Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

When the total fixed costs decreases, the breakeven point:

Accepted Answer

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

Question 3

Which of the following is a variable cost?

Accepted Answer

A) Property taxes 
B) Salary of plant manager 
C) Direct materials cost 
D) Straight-line depreciation expense 
A) Property taxes 
B) Salary of plant manager 
C) Direct materials cost 
D) Straight-line depreciation expense

Question 4

When the selling price per unit decreases, the contribution margin per unit:

Accepted Answer

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

Question 5

Which of the following statements is true if the variable cost per unit increases while the sale price per unit and total fixed costs remain constant?

Accepted Answer

A) The breakeven point decreases. 
B) The contribution margin increases. 
C) The breakeven point remains the same. 
D) The breakeven point increases. 
A) The breakeven point decreases. 
B) The contribution margin increases. 
C) The breakeven point remains the same. 
D) The breakeven point increases.

Question 6

Costs that have both variable and fixed components are called:

Accepted Answer

A) fixed cost. 
B) variable cost. 
C) mixed cost. 
D) contribution cost. 
A) fixed cost. 
B) variable cost. 
C) mixed cost. 
D) contribution cost.

Question 7

The sales mix provides the weights that make up total product sales.

Accepted Answer

A) True 
 B)False

Question 8

Sales mix, or product mix, is the combination of products that make up total sales.

Accepted Answer

A) True 
 B)False

Question 9

If all other factors remain constant, an increase in fixed costs will increase the breakeven point.

Accepted Answer

A) True 
 B)False

Question 10

Variable cost per unit is constant throughout various relevant ranges.

Accepted Answer

A) True 
 B)False

Question 11

An increase in selling price per unit decreases the contribution margin per unit.

Accepted Answer

A) True 
 B)False

Question 12

Jenna Manufacturers produces flooring material. The monthly fixed costs are $10,000 per month. The unit selling price is $75 and variable cost per unit is $35. How many units should Jenna sell in order to earn $10,000 as operating income?

Accepted Answer

Required sales in units = (Fix

Question 13

CVP analysis assumes that the selling price per unit does not change as volume changes.

Accepted Answer

A) True 
 B)False

Question 14

________ is a "what if" technique that estimates profit or loss results if selling price, costs, volume, or underlying assumptions change.

Accepted Answer

A) High-low method of analysis 
B) Sensitivity analysis 
C) Contribution margin 
D) Operating leverage 
A) High-low method of analysis 
B) Sensitivity analysis 
C) Contribution margin 
D) Operating leverage

Question 15

Evans Company has estimated the following amounts for its next fiscal year:   If the company spends an additional $30,000 on advertising, sales volume would increase by 2,500 units. What effect will this decision have on the operating income of Evans?

Accepted Answer

A) Operating income will decrease by $62,500. 
B) Operating income will increase by $7,500. 
C) Operating income will increase by $70,000 
D) Operating income will increase by $37,500. 
A) Operating income will decrease by $62,500. 
B) Operating income will increase by $7,500. 
C) Operating income will increase by $70,000 
D) Operating income will increase by $37,500.

Question 16

Colin was a professional classical guitar player until his motorcycle accident that left him disabled. After long months of therapy, he hired an experienced luthier (maker of stringed instruments)and started a small shop to make and sell Spanish guitars. The guitars sell for $700 and the fixed monthly operating costs are as follows:   Colin's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales, $0.60 went to cover his fixed costs, and that anything past that point was pure profit. Colin is planning to increase the selling price to $820. What impact will the increase in selling price have on the breakeven point in units?

Accepted Answer

A) It will stay the same. 
B) It will go down from 11 to 9 units. 
C) It will go up from 9 to 12 units. 
D) It will go down from 9 to 7 units. 
A) It will stay the same. 
B) It will go down from 11 to 9 units. 
C) It will go up from 9 to 12 units. 
D) It will go down from 9 to 7 units.

Question 17

Which of the following is true of absorption costing?

Accepted Answer

A) the variable manufacturing costs are considered period costs 
B) the fixed manufacturing costs are considered period costs 
C) both variable and fixed manufacturing costs are considered product costs 
D) both variable and fixed manufacturing costs are considered period costs 
A) the variable manufacturing costs are considered period costs 
B) the fixed manufacturing costs are considered period costs 
C) both variable and fixed manufacturing costs are considered product costs 
D) both variable and fixed manufacturing costs are considered period costs

Question 18

Operating leverage predicts the effects fixed costs have on changes in operating income when:

Accepted Answer

A) production is discontinued. 
B) there are no sales returns. 
C) variable costs change. 
D) sales volume changes. 
A) production is discontinued. 
B) there are no sales returns. 
C) variable costs change. 
D) sales volume changes.

Question 19

Under variable costing, the fixed manufacturing overhead costs are classified as period costs and are expensed in the period in which they are incurred.

Accepted Answer

A) True 
 B)False

Question 20

Anthony Company's highest point of total cost was $75,000 in June. Their point of lowest cost was $50,000 in December. The company makes a single product. Production volume in June and December were 13,000 and 8,000 units, respectively. What is the fixed cost per month?

Accepted Answer

A) $50,000 
B) $20,000 
C) $10,000 
D) $8,000 
A) $50,000 
B) $20,000 
C) $10,000 
D) $8,000

Exam 21: Cost-Volume-Profit Analysis

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

When the total fixed costs decreases, the breakeven point:

Which of the following is a variable cost?

When the selling price per unit decreases, the contribution margin per unit:

Which of the following statements is true if the variable cost per unit increases while the sale price per unit and total fixed costs remain constant?

Costs that have both variable and fixed components are called:

The sales mix provides the weights that make up total product sales.

Sales mix, or product mix, is the combination of products that make up total sales.

If all other factors remain constant, an increase in fixed costs will increase the breakeven point.

Variable cost per unit is constant throughout various relevant ranges.

An increase in selling price per unit decreases the contribution margin per unit.

Jenna Manufacturers produces flooring material. The monthly fixed costs are $10,000 per month. The unit selling price is $75 and variable cost per unit is $35. How many units should Jenna sell in order to earn $10,000 as operating income?

CVP analysis assumes that the selling price per unit does not change as volume changes.

________ is a "what if" technique that estimates profit or loss results if selling price, costs, volume, or underlying assumptions change.

Evans Company has estimated the following amounts for its next fiscal year: If the company spends an additional $30,000 on advertising, sales volume would increase by 2,500 units. What effect will this decision have on the operating income of Evans?

Which of the following is true of absorption costing?

Operating leverage predicts the effects fixed costs have on changes in operating income when:

Under variable costing, the fixed manufacturing overhead costs are classified as period costs and are expensed in the period in which they are incurred.

Anthony Company's highest point of total cost was $75,000 in June. Their point of lowest cost was $50,000 in December. The company makes a single product. Production volume in June and December were 13,000 and 8,000 units, respectively. What is the fixed cost per month?

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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