Question 1

The breakeven point is the point where the sales revenues are equal to the total variable costs plus the total fixed costs.

Accepted Answer

A) True 
 B)False

Question 2

Jame Company sells glass vases at a wholesale price of $3 per unit. The variable cost of manufacture is $1.75 per unit. The fixed costs are $7,500 per month. Jame sold 5,500 units during this month. Calculate Jame's operating income (loss)for this month.

Accepted Answer

A) $9,000 
B) $625 
C) ($625) 
D) ($7,500) 
A) $9,000 
B) $625 
C) ($625) 
D) ($7,500)

Question 3

Ruth Company incurred the following costs in July:   Calculate the total product cost using absorption costing and variable costing.

Accepted Answer

The answer of Ruth Company incurred the following costs in...

Question 4

An increase in selling price per unit increases the number of units required to break even.

Accepted Answer

A) True 
 B)False

Question 5

The relevant range of Orleans Company is between 100,000 units and 180,000 units per month. If the company produces beyond 180,000 units per month:

Accepted Answer

A) the fixed costs will remain the same, but the variable cost per unit may change. 
B) the fixed costs may change, but the variable cost per unit will remain the same. 
C) the fixed costs and the variable cost per unit will not change. 
D) both the fixed costs and the variable cost per unit may change. 
A) the fixed costs will remain the same, but the variable cost per unit may change. 
B) the fixed costs may change, but the variable cost per unit will remain the same. 
C) the fixed costs and the variable cost per unit will not change. 
D) both the fixed costs and the variable cost per unit may change.

Question 6

A(n)________ groups cost by behavior; that is, costs are classified as either variable costs or fixed costs.

Accepted Answer

A) balance sheet 
B) contribution margin income statement 
C) traditional income statement 
D) absorption costing income statement 
A) balance sheet 
B) contribution margin income statement 
C) traditional income statement 
D) absorption costing income statement

Question 7

A small business produces a single product and reports the following data:   If the company reduces its price to $7.50, it believes that the volume will go up to 11,000 units. How would this change affect operating income?

Accepted Answer

A) It will go up by $2,500. 
B) It will go up by $9,000. 
C) It will go down by $2,500. 
D) It will go down by $9,000. 
A) It will go up by $2,500. 
B) It will go up by $9,000. 
C) It will go down by $2,500. 
D) It will go down by $9,000.

Question 8

Total variable costs change in direct proportion to changes in the volume of production.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following costs changes in total in direct proportion to a change in volume?

Accepted Answer

A) Fixed cost 
B) Variable cost 
C) Mixed cost 
D) Period cost 
A) Fixed cost 
B) Variable cost 
C) Mixed cost 
D) Period cost

Question 10

The fundamental assumption of cost-volume-profit (CVP)analysis is that in the long-run fixed costs become variable costs.

Accepted Answer

A) True 
 B)False

Question 11

First Buy Company provided the following manufacturing costs for the month of June.   From the above information, calculate First Buy's total variable costs.

Accepted Answer

A) $311,600 
B) $62,300 
C) $234,800 
D) $38,400 
A) $311,600 
B) $62,300 
C) $234,800 
D) $38,400

Question 12

The fixed costs per unit will:

Accepted Answer

A) increase as production decreases. 
B) decrease as production decreases. 
C) remain the same as production levels change. 
D) increase as production increases. 
A) increase as production decreases. 
B) decrease as production decreases. 
C) remain the same as production levels change. 
D) increase as production increases.

Question 13

When the total fixed costs increases, the contribution margin per unit:

Accepted Answer

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

Question 14

Jackson Company has provided the following information regarding the two products that it sells:   Annual fixed costs are $280,000. How many units must be sold in order for Jackson to breakeven, assuming that Jackson sells five jet boats for every two ski boats sold?

Accepted Answer

A) 70 jet boats and 28 ski boats 
B) 50 jet boats and 20 ski boats 
C) 20 jet boats and 50 ski boats 
D) 45 jet boats and 28 ski boats 
A) 70 jet boats and 28 ski boats 
B) 50 jet boats and 20 ski boats 
C) 20 jet boats and 50 ski boats 
D) 45 jet boats and 28 ski boats

Question 15

Fixed cost per unit is assumed to be constant within a particular relevant range of activity.

Accepted Answer

A) True 
 B)False

Question 16

Sensitivity analysis allows managers to see how various business strategies will affect profit levels.

Accepted Answer

A) True 
 B)False

Question 17

The primary focus of a contribution margin income statement is on gross profit.

Accepted Answer

A) True 
 B)False

Question 18

Pluto Company sells a product for $80 per unit. Variable costs are $25 per unit and fixed costs are $4,000 per month. Pluto sold 2,000 units in October, 2014. Prepare an income statement for October using the contribution margin format.

Accepted Answer

The answer of Pluto Company sells a product for $80...

Question 19

The unit product cost under absorption costing is higher than the unit product cost under variable costing.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is true of the behavior of total variable costs, within the relevant range?

Accepted Answer

A) They will decrease as production increases. 
B) They will remain the same as production levels change. 
C) They will decrease as production decreases. 
D) They will increase as production decreases. 
A) They will decrease as production increases. 
B) They will remain the same as production levels change. 
C) They will decrease as production decreases. 
D) They will increase as production decreases.

Exam 21: Cost-Volume-Profit Analysis

The breakeven point is the point where the sales revenues are equal to the total variable costs plus the total fixed costs.

Jame Company sells glass vases at a wholesale price of $3 per unit. The variable cost of manufacture is $1.75 per unit. The fixed costs are $7,500 per month. Jame sold 5,500 units during this month. Calculate Jame's operating income (loss)for this month.

Ruth Company incurred the following costs in July: Calculate the total product cost using absorption costing and variable costing.

An increase in selling price per unit increases the number of units required to break even.

The relevant range of Orleans Company is between 100,000 units and 180,000 units per month. If the company produces beyond 180,000 units per month:

A(n)________ groups cost by behavior; that is, costs are classified as either variable costs or fixed costs.

A small business produces a single product and reports the following data: If the company reduces its price to $7.50, it believes that the volume will go up to 11,000 units. How would this change affect operating income?

Total variable costs change in direct proportion to changes in the volume of production.

Which of the following costs changes in total in direct proportion to a change in volume?

The fundamental assumption of cost-volume-profit (CVP)analysis is that in the long-run fixed costs become variable costs.

First Buy Company provided the following manufacturing costs for the month of June. From the above information, calculate First Buy's total variable costs.

The fixed costs per unit will:

When the total fixed costs increases, the contribution margin per unit:

Jackson Company has provided the following information regarding the two products that it sells: Annual fixed costs are $280,000. How many units must be sold in order for Jackson to breakeven, assuming that Jackson sells five jet boats for every two ski boats sold?

Fixed cost per unit is assumed to be constant within a particular relevant range of activity.

Sensitivity analysis allows managers to see how various business strategies will affect profit levels.

The primary focus of a contribution margin income statement is on gross profit.

Pluto Company sells a product for $80 per unit. Variable costs are $25 per unit and fixed costs are $4,000 per month. Pluto sold 2,000 units in October, 2014. Prepare an income statement for October using the contribution margin format.

The unit product cost under absorption costing is higher than the unit product cost under variable costing.

Which of the following statements is true of the behavior of total variable costs, within the relevant range?

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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