Question 1

What does the margin of safety measure?

Accepted Answer

Answers will vary
The margin o

Question 2

Phan Company has not reported a profit in five years.This year the company would like to narrow its loss to $7,500.Assuming its selling price is $36.50 per unit and its variable costs per unit are $24,how many units must be sold to achieve its target given that total fixed costs are $60,000?

Accepted Answer

A)  2,188 
B)  1,439 
C)  4,200 
D)  1,600 
A)  2,188 
B)  1,439 
C)  4,200 
D)  1,600

Question 3

How is weighted average contribution margin calculated,and how can it be used in cost-volume-profit analysis?

Accepted Answer

Answers will vary
A company that sells t

Question 4

Company X has variable costs per unit of $20,fixed costs of $300,000,and a break-even point in units of 60,000 units.If the sales price per unit decreases by $2 and the variable cost per unit decreases by $2,what would happen to the break-even point?

Accepted Answer

A)  Break-even point increases. 
B)  Break-even point in dollars decreases. 
C)  Break-even point stays the same. 
D)  Break-even point in dollars decreases and break-even point in units stays the same. 
A)  Break-even point increases. 
B)  Break-even point in dollars decreases. 
C)  Break-even point stays the same. 
D)  Break-even point in dollars decreases and break-even point in units stays the same.

Question 5

Crown Company produces and sells two products.The following monthly data are provided: $$\begin{array} { | l | r | r | } 
\hline & \text { Slicer } & \text { Chopper } \
\hline \text { Unit selling price } & \$ 10 & \$ 15 \
\hline \text { Variable manufacturing costs } & 6 & 9 \
\hline \begin{array} { l } 
\text { Variable selling and } \
\text { administrative costs }
\end{array} & 1 & 1 \
\hline \text { Estimated unit sales per month } &280 & 420 \
\hline
\end{array}$$ The break-even point for the current sales mix is 360 units (144 Slicer models and 216 Chopper models).What would be the impact on profit if 360 units are sold but 145 Slicer models are sold instead of 144?

Accepted Answer

A)  $3 decrease 
B)  $5 increase 
C)  $2 decrease 
D)  $2 increase 
A)  $3 decrease 
B)  $5 increase 
C)  $2 decrease 
D)  $2 increase

Question 6

How does an increase in variable costs affect the break-even point in sales dollars?

Accepted Answer

Answers will vary
If all other factors (

Question 7

Database software is especially useful for performing cost-volume-profit sensitivity analysis.

Accepted Answer

A) True 
 B)False

Question 8

Zed Company sells two kinds of mainframe computer power supplies.The company projected the following cost information for the two products: $$\begin{array} { | l | r | r | } 
\hline &  { \begin{array} { l } 
\text { Standard } \
\text { Supply }
\end{array} } &{ \begin{array} { l } 
\text { Heavy-Duty } \
\text { Supply }
\end{array} } \
\hline \text { Unit selling price } & \$ 250 & \$ 120 \
\hline \text { Unit variable cost } & \$ 110 & \$ 50 \
\hline \begin{array} { l } 
\text { Number of units produced and } \
\text { sold }
\end{array} & 7,000 & 3,000 \
\hline
\end{array}$$ Assume that total fixed costs are $428,400.How many units of the standard supply unit would be included in the total number of units required to break-even with the projected sales mix (round your answer to the nearest whole unit)?

Accepted Answer

A)  3,600 units 
B)  2,520 units 
C)  1,080 units 
D)  2,040 units 
A)  3,600 units 
B)  2,520 units 
C)  1,080 units 
D)  2,040 units

Question 9

Which of the following software applications is most useful for performing cost-volume-profit sensitivity analysis?

Accepted Answer

A)  Database software 
B)  Spreadsheet software 
C)  Presentation software 
D)  Word processing software 
A)  Database software 
B)  Spreadsheet software 
C)  Presentation software 
D)  Word processing software

Question 10

A market research specialist told Peachtree Company that it could expect to sell 500,000 units of its new high-capacity computer disk at a price of $5.Assuming the company desires a profit margin equal to 20% of sales,what target cost per unit is necessary?

Accepted Answer

A)  $1.00 
B)  $4.00 
C)  $3.00 
D)  None of these 
A)  $1.00 
B)  $4.00 
C)  $3.00 
D)  None of these

Question 11

Company A makes and sells a single product,unless otherwise indicated.What happens to the break-even point when total fixed costs increase?

Accepted Answer

Answers wi

Question 12

Columbus Industries makes a product that sells for $25 a unit.The product has a $5 per unit variable cost and total fixed costs of $9,000.At budgeted sales of 2,000 units,the margin of safety ratio is:

Accepted Answer

A)  22.5%. 
B)  10%. 
C)  77.5%. 
D)  None of these. 
A)  22.5%. 
B)  10%. 
C)  77.5%. 
D)  None of these.

Question 13

The accuracy of cost-volume-profit analysis is limited because it assumes a strictly linear relationship between the variables.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements about a cost-volume-profit graph is correct?

Accepted Answer

A)  A cost-volume-profit graph is prepared with activity (number of units)on the vertical axis. 
B)  The intersection of the total sales line and the total cost line represents the break-even point. 
C)  The area above the break-even point represents the area of loss. 
D)  The total cost line intersects the vertical axis at the dollar amount of total variable costs. 
A)  A cost-volume-profit graph is prepared with activity (number of units)on the vertical axis. 
B)  The intersection of the total sales line and the total cost line represents the break-even point. 
C)  The area above the break-even point represents the area of loss. 
D)  The total cost line intersects the vertical axis at the dollar amount of total variable costs.

Question 15

Select the incorrect break-even equation from the following:

Accepted Answer

A)  Total contribution margin = total variable costs 
B)  Total contribution margin = total fixed costs 
C)  Total fixed costs ÷ contribution margin ratio = break-even sales in dollars 
D)  Total revenue = total costs 
A)  Total contribution margin = total variable costs 
B)  Total contribution margin = total fixed costs 
C)  Total fixed costs ÷ contribution margin ratio = break-even sales in dollars 
D)  Total revenue = total costs

Question 16

Ruiz Company produces and sells a product that has variable costs of $50 and a selling price of $90.Its current sales total $270,000 per month.Fixed manufacturing costs total $40,000 per month and fixed selling and administrative costs total $35,000 per month.The company is considering a proposal that will increase the selling price by 10%,increase the fixed manufacturing costs by 10%,and increase the fixed selling and administrative costs by $1,500.
Required:
1)Compute the company's current break-even point in units.
2)Compute the company's current income and margin of safety in dollars.
3)Compute the break-even point in units assuming the proposal is accepted.
4)Compute the company's income assuming the proposal is accepted and sales total 3,300 units.Should the proposal be accepted?

Accepted Answer

1)Current break-even point in units = $7

Question 17

The pricing strategy that begins with the determination of a price at which a product will sell and then focuses on developing a cost s

Accepted Answer

A)  cost-plus pricing. 
B)  prestige pricing. 
C)  developmental pricing. 
D)  target costing. 
A)  cost-plus pricing. 
B)  prestige pricing. 
C)  developmental pricing. 
D)  target costing.

Question 18

Compare and contrast a cost-plus pricing strategy to a target pricing strategy.

Accepted Answer

Answers will vary
A cost-plus pricing st

Question 19

Heavener Company produces and sells storage sheds.Its current sales are $500,000.The company's accountant provided the following cost information: $\begin{array}{|l|l|}
\hline \text { Manufacturing costs } & \$ 100,000+40^{\circ} \% \text { of sales } \
\hline \text { Selling costs } & \$ 30,000+10 \% \text { of sales } \
\hline \text { Administrative costs } & \$ 45,000+10 \% \text { of sales } \
\hline
\end{array}$ Required:
1)Compute the product's contribution margin ratio.
2)Compute the company's current net income.
3)Compute the product's break-even point in dollars.
4)Compute the amount of revenue necessary to earn $60,000 in profit.
5)Compute the company's current margin of safety ratio.
6)Should the company accept a proposal that increases sales by 20% and total fixed costs by 25%?

Accepted Answer

1)Contribution margin ratio = 100% - (40

Question 20

Markham Company has a contribution margin ratio of 25%.The company is considering a proposal that will increase sales by $150,000.What increase in profit can be expected assuming total fixed costs increase by $25,000? (Do not round your intermediate calculations. )

Accepted Answer

A)  $6,250 
B)  $31,250 
C)  $37,500 
D)  $12,500 
A)  $6,250 
B)  $31,250 
C)  $37,500 
D)  $12,500

What does the margin of safety measure?

Phan Company has not reported a profit in five years.This year the company would like to narrow its loss to $7,500.Assuming its selling price is $36.50 per unit and its variable costs per unit are $24,how many units must be sold to achieve its target given that total fixed costs are $60,000?

How is weighted average contribution margin calculated,and how can it be used in cost-volume-profit analysis?

Company X has variable costs per unit of $20,fixed costs of $300,000,and a break-even point in units of 60,000 units.If the sales price per unit decreases by $2 and the variable cost per unit decreases by $2,what would happen to the break-even point?

How does an increase in variable costs affect the break-even point in sales dollars?

Database software is especially useful for performing cost-volume-profit sensitivity analysis.

Which of the following software applications is most useful for performing cost-volume-profit sensitivity analysis?

A market research specialist told Peachtree Company that it could expect to sell 500,000 units of its new high-capacity computer disk at a price of $5.Assuming the company desires a profit margin equal to 20% of sales,what target cost per unit is necessary?

Company A makes and sells a single product,unless otherwise indicated.What happens to the break-even point when total fixed costs increase?

Columbus Industries makes a product that sells for $25 a unit.The product has a $5 per unit variable cost and total fixed costs of $9,000.At budgeted sales of 2,000 units,the margin of safety ratio is:

The accuracy of cost-volume-profit analysis is limited because it assumes a strictly linear relationship between the variables.

Which of the following statements about a cost-volume-profit graph is correct?

Select the incorrect break-even equation from the following:

The pricing strategy that begins with the determination of a price at which a product will sell and then focuses on developing a cost s

Compare and contrast a cost-plus pricing strategy to a target pricing strategy.

Markham Company has a contribution margin ratio of 25%.The company is considering a proposal that will increase sales by $150,000.What increase in profit can be expected assuming total fixed costs increase by $25,000? (Do not round your intermediate calculations. )

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation,Tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters

Exam 3: Analysis of Cost,Volume,and Pricing to Increase Profitability

What does the margin of safety measure?

Phan Company has not reported a profit in five years.This year the company would like to narrow its loss to $7,500.Assuming its selling price is $36.50 per unit and its variable costs per unit are $24,how many units must be sold to achieve its target given that total fixed costs are $60,000?

How is weighted average contribution margin calculated,and how can it be used in cost-volume-profit analysis?

Company X has variable costs per unit of $20,fixed costs of $300,000,and a break-even point in units of 60,000 units.If the sales price per unit decreases by $2 and the variable cost per unit decreases by $2,what would happen to the break-even point?

How does an increase in variable costs affect the break-even point in sales dollars?

Database software is especially useful for performing cost-volume-profit sensitivity analysis.

Which of the following software applications is most useful for performing cost-volume-profit sensitivity analysis?

A market research specialist told Peachtree Company that it could expect to sell 500,000 units of its new high-capacity computer disk at a price of $5.Assuming the company desires a profit margin equal to 20% of sales,what target cost per unit is necessary?

Company A makes and sells a single product,unless otherwise indicated.What happens to the break-even point when total fixed costs increase?

Columbus Industries makes a product that sells for $25 a unit.The product has a $5 per unit variable cost and total fixed costs of $9,000.At budgeted sales of 2,000 units,the margin of safety ratio is:

The accuracy of cost-volume-profit analysis is limited because it assumes a strictly linear relationship between the variables.

Which of the following statements about a cost-volume-profit graph is correct?

Select the incorrect break-even equation from the following:

The pricing strategy that begins with the determination of a price at which a product will sell and then focuses on developing a cost s

Compare and contrast a cost-plus pricing strategy to a target pricing strategy.

Markham Company has a contribution margin ratio of 25%.The company is considering a proposal that will increase sales by $150,000.What increase in profit can be expected assuming total fixed costs increase by $25,000? (Do not round your intermediate calculations. )

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation,Tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters