Question 1

A manufacturer reports the following information below for its first three years in operation.   Income for year 2 using absorption costing is:

Accepted Answer

A)  $109,000. 
B)  $117,000. 
C)  $106,600. 
D)  $115,000. 
E)  $111,000. 
A)  $109,000. 
B)  $117,000. 
C)  $106,600. 
D)  $115,000. 
E)  $111,000. C

Question 2

Magnolia Company is considering the production and sale of a new product with the following sales and cost data: unit sales price, $350; unit variable costs, $180; total fixed costs, $399,500; and projected sales, $910,000. Round your answers to the nearest whole unit or dollar.
(a) Calculate break-even in units.
(b) Calculate break-even in dollars (use four decimal places when calculating the contribution margin ratio).
(c) Calculate number of units that would need to be sold to generate an after-tax profit of $420,000 assuming a 30% tax rate.
(d) Calculate dollar sales that would be needed to generate the same profit as above.
(e) Calculate the margin of safety stated as a percentage using the $910,000 projected sales level.
Be sure to label each calculation and show all calculations.

Accepted Answer

(a) $399,500/($350-180) = 2,350 units
(b) $399,500/(($350 - 180)/$350) = $822,524 or $822,500.
(c) $399,500 + ($420,000/(1-.3)) = ($399,500 + $600,000)/$170 = 5,880 units
(d) ($399,500 + $600,000)/.4857 = $2,057,855 or $2,058,000 or (5,880 BE units * $350=$2,058,000)
(e) $910,000 - $822,500 = $87,500/$822,500 = 10.6%

Question 3

A company has fixed costs of $320,000 and a contribution margin per unit of $15. If the firm wants to earn a target $40,000 pretax income, how many units must be sold (rounded to the nearest whole unit)?

Accepted Answer

A)  24,000. 
B)  21,333. 
C)  18,666. 
D)  2,667. 
E)  20,000. 
A)  24,000. 
B)  21,333. 
C)  18,666. 
D)  2,667. 
E)  20,000. A

Question 4

Contribution margin per unit is the amount by which a product's unit selling price exceeds its total variable cost per unit.

Accepted Answer

A) True 
 B)False

Question 5

A line on a scatter diagram that is intended to reflect the past relation between cost and unit volume is the:

Accepted Answer

A)  Margin of safety line. 
B)  Break-even line. 
C)  Contribution margin line. 
D)  Estimated line of cost behavior. 
E)  Standard cost line. 
A)  Margin of safety line. 
B)  Break-even line. 
C)  Contribution margin line. 
D)  Estimated line of cost behavior. 
E)  Standard cost line.

Question 6

The basic form of cost-volume-profit analysis is often called break-even analysis.

Accepted Answer

A) True 
 B)False

Question 7

A firm expects to sell 25,000 units of its product at $11 per unit and to incur variable costs per unit of $6. Total fixed costs are $70,000. The pretax net income is:

Accepted Answer

A)  $55,000. 
B)  $90,000. 
C)  $125,000. 
D)  $150,000. 
E)  $380,000. 
A)  $55,000. 
B)  $90,000. 
C)  $125,000. 
D)  $150,000. 
E)  $380,000.

Question 8

While the total amount of variable cost changes with the level of production, variable cost per unit remains constant as volume changes.

Accepted Answer

A) True 
 B)False

Question 9

A product sells for $200 per unit, and its variable costs are 65% of sales. The fixed costs are $420,000. What is the break-even point in sales dollars?

Accepted Answer

A)  $2,100. 
B)  $6,000. 
C)  $420,000. 
D)  $646,154. 
E)  $1,200,000. 
A)  $2,100. 
B)  $6,000. 
C)  $420,000. 
D)  $646,154. 
E)  $1,200,000.

Question 10

A company manufactures a product and sells it for $120 per unit. The total fixed costs of manufacturing and selling the product are expected to be $155,250, and the variable costs are expected to be $75 per unit. What is the company's break-even point in (a) units and (b) dollar sales?

Accepted Answer

Contribution margin = $120 - $

Question 11

A firm sells two products, Regular and Ultra. For every unit of Regular the firm sells, two units of Ultra are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow. What is the firm's break-even point in units of Regular and Ultra?

Accepted Answer

A)  31,000 Regular units and 31,000 Ultra units. 
B)  31,000 Regular units and 62,000 Ultra units. 
C)  10,333 Regular units and 20,667 Ultra units. 
D)  36,167 Regular units and 72,333 Ultra units. 
E)  62,000 Regular units and 31,000 Ultra units. 
A)  31,000 Regular units and 31,000 Ultra units. 
B)  31,000 Regular units and 62,000 Ultra units. 
C)  10,333 Regular units and 20,667 Ultra units. 
D)  36,167 Regular units and 72,333 Ultra units. 
E)  62,000 Regular units and 31,000 Ultra units.

Question 12

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 4:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the number of units of Product Z McCoy must sell to break even.

Accepted Answer

A)  1,350. 
B)  6,200. 
C)  10,463. 
D)  3,100. 
E)  6,750. 
A)  1,350. 
B)  6,200. 
C)  10,463. 
D)  3,100. 
E)  6,750.

Question 13

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the break-even point in composite units.

Accepted Answer

A)  2,092. 
B)  3,805. 
C)  1,350. 
D)  1,395. 
E)  1,550. 
A)  2,092. 
B)  3,805. 
C)  1,350. 
D)  1,395. 
E)  1,550.

Question 14

The break-even point is the sales level at which a company neither earns a profit nor incurs a loss.

Accepted Answer

A) True 
 B)False

Question 15

Assume that sales are predicted to be $3,750, the expected contribution margin is $1,500, and a net loss of $250 is anticipated. The break-even point in sales dollars is:

Accepted Answer

A)  $1,750. 
B)  $2,500. 
C)  $4,000. 
D)  $4,250. 
E)  $4,375. 
A)  $1,750. 
B)  $2,500. 
C)  $4,000. 
D)  $4,250. 
E)  $4,375.

Question 16

Watson Company has monthly fixed costs of $83,000 and a 40% contribution margin ratio. If the company has set a target monthly income of $15,000, what dollar amount of sales must be made to produce the target income?

Accepted Answer

A)  $245,000 
B)  $207,500 
C)  $37,300 
D)  $170,000 
E)  $39,200 
A)  $245,000 
B)  $207,500 
C)  $37,300 
D)  $170,000 
E)  $39,200

Question 17

Describe how a cost-volume-profit analysis would be performed for a company that sells more than one product when the sales mix is known.

Accepted Answer

Multi product CVP analysis uses composit

Question 18

During a recent fiscal year, Creek Company reported pretax income of $125,000, a contribution margin ratio of 25% and total contribution margin of $400,000. Total variable costs must have been:

Accepted Answer

A)  $1,100,000. 
B)  $1,200,000. 
C)  $500,000. 
D)  $1,600,000. 
E)  $2,100,000. 
A)  $1,100,000. 
B)  $1,200,000. 
C)  $500,000. 
D)  $1,600,000. 
E)  $2,100,000.

Question 19

A product has a contribution margin per unit of $17 and sells at $25 per unit. If the break-even point is 82,000 units, calculate (a) the variable costs per unit and (b) the total fixed costs.

Accepted Answer

(a) Variable costs per unit = $25.00 - $

Question 20

In cost-volume-profit analysis, the unit contribution margin is:

Accepted Answer

A)  Sales price per unit less cost of goods sold per unit. 
B)  Sales price per unit less unit fixed cost per unit. 
C)  Sales price per unit less total variable cost per unit. 
D)  Sales price per unit less unit total cost per unit. 
E)  The same as the contribution margin ratio. 
A)  Sales price per unit less cost of goods sold per unit. 
B)  Sales price per unit less unit fixed cost per unit. 
C)  Sales price per unit less total variable cost per unit. 
D)  Sales price per unit less unit total cost per unit. 
E)  The same as the contribution margin ratio.

A manufacturer reports the following information below for its first three years in operation. Income for year 2 using absorption costing is:

A company has fixed costs of $320,000 and a contribution margin per unit of $15. If the firm wants to earn a target $40,000 pretax income, how many units must be sold (rounded to the nearest whole unit)?

Contribution margin per unit is the amount by which a product's unit selling price exceeds its total variable cost per unit.

A line on a scatter diagram that is intended to reflect the past relation between cost and unit volume is the:

The basic form of cost-volume-profit analysis is often called break-even analysis.

A firm expects to sell 25,000 units of its product at $11 per unit and to incur variable costs per unit of $6. Total fixed costs are $70,000. The pretax net income is:

While the total amount of variable cost changes with the level of production, variable cost per unit remains constant as volume changes.

A product sells for $200 per unit, and its variable costs are 65% of sales. The fixed costs are $420,000. What is the break-even point in sales dollars?

A company manufactures a product and sells it for $120 per unit. The total fixed costs of manufacturing and selling the product are expected to be $155,250, and the variable costs are expected to be $75 per unit. What is the company's break-even point in (a) units and (b) dollar sales?

A firm sells two products, Regular and Ultra. For every unit of Regular the firm sells, two units of Ultra are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow. What is the firm's break-even point in units of Regular and Ultra?

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 4:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the number of units of Product Z McCoy must sell to break even.

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the break-even point in composite units.

The break-even point is the sales level at which a company neither earns a profit nor incurs a loss.

Assume that sales are predicted to be $3,750, the expected contribution margin is $1,500, and a net loss of $250 is anticipated. The break-even point in sales dollars is:

Watson Company has monthly fixed costs of $83,000 and a 40% contribution margin ratio. If the company has set a target monthly income of $15,000, what dollar amount of sales must be made to produce the target income?

Describe how a cost-volume-profit analysis would be performed for a company that sells more than one product when the sales mix is known.

During a recent fiscal year, Creek Company reported pretax income of $125,000, a contribution margin ratio of 25% and total contribution margin of $400,000. Total variable costs must have been:

A product has a contribution margin per unit of $17 and sells at $25 per unit. If the break-even point is 82,000 units, calculate (a) the variable costs per unit and (b) the total fixed costs.

In cost-volume-profit analysis, the unit contribution margin is:

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity Based Costing and Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Analyzing for Business Transactions

Partnership Accounting

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Exam 5: Cost Behavior Cost-Volume-Profit Analysis

A manufacturer reports the following information below for its first three years in operation. Income for year 2 using absorption costing is:

A company has fixed costs of $320,000 and a contribution margin per unit of $15. If the firm wants to earn a target $40,000 pretax income, how many units must be sold (rounded to the nearest whole unit)?

Contribution margin per unit is the amount by which a product's unit selling price exceeds its total variable cost per unit.

A line on a scatter diagram that is intended to reflect the past relation between cost and unit volume is the:

The basic form of cost-volume-profit analysis is often called break-even analysis.

A firm expects to sell 25,000 units of its product at $11 per unit and to incur variable costs per unit of $6. Total fixed costs are $70,000. The pretax net income is:

While the total amount of variable cost changes with the level of production, variable cost per unit remains constant as volume changes.

A product sells for $200 per unit, and its variable costs are 65% of sales. The fixed costs are $420,000. What is the break-even point in sales dollars?

A company manufactures a product and sells it for $120 per unit. The total fixed costs of manufacturing and selling the product are expected to be $155,250, and the variable costs are expected to be $75 per unit. What is the company's break-even point in (a) units and (b) dollar sales?

A firm sells two products, Regular and Ultra. For every unit of Regular the firm sells, two units of Ultra are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow. What is the firm's break-even point in units of Regular and Ultra?

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 4:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the number of units of Product Z McCoy must sell to break even.

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the break-even point in composite units.

The break-even point is the sales level at which a company neither earns a profit nor incurs a loss.

Assume that sales are predicted to be $3,750, the expected contribution margin is $1,500, and a net loss of $250 is anticipated. The break-even point in sales dollars is:

Watson Company has monthly fixed costs of $83,000 and a 40% contribution margin ratio. If the company has set a target monthly income of $15,000, what dollar amount of sales must be made to produce the target income?

Describe how a cost-volume-profit analysis would be performed for a company that sells more than one product when the sales mix is known.

During a recent fiscal year, Creek Company reported pretax income of $125,000, a contribution margin ratio of 25% and total contribution margin of $400,000. Total variable costs must have been:

A product has a contribution margin per unit of $17 and sells at $25 per unit. If the break-even point is 82,000 units, calculate (a) the variable costs per unit and (b) the total fixed costs.

In cost-volume-profit analysis, the unit contribution margin is:

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity Based Costing and Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Analyzing for Business Transactions

Partnership Accounting

Filters