Question 1

Under variable costing, only costs that change in total with changes in production levels are included in product costs.

Accepted Answer

A) True 
 B)False

Question 2

The following information is available for Alba Company's maintenance cost over the last four months.
   Use the high-low method to estimate both the fixed and variable component of its maintenance cost.

Accepted Answer

Variable cost per unit = Change in cost/

Question 3

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 number of units of Product A McCoy must sell to break even.

Accepted Answer

A)  1,350. 
B)  6,750. 
C)  2,700. 
D)  10,463. 
E)  6,200. 
A)  1,350. 
B)  6,750. 
C)  2,700. 
D)  10,463. 
E)  6,200.

Question 4

Kent Manufacturing produces a product that sells for $50.00 and has variable costs of $24.00 per unit. Fixed costs are $260,000. Kent can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. Compute the revised break-even point in units if the new machine is purchased.

Accepted Answer

A)  10,438 units. 
B)  8,814 units. 
C)  10,000 units. 
D)  9,200 units. 
E)  9,869 units. 
A)  10,438 units. 
B)  8,814 units. 
C)  10,000 units. 
D)  9,200 units. 
E)  9,869 units.

Question 5

Cost-volume-profit analysis is based on necessary assumptions. Which of the following is not one of these assumptions?

Accepted Answer

A)  Costs can be classified as variable or fixed. 
B)  Relevant range includes all possible levels of activity that a company might experience. 
C)  Sales price and variable costs per unit of output remain constant as volume changes. 
D)  A constant sales mix in a multiproduct company. 
E)  Total fixed costs are held constant. 
A)  Costs can be classified as variable or fixed. 
B)  Relevant range includes all possible levels of activity that a company might experience. 
C)  Sales price and variable costs per unit of output remain constant as volume changes. 
D)  A constant sales mix in a multiproduct company. 
E)  Total fixed costs are held constant.

Question 6

The margin of safety is the excess of:

Accepted Answer

A)  Break-even sales over expected sales. 
B)  Expected sales over variable costs. 
C)  Expected sales over fixed costs. 
D)  Fixed costs over expected sales. 
E)  Expected sales over break-even sales. 
A)  Break-even sales over expected sales. 
B)  Expected sales over variable costs. 
C)  Expected sales over fixed costs. 
D)  Fixed costs over expected sales. 
E)  Expected sales over break-even sales.

Question 7

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 contribution margin per composite unit.

Accepted Answer

A)  $310. 
B)  $200. 
C)  $300. 
D)  $330. 
E)  $285. 
A)  $310. 
B)  $200. 
C)  $300. 
D)  $330. 
E)  $285.

Question 8

Carver Packing Company reports total contribution margin of $72,000 and pretax net income of $24,000 for the current month. In the next month, the company expects sales volume to increase by 8%. The degree of operating leverage and the expected percent change in income, respectively, are:

Accepted Answer

A)  4.0 and 32% 
B)  0.33 and 8% 
C)  0.33 and 2.7% 
D)  3.0 and 8% 
E)  3.0 and 24% 
A)  4.0 and 32% 
B)  0.33 and 8% 
C)  0.33 and 2.7% 
D)  3.0 and 8% 
E)  3.0 and 24%

Question 9

Barclay Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's break-even point in composite units (rounded to the nearest whole unit).

Accepted Answer

A)  7,575 composite units. 
B)  15,150 composite units. 
C)  858 composite units. 
D)  6,161 composite units. 
E)  429 composite units. 
A)  7,575 composite units. 
B)  15,150 composite units. 
C)  858 composite units. 
D)  6,161 composite units. 
E)  429 composite units.

Question 10

Solving problems to determine the relationship of cost, volume, and profit often commences with the measurement of the ________ point. Further analysis emphasizing profitability may be accomplished by measuring the ________ and ________.

Accepted Answer

break-even

Question 11

Elk Co. manufactures a product that sells for $12 per unit. Total fixed costs are $96,000 and variable costs are $7 per unit. Elk 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 Elk's break-even point in units?

Accepted Answer

Current break-even point in units = $96,

Question 12

Total fixed costs change in proportion to changes in volume of activity.

Accepted Answer

A) True 
 B)False

Question 13

A company has fixed costs of $270,000, a unit contribution margin of $14, and a contribution margin ratio of 55%. If the firm wants to earn a target $60,000 pretax income, what amount of sales must the company make (rounded to the nearest whole dollar)?

Accepted Answer

A)  490,909. 
B)  330,000. 
C)  109,090. 
D)  381,818. 
E)  600,000. 
A)  490,909. 
B)  330,000. 
C)  109,090. 
D)  381,818. 
E)  600,000.

Question 14

Degree of operating leverage (DOL) is defined as total contribution margin in dollars divided by pretax income.

Accepted Answer

A) True 
 B)False

Question 15

The following data relate to a product sold by Hallstone Company:
   (a) Calculate the number of units expected to be sold.
(b) Calculate the expected total dollar sales.

Accepted Answer

(a) ($27,0

Question 16

A cost-volume-profit (CVP) chart is a graph that plots number of units produced on the horizontal axis and dollars of costs and sales on the vertical axis.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Henderson Co. has fixed costs of $36,000 and a contribution margin ratio of 24%. If expected sales are $200,000, what is the margin of safety as a percent of sales?

Accepted Answer

A)  6%. 
B)  25%. 
C)  33%. 
D)  50%. 
E)  75%. 
A)  6%. 
B)  25%. 
C)  33%. 
D)  50%. 
E)  75%.

Question 19

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000. Flannigan Company management targets an annual pre-tax income of $1,125,000. Compute the unit sales to earn the target pre-tax net income.

Accepted Answer

A)  4,444. 
B)  7,500. 
C)  6,650. 
D)  10,694. 
E)  11,750. 
A)  4,444. 
B)  7,500. 
C)  6,650. 
D)  10,694. 
E)  11,750.

Question 20

An important tool in predicting the volume of activity, the costs to be incurred, the sales to be made, and the profit to be earned is:

Accepted Answer

A)  Target income analysis. 
B)  Cost-volume-profit analysis. 
C)  Least-squares regression analysis. 
D)  Variance analysis. 
E)  Process costing. 
A)  Target income analysis. 
B)  Cost-volume-profit analysis. 
C)  Least-squares regression analysis. 
D)  Variance analysis. 
E)  Process costing.

Under variable costing, only costs that change in total with changes in production levels are included in product costs.

The following information is available for Alba Company's maintenance cost over the last four months. Use the high-low method to estimate both the fixed and variable component of its maintenance cost.

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 number of units of Product A McCoy must sell to break even.

Cost-volume-profit analysis is based on necessary assumptions. Which of the following is not one of these assumptions?

The margin of safety is the excess of:

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 contribution margin per composite unit.

Carver Packing Company reports total contribution margin of $72,000 and pretax net income of $24,000 for the current month. In the next month, the company expects sales volume to increase by 8%. The degree of operating leverage and the expected percent change in income, respectively, are:

Solving problems to determine the relationship of cost, volume, and profit often commences with the measurement of the point. Further analysis emphasizing profitability may be accomplished by measuring the and .

Total fixed costs change in proportion to changes in volume of activity.

A company has fixed costs of $270,000, a unit contribution margin of $14, and a contribution margin ratio of 55%. If the firm wants to earn a target $60,000 pretax income, what amount of sales must the company make (rounded to the nearest whole dollar)?

Degree of operating leverage (DOL) is defined as total contribution margin in dollars divided by pretax income.

The following data relate to a product sold by Hallstone Company: (a) Calculate the number of units expected to be sold. (b) Calculate the expected total dollar sales.

A cost-volume-profit (CVP) chart is a graph that plots number of units produced on the horizontal axis and dollars of costs and sales on the vertical axis.

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

Henderson Co. has fixed costs of $36,000 and a contribution margin ratio of 24%. If expected sales are $200,000, what is the margin of safety as a percent of sales?

An important tool in predicting the volume of activity, the costs to be incurred, the sales to be made, and the profit to be earned 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

Exam 5: Cost Behavior Cost-Volume-Profit Analysis

Under variable costing, only costs that change in total with changes in production levels are included in product costs.

The following information is available for Alba Company's maintenance cost over the last four months. Use the high-low method to estimate both the fixed and variable component of its maintenance cost.

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 number of units of Product A McCoy must sell to break even.

Cost-volume-profit analysis is based on necessary assumptions. Which of the following is not one of these assumptions?

The margin of safety is the excess of:

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 contribution margin per composite unit.

Carver Packing Company reports total contribution margin of $72,000 and pretax net income of $24,000 for the current month. In the next month, the company expects sales volume to increase by 8%. The degree of operating leverage and the expected percent change in income, respectively, are:

Solving problems to determine the relationship of cost, volume, and profit often commences with the measurement of the ________ point. Further analysis emphasizing profitability may be accomplished by measuring the ________ and ________.

Total fixed costs change in proportion to changes in volume of activity.

A company has fixed costs of $270,000, a unit contribution margin of $14, and a contribution margin ratio of 55%. If the firm wants to earn a target $60,000 pretax income, what amount of sales must the company make (rounded to the nearest whole dollar)?

Degree of operating leverage (DOL) is defined as total contribution margin in dollars divided by pretax income.

The following data relate to a product sold by Hallstone Company: (a) Calculate the number of units expected to be sold. (b) Calculate the expected total dollar sales.

A cost-volume-profit (CVP) chart is a graph that plots number of units produced on the horizontal axis and dollars of costs and sales on the vertical axis.

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

Henderson Co. has fixed costs of $36,000 and a contribution margin ratio of 24%. If expected sales are $200,000, what is the margin of safety as a percent of sales?

An important tool in predicting the volume of activity, the costs to be incurred, the sales to be made, and the profit to be earned 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

Solving problems to determine the relationship of cost, volume, and profit often commences with the measurement of the point. Further analysis emphasizing profitability may be accomplished by measuring the and .