Question 1

Breakeven is the point where the sales revenues are exactly equal to the total variable costs plus the total fixed costs.

Accepted Answer

A) True 
 B)False

Question 2

Chambers Company sells glass vases at a wholesale price of $2.50 per unit. Variable cost is $1.75 per unit. Chambers' fixed costs are $6,500 per month. Chambers is currently selling 15,000 units per month. If Chambers wants to increase operating income by 20%, how many more units, over and above the current volume, must they sell? (Please round to nearest whole number.)

Accepted Answer

A)  1,166 
B)  1,333 
C)  1,267 
D)  5,666 
A)  1,166 
B)  1,333 
C)  1,267 
D)  5,666

Question 3

Allston Products sells a special kind of effects pedal for musical performers. Each unit sells for $20.00. Additional data for the month of April, 2011, are as follows:
$$\begin{array} { | l | r | r | } 
\hline \text { Direct materials } & \$ 4.00 & \text { per unit } \
\hline \text { Direct labor } & \$ 8.00 & \text { per unit } \
\hline \text { Variable manuf. overhead } & \$ 20,000 & \text { per month } \
\hline \text { Fixed manuf. ovehead } & \$ 14,000 & \text { per month } \
\hline \text { Operating Experses } & \$ 21,000 & \text { per month } \
\hline & & \
\hline \text { Bepinging inventory } & 0 & \text { units } \
\hline \text { Units produced } & 8,000 & \text { units } \
\hline \text { Units sold } & 7,500 & \text { units } \
\hline \text { Ending inventory } & 500 & \text { units } \
\hline
\end{array}$$
-
Using absorption costing, what is the cost per unit produced?

Accepted Answer

A)  $16.25 
B)  $14.25 
C)  $14.50 
D)  $12.75 
A)  $16.25 
B)  $14.25 
C)  $14.50 
D)  $12.75

Question 4

Jenny was reviewing the water bill for her doggy day spa and determined that her highest bill, $1,700, occurred in July when she washed 800 dogs and her lowest bill, $900, occurred in November when she washed 400 dogs.
-  What was the fixed cost associated with Jenny's water bill?

Accepted Answer

A)  $150 
B)  $300 
C)  $100 
D)  $200 
A)  $150 
B)  $300 
C)  $100 
D)  $200

Question 5

The only difference between absorption costing and variable costing is the way that fixed manufacturing overhead costs are treated.

Accepted Answer

A) True 
 B)False

Question 6

Jarvis Foods produces a gourmet condiment which sells for $10.00 per unit. Variable costs are $7.50 per unit, and fixed costs are $18,000 per month. Jarvis is currently selling 8,000 units per month. How much is Jarvis's margin of safety expressed in units?

Accepted Answer

A)  250 units 
B)  800 units 
C)  160 units 
D)  40 units 
A)  250 units 
B)  800 units 
C)  160 units 
D)  40 units

Question 7

The long distance company that you use charges $5.00 per month and $0.10 per minute per call. If your current bill is $25.00, how many minutes did you use?

Accepted Answer

A)  250 minutes 
B)  100 minutes 
C)  200 minutes 
D)  150 minutes 
A)  250 minutes 
B)  100 minutes 
C)  200 minutes 
D)  150 minutes

Question 8

Which of the following accurately describes absorption costing?

Accepted Answer

A)  Only variable manufacturing costs are assigned to products. 
B)  Only fixed manufacturing costs are assigned to products. 
C)  Both variable and fixed manufacturing costs are assigned to products. 
D)  Both manufacturing and non-manufacturing costs are assigned to products. 
A)  Only variable manufacturing costs are assigned to products. 
B)  Only fixed manufacturing costs are assigned to products. 
C)  Both variable and fixed manufacturing costs are assigned to products. 
D)  Both manufacturing and non-manufacturing costs are assigned to products.

Question 9

A small business produces a single product and reports the following data:
$$\begin{array} { | l | r | r | } 
\hline \text { Price } & \$ 8.00 & \text { per unit } \
\hline \text { Variable cost } & \$ 5.00 & \text { per unit } \
\hline \text { Fixed cost } & \$ 21,000 & \text { per month } \
\hline \text { Volume } & 10,000 & \text { per month } \
\hline
\end{array}$$
-
The company's variable cost goes up by $0.25 per unit. Fixed costs are lowered from $21,000 to $18,000. Assume other factors remain the same. How would this change affect operating income?

Accepted Answer

A)  It will go up by $500. 
B)  It will go up by $800. 
C)  It will go down by $2,500. 
D)  It will stay the same. 
A)  It will go up by $500. 
B)  It will go up by $800. 
C)  It will go down by $2,500. 
D)  It will stay the same.

Question 10

Porterhouse Company has both fixed and variable production costs. If volume goes up by 20%, how would that affect the total variable costs? (Assume all volumes are within the relevant range.)

Accepted Answer

A)  Would go up 20% 
B)  Would remain the same 
C)  Would go up by some amount less than 20% 
D)  Would go down 
A)  Would go up 20% 
B)  Would remain the same 
C)  Would go up by some amount less than 20% 
D)  Would go down

Question 11

Both the income statement approach and the contribution margin approach will yield the same answer for calculating breakeven points.

Accepted Answer

A) True 
 B)False

Question 12

Reevis Company sells hand-sewn shirts for $25 per unit, and has fixed costs of $7,500. Their contribution margin ratio is 20%. How much is the variable cost per unit?

Accepted Answer

A)  $20 
B)  $8 
C)  $5 
D)  $15 
A)  $20 
B)  $8 
C)  $5 
D)  $15

Question 13

A small business produces a single product and reports the following data:
$$\begin{array} { | l | r | r | } 
\hline \text { Price } & \$ 8.00 & \text { per unit } \
\hline \text { Variable cost } & \$ 5.00 & \text { per unit } \
\hline \text { Fixed cost } & \$ 21,000 & \text { per month } \
\hline \text { Volume } & 10,000 & \text { per month } \
\hline
\end{array}$$
-
Fixed costs go up by $2,000 per month, and the price is raised by $0.20 per unit. Assume other factors remain the same. How would this change affect operating income?

Accepted Answer

A)  It will go up by $500. 
B)  It will go up by $1,500. 
C)  It will go down by $2,500. 
D)  It will stay the same. 
A)  It will go up by $500. 
B)  It will go up by $1,500. 
C)  It will go down by $2,500. 
D)  It will stay the same.

Question 14

Gould Enterprises sells computer disks for $1.50 per disk. Unit variable expenses total $0.90. The breakeven point in units is 3,000 and budgeted sales in units are 4,300. What is the margin of safety in dollars?

Accepted Answer

A)  $4,500 
B)  $1,950 
C)  $2,580 
D)  $780 
A)  $4,500 
B)  $1,950 
C)  $2,580 
D)  $780

Question 15

The combination of products that make up total sales, and the proportion of sales among the products is referred to as "sales mix."

Accepted Answer

A) True 
 B)False

Question 16

When companies sell multiple products, prices are set to ensure that all products have the same contribution margin.

Accepted Answer

A) True 
 B)False

Question 17

A company's product sells for $240 per unit. Variable cost is $210 per unit. Fixed costs run at $141,000 per month. How many dollars of sale revenue are required to break even?

Accepted Answer

A)  $1,290,000 
B)  $1,128,000 
C)  $956,000 
D)  $1,050,000 
A)  $1,290,000 
B)  $1,128,000 
C)  $956,000 
D)  $1,050,000

Question 18

Arquebus Company is owned and operated by a craftsman who makes replicas of historic firearms for museums, sportsmen and collectors. He is currently producing 40 flintlock muskets per month. Cost data are as follows: $$\begin{array} { l l } 
\text { Price } & \$ 720 \text { per unit } \
\text { Variable cost } & \$ 470 \text { per unit } \
\text { Fixed costs } & \$ 8,000 \text { per month }
\end{array}$$ In June, the cost of the special kind of metal he uses went up considerably, and the variable cost per unit increased by $50 per unit. 
-If volume and other factors remain constant, how will this affect the company's breakeven point?

Accepted Answer

A)  It will go up by 12 units. 
B)  It will have no effect on breakeven. 
C)  It will go up by 8 units per month. 
D)  It will go down by 2 units per month. 
A)  It will go up by 12 units. 
B)  It will have no effect on breakeven. 
C)  It will go up by 8 units per month. 
D)  It will go down by 2 units per month.

Question 19

Jarvis Foods produces a gourmet condiment which sells for $10.00 per unit. Variable costs are $7.50 per unit, and fixed costs are $18,000 per month. Jarvis is currently selling 8,000 units per month. If Jarvis reduces the selling price down to $9.00 per unit, they believe volume will rise to 13,000 units per month. How would that affect its operating income?

Accepted Answer

A)  Operating income will go up by $6,000. 
B)  Operating income will go down by $1,600. 
C)  Operating income will go down by $500. 
D)  Operating income will go up by $2,000. 
A)  Operating income will go up by $6,000. 
B)  Operating income will go down by $1,600. 
C)  Operating income will go down by $500. 
D)  Operating income will go up by $2,000.

Question 20

A decrease in inventory levels will cause which of the following when comparing operating income under absorption and variable costing?

Accepted Answer

A)  The same operating income under both variable costing and absorption costing 
B)  A higher operating income under variable costing 
C)  A lower operating income under variable costing 
D)  A lower cost of goods sold and a higher operating income under absorption costing 
A)  The same operating income under both variable costing and absorption costing 
B)  A higher operating income under variable costing 
C)  A lower operating income under variable costing 
D)  A lower cost of goods sold and a higher operating income under absorption costing

Breakeven is the point where the sales revenues are exactly equal to the total variable costs plus the total fixed costs.

Jenny was reviewing the water bill for her doggy day spa and determined that her highest bill, $1,700, occurred in July when she washed 800 dogs and her lowest bill, $900, occurred in November when she washed 400 dogs. - What was the fixed cost associated with Jenny's water bill?

The only difference between absorption costing and variable costing is the way that fixed manufacturing overhead costs are treated.

Jarvis Foods produces a gourmet condiment which sells for $10.00 per unit. Variable costs are $7.50 per unit, and fixed costs are $18,000 per month. Jarvis is currently selling 8,000 units per month. How much is Jarvis's margin of safety expressed in units?

The long distance company that you use charges $5.00 per month and $0.10 per minute per call. If your current bill is $25.00, how many minutes did you use?

Which of the following accurately describes absorption costing?

Porterhouse Company has both fixed and variable production costs. If volume goes up by 20%, how would that affect the total variable costs? (Assume all volumes are within the relevant range.)

Both the income statement approach and the contribution margin approach will yield the same answer for calculating breakeven points.

Reevis Company sells hand-sewn shirts for $25 per unit, and has fixed costs of $7,500. Their contribution margin ratio is 20%. How much is the variable cost per unit?

Gould Enterprises sells computer disks for $1.50 per disk. Unit variable expenses total $0.90. The breakeven point in units is 3,000 and budgeted sales in units are 4,300. What is the margin of safety in dollars?

The combination of products that make up total sales, and the proportion of sales among the products is referred to as "sales mix."

When companies sell multiple products, prices are set to ensure that all products have the same contribution margin.

A company's product sells for $240 per unit. Variable cost is $210 per unit. Fixed costs run at $141,000 per month. How many dollars of sale revenue are required to break even?

A decrease in inventory levels will cause which of the following when comparing operating income under absorption and variable costing?

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Activity-Based Costing and Other Cost Management Tools

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

Filters

Exam 19: Cost-Volume-Profit Analysis

Breakeven is the point where the sales revenues are exactly equal to the total variable costs plus the total fixed costs.

Jenny was reviewing the water bill for her doggy day spa and determined that her highest bill, $1,700, occurred in July when she washed 800 dogs and her lowest bill, $900, occurred in November when she washed 400 dogs. - What was the fixed cost associated with Jenny's water bill?

The only difference between absorption costing and variable costing is the way that fixed manufacturing overhead costs are treated.

Jarvis Foods produces a gourmet condiment which sells for $10.00 per unit. Variable costs are $7.50 per unit, and fixed costs are $18,000 per month. Jarvis is currently selling 8,000 units per month. How much is Jarvis's margin of safety expressed in units?

The long distance company that you use charges $5.00 per month and $0.10 per minute per call. If your current bill is $25.00, how many minutes did you use?

Which of the following accurately describes absorption costing?

Porterhouse Company has both fixed and variable production costs. If volume goes up by 20%, how would that affect the total variable costs? (Assume all volumes are within the relevant range.)

Both the income statement approach and the contribution margin approach will yield the same answer for calculating breakeven points.

Reevis Company sells hand-sewn shirts for $25 per unit, and has fixed costs of $7,500. Their contribution margin ratio is 20%. How much is the variable cost per unit?

Gould Enterprises sells computer disks for $1.50 per disk. Unit variable expenses total $0.90. The breakeven point in units is 3,000 and budgeted sales in units are 4,300. What is the margin of safety in dollars?

The combination of products that make up total sales, and the proportion of sales among the products is referred to as "sales mix."

When companies sell multiple products, prices are set to ensure that all products have the same contribution margin.

A company's product sells for $240 per unit. Variable cost is $210 per unit. Fixed costs run at $141,000 per month. How many dollars of sale revenue are required to break even?

A decrease in inventory levels will cause which of the following when comparing operating income under absorption and variable costing?

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Activity-Based Costing and Other Cost Management Tools

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

Filters