Question 1

If the fixed expenses increase in a company,and all other factors remain unchanged,then one would expect the margin of safety to decrease.

Accepted Answer

A) True 
 B)False  True

Question 2

A company has sales of $87,500 at the break-even point and fixed costs are $35,000.Assuming cost behaviour does not change if sales increase by $20,000 how much will operating income will increase by?

Accepted Answer

A)  $20,000.00. 
B)  $12,000.00. 
C)  $8,000.00. 
D)  $4,000.00. 
A)  $20,000.00. 
B)  $12,000.00. 
C)  $8,000.00. 
D)  $4,000.00. C

Question 3

What is the company's break-even in units?

Accepted Answer

A)  20,000 units. 
B)  0 units. 
C)  18,000 units. 
D)  12,000 units. 
A)  20,000 units. 
B)  0 units. 
C)  18,000 units. 
D)  12,000 units. D

Question 4

Koby Co.has sales of $200,000 with variable expenses of $150,000,fixed expenses of $60,000,and a net loss of $10,000.How much would Koby have to sell in order to achieve an operating income of 10% of sales?

Accepted Answer

A)  $375,000. 
B)  $451,000. 
C)  $431,000. 
D)  $400,000.Sales = 60,000/(.25 - .10)= $400,000 
A)  $375,000. 
B)  $451,000. 
C)  $431,000. 
D)  $400,000.Sales = 60,000/(.25 - .10)= $400,000

Question 5

Once the break-even point is reached,which of the following statements is true?

Accepted Answer

A)  The total contribution margin changes from negative to positive. 
B)  Operating income will increase by the unit contribution margin for each additional item sold. 
C)  Variable expenses will remain constant in total. 
D)  The contribution margin ratio begins to decrease. 
A)  The total contribution margin changes from negative to positive. 
B)  Operating income will increase by the unit contribution margin for each additional item sold. 
C)  Variable expenses will remain constant in total. 
D)  The contribution margin ratio begins to decrease.

Question 6

What is the company's degree of operating leverage?

Accepted Answer

A)  0.2. 
B)  8.0. 
C)  1.7. 
D)  5.0. 
A)  0.2. 
B)  8.0. 
C)  1.7. 
D)  5.0.

Question 7

A company with a degree of operating leverage of 4 would expect income to increase by 200% if sales increased from $100,000 to $150,000.
Increase in Sales is 50% so income increases 50%*4

Accepted Answer

A) True 
 B)False

Question 8

The following monthly data are available for the Challenger Company and its only product,Product SW:   
Required:
a)Without resorting to calculations,what is the total contribution margin at the break-even point?
b)Management is contemplating the use of plastic gearing rather than metal gearing in Product SW.This change would reduce variable costs by $15.The company's marketing manager predicts that this would reduce the overall quality of the product and thus would result in a decline in sales to a level of 350 units per month.Should this change be made?
c)Assume that Challenger Company is currently selling 400 units of Product SW per month.Management wants to increase sales and feels that this can be done by cutting the selling price by $25 per unit and increasing the advertising budget by $20,000 per month.Management believes that these actions will increase unit sales by 50%.Should these changes be made?
d)Assume that Challenger Company is currently selling 400 units of Product SW.Management wants to automate a portion of the production process for Product SW.The new equipment would reduce direct labour costs by $20 per unit but would result in a monthly rental cost for the new robotic equipment of $10,000.Management believes that the new equipment will increase the reliability of Product SW,thus resulting in an increase in monthly sales of 12%.Should these changes be made?

Accepted Answer

a)The total contribution margin is $52,8

Question 9

Last year,Perry Company reported profits of $4,200.Its total variable expenses were $66,000,or $6 per unit.The unit contribution margin was $3.00.What is the break-even point in units for Perry Company?

Accepted Answer

A)  11,000 units. 
B)  9,600 units. 
C)  22,000 units. 
D)  12,400 units.B/E = $28,800/3 = 9,600 units. 
A)  11,000 units. 
B)  9,600 units. 
C)  22,000 units. 
D)  12,400 units.B/E = $28,800/3 = 9,600 units.

Question 10

In the current year,the company sold 43,000 units.Due to competition,management will be forced to lower the selling price by 10% next year.How many units must be sold next year to earn the same operating income as was earned in the current year?

Accepted Answer

A)  50,000 units. 
B)  53,200 units. 
C)  58,800 units. 
D)  60,200 units.New CM = 40 * (1 - .10)- 20 - 6 = $10.Units required = (532,000 + 70,000)/10 = 60,200 units. 
A)  50,000 units. 
B)  53,200 units. 
C)  58,800 units. 
D)  60,200 units.New CM = 40 * (1 - .10)- 20 - 6 = $10.Units required = (532,000 + 70,000)/10 = 60,200 units.

Question 11

The following is last month's contribution format income statement:  
What is the company's break-even sales in units?

Accepted Answer

A)  0 units. 
B)  12,000 units. 
C)  6,000 units. 
D)  8,000 units. 
A)  0 units. 
B)  12,000 units. 
C)  6,000 units. 
D)  8,000 units.

Question 12

Last year,Perry Company reported profits of $4,200.Its total variable expenses were $66,000,or $6 per unit.The unit contribution margin was $3.00.What is the break-even point in units for Perry Company?

Accepted Answer

A)  11,000 units. 
B)  9,600 units. 
C)  22,000 units. 
D)  12,400 units.B/E = $28,800/3 = 9,600 units. 
A)  11,000 units. 
B)  9,600 units. 
C)  22,000 units. 
D)  12,400 units.B/E = $28,800/3 = 9,600 units.

Question 13

Dodero Company produces a single product that sells for $100 per unit.Fixed expenses total $12,000 per month,and variable expenses are $60 per unit.The company's sales average 500 units per month.Which of the following statements is correct?

Accepted Answer

A)  The company's break-even point is $12,000 per month. 
B)  The fixed expenses remain constant at $24 per unit for any activity level within the relevant range. 
C)  The company's contribution margin ratio is 40%. 
D)  Responses A,B,and C are all correct. 
A)  The company's break-even point is $12,000 per month. 
B)  The fixed expenses remain constant at $24 per unit for any activity level within the relevant range. 
C)  The company's contribution margin ratio is 40%. 
D)  Responses A,B,and C are all correct.

Question 14

Koby Co.has sales of $200,000 with variable expenses of $150,000,fixed expenses of $60,000,and a net loss of $10,000.How much would Koby have to sell in order to achieve an operating income of 10% of sales?

Accepted Answer

A)  $375,000. 
B)  $451,000. 
C)  $431,000. 
D)  $400,000.Sales = 60,000/(.25 - .10)= $400,000 
A)  $375,000. 
B)  $451,000. 
C)  $431,000. 
D)  $400,000.Sales = 60,000/(.25 - .10)= $400,000

Question 15

If sales increase by 100 units,by how much should operating income increase?

Accepted Answer

A)  $400. 
B)  $4,800. 
C)  $1,500. 
D)  $2,500. 
A)  $400. 
B)  $4,800. 
C)  $1,500. 
D)  $2,500.

Question 16

A company has sales of $87,500 at the break-even point and fixed costs are $35,000.Assuming cost behaviour does not change if sales increase by $20,000 how much will operating income will increase by?

Accepted Answer

A)  $20,000.00. 
B)  $12,000.00. 
C)  $8,000.00. 
D)  $4,000.00. 
A)  $20,000.00. 
B)  $12,000.00. 
C)  $8,000.00. 
D)  $4,000.00.

Question 17

What is the variable expense per unit?

Accepted Answer

A)  $31.20 per unit. 
B)  $24.00 per unit. 
C)  $36.00 per unit. 
D)  $28.80 per unit. 
A)  $31.20 per unit. 
B)  $24.00 per unit. 
C)  $36.00 per unit. 
D)  $28.80 per unit.

Question 18

For a given level of sales,a low contribution margin ratio will produce less operating income than a high contribution margin ratio.

Accepted Answer

A) True 
 B)False

Question 19

Scott Company's variable expenses are 72% of sales.The company's break-even point in sales is $2,450,000.If sales are $60,000 below the break-even point,what operating loss would the company report?

Accepted Answer

A)  $43,200. 
B)  $60,000. 
C)  $16,800. 
D)  Cannot be determined from the data given. 
A)  $43,200. 
B)  $60,000. 
C)  $16,800. 
D)  Cannot be determined from the data given.

Question 20

What is the break-even point in annual sales dollars?

Accepted Answer

A)  $530,000. 
B)  $350,000. 
C)  $460,000. 
D)  $400,000. 
A)  $530,000. 
B)  $350,000. 
C)  $460,000. 
D)  $400,000.

If the fixed expenses increase in a company,and all other factors remain unchanged,then one would expect the margin of safety to decrease.

A company has sales of $87,500 at the break-even point and fixed costs are $35,000.Assuming cost behaviour does not change if sales increase by $20,000 how much will operating income will increase by?

What is the company's break-even in units?

Koby Co.has sales of $200,000 with variable expenses of $150,000,fixed expenses of $60,000,and a net loss of $10,000.How much would Koby have to sell in order to achieve an operating income of 10% of sales?

Once the break-even point is reached,which of the following statements is true?

What is the company's degree of operating leverage?

A company with a degree of operating leverage of 4 would expect income to increase by 200% if sales increased from $100,000 to $150,000. Increase in Sales is 50% so income increases 50%*4

Last year,Perry Company reported profits of $4,200.Its total variable expenses were $66,000,or $6 per unit.The unit contribution margin was $3.00.What is the break-even point in units for Perry Company?

In the current year,the company sold 43,000 units.Due to competition,management will be forced to lower the selling price by 10% next year.How many units must be sold next year to earn the same operating income as was earned in the current year?

The following is last month's contribution format income statement: What is the company's break-even sales in units?

Last year,Perry Company reported profits of $4,200.Its total variable expenses were $66,000,or $6 per unit.The unit contribution margin was $3.00.What is the break-even point in units for Perry Company?

Dodero Company produces a single product that sells for $100 per unit.Fixed expenses total $12,000 per month,and variable expenses are $60 per unit.The company's sales average 500 units per month.Which of the following statements is correct?

Koby Co.has sales of $200,000 with variable expenses of $150,000,fixed expenses of $60,000,and a net loss of $10,000.How much would Koby have to sell in order to achieve an operating income of 10% of sales?

If sales increase by 100 units,by how much should operating income increase?

A company has sales of $87,500 at the break-even point and fixed costs are $35,000.Assuming cost behaviour does not change if sales increase by $20,000 how much will operating income will increase by?

What is the variable expense per unit?

For a given level of sales,a low contribution margin ratio will produce less operating income than a high contribution margin ratio.

Scott Company's variable expenses are 72% of sales.The company's break-even point in sales is $2,450,000.If sales are $60,000 below the break-even point,what operating loss would the company report?

What is the break-even point in annual sales dollars?

Managerial Accounting and the Business Environment

Cost Terms, Concepts, and Classifications

Cost Behaviour: Analysis and Use

Systems Design: Job-Order Costing

Systems Design: Process Costing

Activity-Based Costing: a Tool to Aid Decision Making

Variable Costing: a Tool for Management

Budgeting

Standard Costs and Overhead Analysis

Reporting for Control

Relevant Costs for Decision Making

Capital Budgeting Decisions

Financial Statement Analysis Online

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Exam 4: Cost-Volume-Profit Relationships

If the fixed expenses increase in a company,and all other factors remain unchanged,then one would expect the margin of safety to decrease.

A company has sales of $87,500 at the break-even point and fixed costs are $35,000.Assuming cost behaviour does not change if sales increase by $20,000 how much will operating income will increase by?

What is the company's break-even in units?

Koby Co.has sales of $200,000 with variable expenses of $150,000,fixed expenses of $60,000,and a net loss of $10,000.How much would Koby have to sell in order to achieve an operating income of 10% of sales?

Once the break-even point is reached,which of the following statements is true?

What is the company's degree of operating leverage?

A company with a degree of operating leverage of 4 would expect income to increase by 200% if sales increased from $100,000 to $150,000. Increase in Sales is 50% so income increases 50%*4

Last year,Perry Company reported profits of $4,200.Its total variable expenses were $66,000,or $6 per unit.The unit contribution margin was $3.00.What is the break-even point in units for Perry Company?

In the current year,the company sold 43,000 units.Due to competition,management will be forced to lower the selling price by 10% next year.How many units must be sold next year to earn the same operating income as was earned in the current year?

The following is last month's contribution format income statement: What is the company's break-even sales in units?

Last year,Perry Company reported profits of $4,200.Its total variable expenses were $66,000,or $6 per unit.The unit contribution margin was $3.00.What is the break-even point in units for Perry Company?

Dodero Company produces a single product that sells for $100 per unit.Fixed expenses total $12,000 per month,and variable expenses are $60 per unit.The company's sales average 500 units per month.Which of the following statements is correct?

Koby Co.has sales of $200,000 with variable expenses of $150,000,fixed expenses of $60,000,and a net loss of $10,000.How much would Koby have to sell in order to achieve an operating income of 10% of sales?

If sales increase by 100 units,by how much should operating income increase?

A company has sales of $87,500 at the break-even point and fixed costs are $35,000.Assuming cost behaviour does not change if sales increase by $20,000 how much will operating income will increase by?

What is the variable expense per unit?

For a given level of sales,a low contribution margin ratio will produce less operating income than a high contribution margin ratio.

Scott Company's variable expenses are 72% of sales.The company's break-even point in sales is $2,450,000.If sales are $60,000 below the break-even point,what operating loss would the company report?

What is the break-even point in annual sales dollars?

Managerial Accounting and the Business Environment

Cost Terms, Concepts, and Classifications

Cost Behaviour: Analysis and Use

Systems Design: Job-Order Costing

Systems Design: Process Costing

Activity-Based Costing: a Tool to Aid Decision Making

Variable Costing: a Tool for Management

Budgeting

Standard Costs and Overhead Analysis

Reporting for Control

Relevant Costs for Decision Making

Capital Budgeting Decisions

Financial Statement Analysis Online

Filters