chart 
A) Incremental analysis 
B) Margin of safety 
C) Operating leverage 
D) A break-even chart

Question 20

The formula for margin of safety is _____________.

Accepted Answer

1 - Degree

The margin of safety is an effective measure of risk for a company.

Break-even analysis assumes over the relevant range that

A firm's break-even point in dollars can be found in one calculation using which of the following formulas?

A managerial preference for a very low degree of operating leverage might indicate that

On a CVP graph,the total fixed cost line parallels the x-axis.

The contribution margin ratio always increases when the

Dividing total fixed costs by the contribution margin ratio yields break-even point in units.

Management is considering replacing an existing sales commission compensation plan with a fixed salary plan.If the change is adopted,the company's

Which of the following will decrease the break-even point? Decrease in Increase in directIncrease in $\text {\underline{ fixed cost} }$ $\text {\underline{ labor cost} }$ $\text {\underline{ selling price} }$

On a CVP graph,the total variable cost line intersects the y-axis at zero.

In CVP analysis,sales and production are assumed to be equal.

After the break-even point is reached,each dollar of contribution margin is a dollar of before-tax profit.

____ focuses only on factors that change from one course of action to another.

The formula for margin of safety is _____________.

Introduction to Cost Accounting

Cost Terminology and Cost Behaviors

Predetermined Overhead Rates, Flexible Budgets, and Absorptionvariable Costing

Activity-Based Management and Activity-Based Costing

Job Order Costing

Process Costing

Standard Costing and Variance Analysis

The Master Budget

Relevant Information for Decision Making

Allocation of Joint Costs and Accounting for By-Products

Introduction to Cost Management Systems

Responsibility Accounting,support Department Allocations,and Transfer Pricing

Performance Measurement, balanced Scorecards, and Performance Rewards

Capital Budgeting

Managing Costs and Uncertainty

Implementing Quality Concepts

Inventory and Production Management

Emerging Management Practices

Filters

Exam 9: Break-Even Point and Cost-Volume-Profit Analysis

The margin of safety is an effective measure of risk for a company.

Break-even analysis assumes over the relevant range that

A firm's break-even point in dollars can be found in one calculation using which of the following formulas?

A managerial preference for a very low degree of operating leverage might indicate that

On a CVP graph,the total fixed cost line parallels the x-axis.

The contribution margin ratio always increases when the

Dividing total fixed costs by the contribution margin ratio yields break-even point in units.

Management is considering replacing an existing sales commission compensation plan with a fixed salary plan.If the change is adopted,the company's

Which of the following will decrease the break-even point? Decrease in Increase in directIncrease in fixed cost‾ \text {\underline{ fixed cost} } fixed cost​ labor cost‾ \text {\underline{ labor cost} } labor cost​ selling price‾ \text {\underline{ selling price} } selling price​

On a CVP graph,the total variable cost line intersects the y-axis at zero.

In CVP analysis,sales and production are assumed to be equal.

After the break-even point is reached,each dollar of contribution margin is a dollar of before-tax profit.

____ focuses only on factors that change from one course of action to another.

The formula for margin of safety is _____________.

Introduction to Cost Accounting

Cost Terminology and Cost Behaviors

Predetermined Overhead Rates, Flexible Budgets, and Absorptionvariable Costing

Activity-Based Management and Activity-Based Costing

Job Order Costing

Process Costing

Standard Costing and Variance Analysis

The Master Budget

Relevant Information for Decision Making

Allocation of Joint Costs and Accounting for By-Products

Introduction to Cost Management Systems

Responsibility Accounting,support Department Allocations,and Transfer Pricing

Performance Measurement, balanced Scorecards, and Performance Rewards

Capital Budgeting

Managing Costs and Uncertainty

Implementing Quality Concepts

Inventory and Production Management

Emerging Management Practices

Filters

Which of the following will decrease the break-even point? Decrease in Increase in directIncrease in $\text {\underline{ fixed cost} }$ $\text {\underline{ labor cost} }$ $\text {\underline{ selling price} }$