Question 1

The contribution margin ratio always increases when which of the following occurs?

Accepted Answer

A)  Variable expenses as a percentage of sales increase. 
B)  Variable expenses as a percentage of sales decrease. 
C)  Break-even point increases. 
D)  Fixed Costs increase. 
A)  Variable expenses as a percentage of sales increase. 
B)  Variable expenses as a percentage of sales decrease. 
C)  Break-even point increases. 
D)  Fixed Costs increase.

Question 2

If fixed expenses increase by $10,000 per year,then the level of sales needed to break even will also increase by $10,000.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is defined as the ratio of fixed expenses to the unit contribution margin?

Accepted Answer

A)  Break-even point in unit sales. 
B)  Profit margin. 
C)  Contribution margin ratio. 
D)  Margin of safety. 
A)  Break-even point in unit sales. 
B)  Profit margin. 
C)  Contribution margin ratio. 
D)  Margin of safety.

Question 4

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 5

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 6

Barnes Company sells three products: A,B,and C.Budgeted sales by product and in total for the coming month are as follows:

As shown by these data,operating income is budgeted at $36,400 for the month,and break-even sales at $430,000.
Assume that actual sales for the month total $500,000 as planned.Actual sales by product are:
A $160,000
B $200,000
C $140,000
Required:
a)Prepare a contribution income statement for the month based on actual sales data.Assume variable expenses as a percentage of sales and total fixed expenses are the same as budgeted.Present the income statement in the format shown in the images above.
b)Compute break-even sales for the month,based on actual data.
c)Explain why the company did not meet the budgeted operating results or break-even sales even though it met its $500,000 sales budget.

Accepted Answer

a) @#IMG-DLM& 
 @#IMG-DLM& 
 @#IMG-DLM& c)Despite the fact that the co

Question 7

Jeff Merchandisers (JM)has determined with 100 percent certainty the following costs for making one unit of its only product:   
The company is,however,not sure of the behaviour of its total indirect manufacturing costs (that is,manufacturing overhead).The controller therefore ran a simple regression based on 20 pairs of monthly observations and obtained the following results:   
Y represents total monthly manufacturing overhead costs while X represents total monthly manufacturing direct labour costs.
Required:
Assume JM incurs NO selling and administrative expenses.What is your best estimate of the company's monthly breakeven sales in units at a guaranteed selling price of $20.00 per unit?

Accepted Answer

The answer of Jeff Merchandisers (JM)has determined with 100 percent...

Question 8

Last year,Twins Company reported $750,000 in sales (25,000 units)and an operating income of $25,000.At the break-even point,the company's total contribution margin equals $500,000.Based on this information,which of the following statements is true?

Accepted Answer

A)  The company's contribution margin ratio is 40%. 
B)  The company's break-even point is 24,000 units. 
C)  The company's variable expense per unit is $9. 
D)  The company's variable expenses are 60% of sales. 
A)  The company's contribution margin ratio is 40%. 
B)  The company's break-even point is 24,000 units. 
C)  The company's variable expense per unit is $9. 
D)  The company's variable expenses are 60% of sales.

Question 9

A product sells for $20 per unit and has a contribution margin ratio of 40%.Fixed expenses total $240,000 annually.How many units of the product must be sold to yield an operating income of $60,000?

Accepted Answer

A)  37,500 units. 
B)  40,000 units. 
C)  65,000 units. 
D)  30,000 units. 
A)  37,500 units. 
B)  40,000 units. 
C)  65,000 units. 
D)  30,000 units.

Question 10

If the expected monthly sales in units were divided equally between the two models (900 Standard and 900 Deluxe),where would the break-even level of sales be as compared to the expected sales mix?

Accepted Answer

A)  The same as with the expected sales mix. 
B)  Higher than with the expected sales mix. 
C)  Lower than with the expected sales mix. 
D)  Cannot be determined with the available data. 
A)  The same as with the expected sales mix. 
B)  Higher than with the expected sales mix. 
C)  Lower than with the expected sales mix. 
D)  Cannot be determined with the available data.

Question 11

Wilson Company prepared the following preliminary budget assuming no advertising expenditures:  
Based on a market study,the company estimated that it could increase the unit selling price by 15% and increase the unit sales volume by 10%,if $100,000 were spent on advertising.Assuming that these changes are incorporated in its budget,what should be the budgeted operating income?

Accepted Answer

A)  $175,000. 
B)  $190,000. 
C)  $205,000. 
D)  $365,000.Budgeted Operating Income = 100,000 * 1.10 * $5.50 - 300,000 - 100,000 = $205,000. 
A)  $175,000. 
B)  $190,000. 
C)  $205,000. 
D)  $365,000.Budgeted Operating Income = 100,000 * 1.10 * $5.50 - 300,000 - 100,000 = $205,000.

Question 12

How is the margin of safety percentage computed?

Accepted Answer

A)  Break-even sales divided by Total sales. 
B)  Total sales minus Break-even sales. 
C)  (Total sales - Break-even sales)divided by Break-even sales. 
D)  (Total sales - Break-even sales)divided by Total sales. 
A)  Break-even sales divided by Total sales. 
B)  Total sales minus Break-even sales. 
C)  (Total sales - Break-even sales)divided by Break-even sales. 
D)  (Total sales - Break-even sales)divided by Total sales.

Question 13

The following data pertain to Wistron Company's two products:  
If fixed expenses for the company as a whole are $60,000 and the product mix is constant,what would be the overall break-even point in sales dollar for the company?

Accepted Answer

A)  $150,000. 
B)  $153,846. 
C)  $100,000. 
D)  $132,000.B/E sales dollars = 60,000/.40 = $150,000. 
A)  $150,000. 
B)  $153,846. 
C)  $100,000. 
D)  $132,000.B/E sales dollars = 60,000/.40 = $150,000.

Question 14

If the company's sales volume increases by 30% next year,all other factors remaining the same,by how much will its operating income increase?

Accepted Answer

A)  $92,400. 
B)  $50,400. 
C)  $37,800. 
D)  $72,000. 
A)  $92,400. 
B)  $50,400. 
C)  $37,800. 
D)  $72,000.

Question 15

Austin Manufacturing had the following operating data for the year just ended:  
Management plans to improve the quality of its only product by replacing a component that costs $3.50 with a higher-grade component that costs $5.50,and renting a packing machine for $18,000 a year.If the desired target operating profit is $288,000,how many units must the company sell?

Accepted Answer

A)  19,300 units. 
B)  21,316 units. 
C)  22,500 units. 
D)  20,842 units. 
A)  19,300 units. 
B)  21,316 units. 
C)  22,500 units. 
D)  20,842 units.

Question 16

The break-even point in unit sales increases when variable expenses do which of the following?

Accepted Answer

A)  Increase,and the selling price remains unchanged. 
B)  Decrease,and the selling price,remains unchanged. 
C)  Decrease,and the selling price increases. 
D)  Remain unchanged,and the selling price increases. 
A)  Increase,and the selling price remains unchanged. 
B)  Decrease,and the selling price,remains unchanged. 
C)  Decrease,and the selling price increases. 
D)  Remain unchanged,and the selling price increases.

Question 17

Once the break-even point has been reached,increases in contribution margin will be reflected dollar for dollar in increased operating income.

Accepted Answer

A) True 
 B)False

Question 18

Wallace,Inc. ,prepared the following budgeted data based on a sales forecast of $6,000,000:  
What would be the amount of sales dollars at the break-even point?

Accepted Answer

A)  $2,250,000. 
B)  $3,500,000. 
C)  $4,000,000. 
D)  $5,300,000. 
A)  $2,250,000. 
B)  $3,500,000. 
C)  $4,000,000. 
D)  $5,300,000.

Question 19

The formula for the break-even point is the same as the formula to attain a given target operating profit for the special case where the target operating profit is zero.

Accepted Answer

A) True 
 B)False

Question 20

Roberts Company sells a single product at a selling price of $55 per unit.Variable costs are $30.25 per unit,and fixed costs are $113,850.What is Roberts Company's break-even point?

Accepted Answer

A)  $207,000. 
B)  3,764 units. 
C)  $253,000. 
D)  2,070 units. 
A)  $207,000. 
B)  3,764 units. 
C)  $253,000. 
D)  2,070 units.

The contribution margin ratio always increases when which of the following occurs?

If fixed expenses increase by $10,000 per year,then the level of sales needed to break even will also increase by $10,000.

Which of the following is defined as the ratio of fixed expenses to the unit contribution margin?

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

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?

Last year,Twins Company reported $750,000 in sales (25,000 units)and an operating income of $25,000.At the break-even point,the company's total contribution margin equals $500,000.Based on this information,which of the following statements is true?

A product sells for $20 per unit and has a contribution margin ratio of 40%.Fixed expenses total $240,000 annually.How many units of the product must be sold to yield an operating income of $60,000?

If the expected monthly sales in units were divided equally between the two models (900 Standard and 900 Deluxe),where would the break-even level of sales be as compared to the expected sales mix?

How is the margin of safety percentage computed?

The following data pertain to Wistron Company's two products: If fixed expenses for the company as a whole are $60,000 and the product mix is constant,what would be the overall break-even point in sales dollar for the company?

If the company's sales volume increases by 30% next year,all other factors remaining the same,by how much will its operating income increase?

The break-even point in unit sales increases when variable expenses do which of the following?

Once the break-even point has been reached,increases in contribution margin will be reflected dollar for dollar in increased operating income.

Wallace,Inc. ,prepared the following budgeted data based on a sales forecast of $6,000,000: What would be the amount of sales dollars at the break-even point?

The formula for the break-even point is the same as the formula to attain a given target operating profit for the special case where the target operating profit is zero.

Roberts Company sells a single product at a selling price of $55 per unit.Variable costs are $30.25 per unit,and fixed costs are $113,850.What is Roberts Company's break-even point?

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

Exam 4: Cost-Volume-Profit Relationships

The contribution margin ratio always increases when which of the following occurs?

If fixed expenses increase by $10,000 per year,then the level of sales needed to break even will also increase by $10,000.

Which of the following is defined as the ratio of fixed expenses to the unit contribution margin?

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

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?

Last year,Twins Company reported $750,000 in sales (25,000 units)and an operating income of $25,000.At the break-even point,the company's total contribution margin equals $500,000.Based on this information,which of the following statements is true?

A product sells for $20 per unit and has a contribution margin ratio of 40%.Fixed expenses total $240,000 annually.How many units of the product must be sold to yield an operating income of $60,000?

If the expected monthly sales in units were divided equally between the two models (900 Standard and 900 Deluxe),where would the break-even level of sales be as compared to the expected sales mix?

How is the margin of safety percentage computed?

The following data pertain to Wistron Company's two products: If fixed expenses for the company as a whole are $60,000 and the product mix is constant,what would be the overall break-even point in sales dollar for the company?

If the company's sales volume increases by 30% next year,all other factors remaining the same,by how much will its operating income increase?

The break-even point in unit sales increases when variable expenses do which of the following?

Once the break-even point has been reached,increases in contribution margin will be reflected dollar for dollar in increased operating income.

Wallace,Inc. ,prepared the following budgeted data based on a sales forecast of $6,000,000: What would be the amount of sales dollars at the break-even point?

The formula for the break-even point is the same as the formula to attain a given target operating profit for the special case where the target operating profit is zero.

Roberts Company sells a single product at a selling price of $55 per unit.Variable costs are $30.25 per unit,and fixed costs are $113,850.What is Roberts Company's break-even point?

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