Question 1

Cost-volume-profit analysis can be used to predict the effects of reduced selling prices,increased fixed costs,and reduced variable costs on break-even points.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is the correct interpretation of a degree of operating leverage of 5?

Accepted Answer

A) Operating leverage of 5 means that sales can decrease by 5% before the firm's current level of sales will hit the break-even point. 
B) Operating leverage of 5 means that if sales increase by 5% the firm will hit its break-even point. 
C) Operating leverage of 5 means that if sales increase by 5%, there will be a 25% increase in the firm's pretax profit. 
D) Operating leverage of 5 measures the degree of debt employed by the firm's debt structure. 
E) Operating leverage of 5 means that the company would need to increase sales by 5 times in order to hit its break-even point. 
A) Operating leverage of 5 means that sales can decrease by 5% before the firm's current level of sales will hit the break-even point. 
B) Operating leverage of 5 means that if sales increase by 5% the firm will hit its break-even point. 
C) Operating leverage of 5 means that if sales increase by 5%, there will be a 25% increase in the firm's pretax profit. 
D) Operating leverage of 5 measures the degree of debt employed by the firm's debt structure. 
E) Operating leverage of 5 means that the company would need to increase sales by 5 times in order to hit its break-even point.

Question 3

Total variable costs change proportionately with changes in output activity.

Accepted Answer

A) True 
 B)False

Question 4

Dunkin Company manufactures and sells a single product that sells for $480 per unit; variable costs are $300.Annual fixed costs are $990,000.Current sales volume is $4,200,000.Dunkin company management targets an annual after-tax income of $843,750.The company is subject to a 25% income tax rate.Compute the unit sales to earn the target after-tax net income.

Accepted Answer

A) 12,000. 
B) 10,188. 
C) 6,672. 
D) 11,750. 
E) 14,688. 
A) 12,000. 
B) 10,188. 
C) 6,672. 
D) 11,750. 
E) 14,688.

Question 5

Boston Co.is considering the production and sale of a new product with the following sales and cost data:
 unit sales price,$300; unit variable costs,$180; total fixed costs,$270,000; and projected sales,$900,000.What is the margin of safety:
(a)In dollar sales?
 And (b)As a percent of sales?

Accepted Answer

Contribution margin ratio = ($300 - $180

Question 6

The difference between the unit sales price and the unit variable cost of an item is defined as the _________________________.

Accepted Answer

unit contr

Question 7

Discuss how CVP analysis can be useful in planning.

Accepted Answer

CVP analysis is useful in determining th

Question 8

Total contribution margin in dollars divided by pretax income is the:

Accepted Answer

A) Degree of operating leverage. 
B) Contribution margin ratio. 
C) Margin of safety. 
D) Sales mix. 
E) Break-even point in units. 
A) Degree of operating leverage. 
B) Contribution margin ratio. 
C) Margin of safety. 
D) Sales mix. 
E) Break-even point in units.

Question 9

When graphing cost-volume-profit data on a CVP chart:

Accepted Answer

A) Units are plotted on the horizontal axis; costs on the vertical axis. 
B) Units are plotted on the vertical axis; costs on the horizontal axis. 
C) Both units and costs are plotted on the horizontal axis. 
D) Both units and cost are plotted on the vertical axis. 
E) Data points always represent expected future points. 
A) Units are plotted on the horizontal axis; costs on the vertical axis. 
B) Units are plotted on the vertical axis; costs on the horizontal axis. 
C) Both units and costs are plotted on the horizontal axis. 
D) Both units and cost are plotted on the vertical axis. 
E) Data points always represent expected future points.

Question 10

Dividing a mixed cost into its separate fixed and variable cost components makes it more difficult to perform cost-volume-profit analysis.

Accepted Answer

A) True 
 B)False

Question 11

Legacy Company is considering the production and sale of a new product with the following sales and cost data:
 unit sales price $18; unit variable costs $8.10; and total fixed costs of $8,250.Legacy is subject to a 25% tax rate.Determine the dollar sales needed to generate an after-tax income of $33,000.

Accepted Answer

Target pretax income = $33,000/(1 - .25)

Question 12

A term describing a firm's normal range of operating activities is:

Accepted Answer

A) Relevant range of operations. 
B) Break-even level of operations. 
C) Margin of safety of operations. 
D) Relevant operating analysis. 
E) High-low level of operations. 
A) Relevant range of operations. 
B) Break-even level of operations. 
C) Margin of safety of operations. 
D) Relevant operating analysis. 
E) High-low level of operations.

Question 13

The ______________________ is the sales level at which a company neither earns a profit nor incurs a loss.

Accepted Answer

The answer of The ______________________ is the sales level at...

Question 14

Brown Company's contribution margin ratio is 24%.Total fixed costs are $84,000.What is Brown's break-even point in sales dollars?

Accepted Answer

A) $20,160. 
B) $110,526. 
C) $350,000. 
D) $240,000. 
E) $84,000. 
A) $20,160. 
B) $110,526. 
C) $350,000. 
D) $240,000. 
E) $84,000.

Question 15

Cost-volume-profit analysis provides approximate,but not precise,answers to questions about costs,volumes,and profits.

Accepted Answer

A) True 
 B)False

Question 16

A graphic presentation of cost-volume-profit data is known as a __________________ graph (or chart); this presentation is also sometimes called a ______________ chart.

Accepted Answer

answers m

Question 17

_____________ is a statistical method of identifying an estimated line of cost behavior.

Accepted Answer

Least-squa

Question 18

Hess Co.manufactures a product that sells for $12 per unit.Total fixed costs are $96,000 and variable costs are $7 per unit.Hess can buy a newer production machine that will increase total fixed costs by $22,800 but variable costs will be decreased by $0.40 per unit.What effect would the purchase of the new machine have on Hess's break-even point in units?

Accepted Answer

Current break-even point in units = $96,

Question 19

Cost-volume-profit analysis cannot be used when a firm produces and sells more than one product.

Accepted Answer

A) True 
 B)False

Question 20

A company has a goal of earning $100,000 in after-tax income.The company must pay $28,000 in income tax if it achieves the goal.The contribution margin ratio is 30%.What dollar amount of sales must be achieved to reach the goal if fixed costs are $64,000?

Accepted Answer

Targeted dollar sale

Exam 21: Cost-Volume-Profit Analysis

Cost-volume-profit analysis can be used to predict the effects of reduced selling prices,increased fixed costs,and reduced variable costs on break-even points.

Which of the following is the correct interpretation of a degree of operating leverage of 5?

Total variable costs change proportionately with changes in output activity.

Boston Co.is considering the production and sale of a new product with the following sales and cost data: unit sales price,$300; unit variable costs,$180; total fixed costs,$270,000; and projected sales,$900,000.What is the margin of safety: (a)In dollar sales? And (b)As a percent of sales?

The difference between the unit sales price and the unit variable cost of an item is defined as the _________________________.

Discuss how CVP analysis can be useful in planning.

Total contribution margin in dollars divided by pretax income is the:

When graphing cost-volume-profit data on a CVP chart:

Dividing a mixed cost into its separate fixed and variable cost components makes it more difficult to perform cost-volume-profit analysis.

A term describing a firm's normal range of operating activities is:

The ______________________ is the sales level at which a company neither earns a profit nor incurs a loss.

Brown Company's contribution margin ratio is 24%.Total fixed costs are $84,000.What is Brown's break-even point in sales dollars?

Cost-volume-profit analysis provides approximate,but not precise,answers to questions about costs,volumes,and profits.

A graphic presentation of cost-volume-profit data is known as a __________________ graph (or chart); this presentation is also sometimes called a ______________ chart.

_____________ is a statistical method of identifying an estimated line of cost behavior.

Cost-volume-profit analysis cannot be used when a firm produces and sells more than one product.

A company has a goal of earning $100,000 in after-tax income.The company must pay $28,000 in income tax if it achieves the goal.The contribution margin ratio is 30%.What dollar amount of sales must be achieved to reach the goal if fixed costs are $64,000?

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Time Value of Money B

Activity-Based Costing C

Filters

A graphic presentation of cost-volume-profit data is known as a ____ graph (or chart); this presentation is also sometimes called a chart.