Question 1

If a company reduces its fixed costs, the operating income will increase by the same amount as the cost reduction.

Accepted Answer

A) True 
 B)False

Question 2

McDaniel Company sells two products-J and B. McDaniel predicts that it will sell 7,200 units of J and 5,600 units of B in the next period. The unit contribution margins are $2.85 and $6.30, respectively. What is the weighted-average unit contribution margin?

Accepted Answer

A) $9.96 per product 
B) $4.58 per product 
C) $7.75 per product 
D) $4.36 per product 
A) $9.96 per product 
B) $4.58 per product 
C) $7.75 per product 
D) $4.36 per product

Question 3

Perfect Fit Company sells hand-sewn shirts for $40 per shirt. It incurs monthly fixed costs of $5,000. The contribution margin ratio is calculated to be 20%. What is the variable cost per shirt?

Accepted Answer

A) $32 per shirt 
B) $48 per shirt 
C) $40 per shirt 
D) $38 per shirt 
A) $32 per shirt 
B) $48 per shirt 
C) $40 per shirt 
D) $38 per shirt

Question 4

Williams Company has variable costs of $0.60 per unit of product. In August, the volume of production was 24,000 units and units sold were 20,000. The total production costs incurred were $31,900. What are the fixed costs per month?

Accepted Answer

A) $17,500 
B) $19,900 
C) $9,600 
D) $14,400 
A) $17,500 
B) $19,900 
C) $9,600 
D) $14,400

Question 5

From the graph given below, identify the sales revenue line.

Accepted Answer

A) OB 
B) AC 
C) AD 
D) AE 
A) OB 
B) AC 
C) AD 
D) AE

Question 6

Contribution margin is the difference between net sales revenue and variable costs.

Accepted Answer

A) True 
 B)False

Question 7

When the total variable costs are deducted from total mixed costs, we obtain:

Accepted Answer

A) mixed cost per unit. 
B) variable cost per unit. 
C) total high-low costs. 
D) total fixed costs. 
A) mixed cost per unit. 
B) variable cost per unit. 
C) total high-low costs. 
D) total fixed costs.

Question 8

Contribution margin ratio is equal to:

Accepted Answer

A) fixed costs divided by contribution margin per unit. 
B) net sales revenue per unit minus variable costs per unit. 
C) net sales revenue minus variable costs. 
D) contribution margin divided by net sales revenue. 
A) fixed costs divided by contribution margin per unit. 
B) net sales revenue per unit minus variable costs per unit. 
C) net sales revenue minus variable costs. 
D) contribution margin divided by net sales revenue.

Question 9

In absorption costing, all fixed manufacturing costs are expensed in the period incurred.

Accepted Answer

A) True 
 B)False

Question 10

Under variable costing, fixed manufacturing overhead costs are treated as a product cost.

Accepted Answer

A) True 
 B)False

Question 11

McPherson Company is facing a $6 increase in the variable cost of producing one of its products for the upcoming year. Because of this situation, the sales manager has made a proposal to increase the selling price of the product while increasing the advertising budget at the same time. The price increase will lower sales volume, but the other changes may help the company maintain its profit margins. McPherson has provided the following information regarding the current year results and the proposal made by the sales manager:   Relative to the current year, the sales manager's proposal will:

Accepted Answer

A) decrease operating income by $90,000. 
B) increase contribution margin by $90,000. 
C) decrease the unit breakeven point. 
D) decrease operating income by $110,000. 
A) decrease operating income by $90,000. 
B) increase contribution margin by $90,000. 
C) decrease the unit breakeven point. 
D) decrease operating income by $110,000.

Question 12

Sensitivity analysis empowers managers with better information for decision making by analyzing how various business strategies will affect profits earned by the company.

Accepted Answer

A) True 
 B)False

Question 13

Variable costing cannot be used for preparing financial reports for external users, such as investors and creditors.

Accepted Answer

A) True 
 B)False

Question 14

Antique Works is owned and operated by a craftsman who makes replicas of historic firearms for museums, sportsmen, and collectors. The cost data are as follows:   If Antique expects to sell 40 units per month, what is his margin of safety expressed in units per month?

Accepted Answer

A) 8 units 
B) 6 units 
C) 4 units 
D) 2 units 
A) 8 units 
B) 6 units 
C) 4 units 
D) 2 units

Question 15

Fixed costs per unit decrease as production levels decrease.

Accepted Answer

A) True 
 B)False

Question 16

Total fixed costs can change from one relevant range to another.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following costs does not change in total despite changes in volume?

Accepted Answer

A) Fixed cost 
B) Variable cost 
C) Mixed cost 
D) Total production cost 
A) Fixed cost 
B) Variable cost 
C) Mixed cost 
D) Total production cost

Question 18

If the selling price of Product X is $15.50 per unit and unit fixed cost is $5.50, its contribution margin per unit is $10.00.

Accepted Answer

A) True 
 B)False

Question 19

When the selling price per unit decreases, the breakeven point:

Accepted Answer

A) increases. 
B) decreases. 
C) remains the same. 
D) decreases proportionately. 
A) increases. 
B) decreases. 
C) remains the same. 
D) decreases proportionately.

Question 20

Fixed costs per unit is inversely proportional to the volume of units produced.

Accepted Answer

A) True 
 B)False

Exam 21: Cost-Volume-Profit Analysis

If a company reduces its fixed costs, the operating income will increase by the same amount as the cost reduction.

McDaniel Company sells two products-J and B. McDaniel predicts that it will sell 7,200 units of J and 5,600 units of B in the next period. The unit contribution margins are $2.85 and $6.30, respectively. What is the weighted-average unit contribution margin?

Perfect Fit Company sells hand-sewn shirts for $40 per shirt. It incurs monthly fixed costs of $5,000. The contribution margin ratio is calculated to be 20%. What is the variable cost per shirt?

Williams Company has variable costs of $0.60 per unit of product. In August, the volume of production was 24,000 units and units sold were 20,000. The total production costs incurred were $31,900. What are the fixed costs per month?

From the graph given below, identify the sales revenue line.

Contribution margin is the difference between net sales revenue and variable costs.

When the total variable costs are deducted from total mixed costs, we obtain:

Contribution margin ratio is equal to:

In absorption costing, all fixed manufacturing costs are expensed in the period incurred.

Under variable costing, fixed manufacturing overhead costs are treated as a product cost.

Sensitivity analysis empowers managers with better information for decision making by analyzing how various business strategies will affect profits earned by the company.

Variable costing cannot be used for preparing financial reports for external users, such as investors and creditors.

Antique Works is owned and operated by a craftsman who makes replicas of historic firearms for museums, sportsmen, and collectors. The cost data are as follows: If Antique expects to sell 40 units per month, what is his margin of safety expressed in units per month?

Fixed costs per unit decrease as production levels decrease.

Total fixed costs can change from one relevant range to another.

Which of the following costs does not change in total despite changes in volume?

If the selling price of Product X is $15.50 per unit and unit fixed cost is $5.50, its contribution margin per unit is $10.00.

When the selling price per unit decreases, the breakeven point:

Fixed costs per unit is inversely proportional to the volume of units produced.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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