Question 1

What are the assumptions underlying cost-volume-profit analysis?

Accepted Answer

Some of th

Question 2

Total contribution margin divided by total sales is the

Accepted Answer

A)  indifference point. 
B)  margin of safety. 
C)  sales ratio. 
D)  target income. 
E)  contribution margin ratio. 
A)  indifference point. 
B)  margin of safety. 
C)  sales ratio. 
D)  target income. 
E)  contribution margin ratio.

Question 3

The cost-volume-profit graph

Accepted Answer

A)  plots three separate lines. 
B)  plots the total revenue line and the total cost line. 
C)  the vertical axis is measured in units sold and the horizontal axis in dollars. 
D)  All of these are correct. 
A)  plots three separate lines. 
B)  plots the total revenue line and the total cost line. 
C)  the vertical axis is measured in units sold and the horizontal axis in dollars. 
D)  All of these are correct.

Question 4

Figure 4-6.Shorter Company had originally expected to earn operating income of $130,000 in the coming year. Shorter's degree of operating leverage is 2.4. Recently, Shorter revised its plans and now expects to increase sales by 20% next year.
-Refer to Figure 4-6. What is the percent change in operating income expected by Shorter in the coming year?

Accepted Answer

A)  8.33% 
B)  48.0% 
C)  20.0% 
D)  54.17% 
E)  30.0% 
A)  8.33% 
B)  48.0% 
C)  20.0% 
D)  54.17% 
E)  30.0%

Question 5

If the contribution margin per unit decreases, the break-even point in units

Accepted Answer

A)  will increase. 
B)  will decrease. 
C)  will remain the same. 
D)  cannot be determined from the information given. 
A)  will increase. 
B)  will decrease. 
C)  will remain the same. 
D)  cannot be determined from the information given.

Question 6

Figure 4-6.Shorter Company had originally expected to earn operating income of $130,000 in the coming year. Shorter's degree of operating leverage is 2.4. Recently, Shorter revised its plans and now expects to increase sales by 20% next year.
-Refer to Figure 4-6. What is Shorter's revised expected operating income for the coming year?

Accepted Answer

A)  $192,400 
B)  $156,000 
C)  $312,000 
D)  $130,000 
E)  $62,400 
A)  $192,400 
B)  $156,000 
C)  $312,000 
D)  $130,000 
E)  $62,400

Question 7

If fixed costs increase, the break-even point decreases.

Accepted Answer

A) True 
 B)False

Question 8

Operating leverage is the use of fixed cost to extract higher percentage changes in profits as sales activity changes.

Accepted Answer

A) True 
 B)False

Question 9

If the contribution margin ratio increases, the break-even point in sales dollars will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  double. 
A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  double.

Question 10

Figure 4-4.Yerke Company makes jungle gyms and tree houses for children. For jungle gyms, the price is $120 and variable expenses are $90 per unit. For tree houses, the price is $200 and variable expenses are $100. Total fixed expenses are $253,750. Last year, Yerke sold 12,000 gyms and 4,000 tree houses.
-Refer to Figure 4-4. Now suppose that Yerke expects tree house demand to increase from 4,000 to 8,000 units. What is the new contribution margin ratio (rounded to two decimal places)?

Accepted Answer

A)  38% 
B)  62% 
C)  40% 
D)  60% 
E)  50% 
A)  38% 
B)  62% 
C)  40% 
D)  60% 
E)  50%

Question 11

______________ gives us a way to determine how many units must be sold, or how much sales revenue must be generated to earn a particular target income.

Accepted Answer

The answer of ______________ gives us a way to determine...

Question 12

Figure 4-7.A company provided the following data:
  
-Refer to Figure 4-7. What is the break-even point in units?

Accepted Answer

A)  20,000 
B)  10,000 
C)  6,667 
D)  13,333 
E)  12,000 
A)  20,000 
B)  10,000 
C)  6,667 
D)  13,333 
E)  12,000

Question 13

The Lauren Company manufactures two products. Information about the two product lines for the year is as follows:
  
The company expects fixed costs to be $144,000. The firm expects 60% of its sales (in units) to be Product X.
Required: Determine the break-even point in units for both Product X and Product Y.

Accepted Answer

Form a package with 3 units of Product X

Question 14

The profit-volume graph shows the relationship between operating income and the number of units sold.

Accepted Answer

A) True 
 B)False

Question 15

If the break-even point increases, the margin of safety increases.

Accepted Answer

A) True 
 B)False

Question 16

Patricia Company produces two products, X and Y, which account for 60% and 40%, respectively, of total sales dollars. Contribution margin ratios are 50% for X and 25% for Y. Total fixed costs are $120,000. What is Patricia's break-even point in sales dollars?

Accepted Answer

A)  $300,000 
B)  $328,767 
C)  $342,856 
D)  $375,000 
A)  $300,000 
B)  $328,767 
C)  $342,856 
D)  $375,000

Question 17

Operating leverage is

Accepted Answer

A)  the difference between sales and variable expense. 
B)  the use of fixed costs to extract higher percentage changes in profits as sales activity changes. 
C)  the portion of each sales dollar available to cover fixed costs and provide for profit. 
D)  visually portrays the relationship between profits and units sold. 
E)  none of these 
A)  the difference between sales and variable expense. 
B)  the use of fixed costs to extract higher percentage changes in profits as sales activity changes. 
C)  the portion of each sales dollar available to cover fixed costs and provide for profit. 
D)  visually portrays the relationship between profits and units sold. 
E)  none of these

Question 18

Figure 4-2.Pauley Company provides home health care. Pauley charges $35/hour for professional care. Variable costs are $21/hour and fixed costs are $78,000. Next year, Pauley expects to charge out 12,000 hours of home health care.
-Refer to Figure 4-2. What is the budgeted operating income?

Accepted Answer

A)  $342,000 
B)  $174,000 
C)  $168,000 
D)  $90,000 
E)  $420,000 
A)  $342,000 
B)  $174,000 
C)  $168,000 
D)  $90,000 
E)  $420,000

Question 19

Figure 4-5.Standlar Company makes wireless speakers. The standard model price is $360 and variable expenses are $210. The deluxe model price is $500 and variable expenses are $300. The superior model price is $1,600 and variable expense per unit is $600. Total fixed expenses are $300,000. Generally, Standlar sells 8 standard models and 4 deluxe models for every superior model sold.
-Refer to Figure 4-5. What is the overall sales revenue at break-even?

Accepted Answer

A)  $778,800 
B)  $387,200 
C)  $648,000 
D)  $550,000 
E)  $480,000 
A)  $778,800 
B)  $387,200 
C)  $648,000 
D)  $550,000 
E)  $480,000

Question 20

The following information was extracted from the accounting records of MVP Corporation:
  Required:

Accepted Answer

The answer of The following information was extracted from the...

What are the assumptions underlying cost-volume-profit analysis?

Total contribution margin divided by total sales is the

The cost-volume-profit graph

If the contribution margin per unit decreases, the break-even point in units

If fixed costs increase, the break-even point decreases.

Operating leverage is the use of fixed cost to extract higher percentage changes in profits as sales activity changes.

If the contribution margin ratio increases, the break-even point in sales dollars will

______________ gives us a way to determine how many units must be sold, or how much sales revenue must be generated to earn a particular target income.

Figure 4-7.A company provided the following data: -Refer to Figure 4-7. What is the break-even point in units?

The profit-volume graph shows the relationship between operating income and the number of units sold.

If the break-even point increases, the margin of safety increases.

Patricia Company produces two products, X and Y, which account for 60% and 40%, respectively, of total sales dollars. Contribution margin ratios are 50% for X and 25% for Y. Total fixed costs are $120,000. What is Patricia's break-even point in sales dollars?

Operating leverage is

Figure 4-2.Pauley Company provides home health care. Pauley charges $35/hour for professional care. Variable costs are $21/hour and fixed costs are $78,000. Next year, Pauley expects to charge out 12,000 hours of home health care. -Refer to Figure 4-2. What is the budgeted operating income?

The following information was extracted from the accounting records of MVP Corporation: Required:

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behavior

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing, and Inventory Management

Profit Planning

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

Statement of Cash Flows

Financial Statement Analysis

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Exam 4: Cost-Volume-Profit Analysis: a Managerial Planning Tool

What are the assumptions underlying cost-volume-profit analysis?

Total contribution margin divided by total sales is the

The cost-volume-profit graph

If the contribution margin per unit decreases, the break-even point in units

If fixed costs increase, the break-even point decreases.

Operating leverage is the use of fixed cost to extract higher percentage changes in profits as sales activity changes.

If the contribution margin ratio increases, the break-even point in sales dollars will

______________ gives us a way to determine how many units must be sold, or how much sales revenue must be generated to earn a particular target income.

Figure 4-7.A company provided the following data: -Refer to Figure 4-7. What is the break-even point in units?

The profit-volume graph shows the relationship between operating income and the number of units sold.

If the break-even point increases, the margin of safety increases.

Patricia Company produces two products, X and Y, which account for 60% and 40%, respectively, of total sales dollars. Contribution margin ratios are 50% for X and 25% for Y. Total fixed costs are $120,000. What is Patricia's break-even point in sales dollars?

Operating leverage is

Figure 4-2.Pauley Company provides home health care. Pauley charges $35/hour for professional care. Variable costs are $21/hour and fixed costs are $78,000. Next year, Pauley expects to charge out 12,000 hours of home health care. -Refer to Figure 4-2. What is the budgeted operating income?

The following information was extracted from the accounting records of MVP Corporation: Required:

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behavior

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing, and Inventory Management

Profit Planning

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

Statement of Cash Flows

Financial Statement Analysis

Filters