Question 1

The break-even point is the sales level at which a company neither earns a profit nor incurs a loss.

Accepted Answer

A) True 
 B)False

Question 2

Maroon Company's contribution margin ratio is 24%.Total fixed costs are $84,000.What is Maroon's break-even point in sales dollars?

Accepted Answer

A) $20,160. 
B) $110,526. 
C) $350,000. 
D) $240,000. 
E) $84,000. 
A) $20,160. 
B) $110,526. 
C) $350,000. 
D) $240,000. 
E) $84,000.

Question 3

There are only two methods to derive an estimated line of cost behavior; the high-low method and the scatter diagram.

Accepted Answer

A) True 
 B)False

Question 4

Whiting Company sells a mix of three related products.Total fixed costs are $144,000.The following additional information is available for Whiting Company.
   Determine the company's break-even point in composite units.

Accepted Answer

Selling price of a composite u

Question 5

The high-low method of deriving an estimated cost line uses all the data points available.

Accepted Answer

A) True 
 B)False

Question 6

Madison Corporation sells three products (M,N,and O)in the following mix: 3:1:2.Unit price and cost data are:  Total fixed costs are $340,000.
-The break-even point in sales dollars for the current sales mix is (round to the nearest thousand):

Accepted Answer

A) $ 20,000. 
B) $289,000. 
C) $400,000. 
D) $629,000. 
E) $740,000. 
A) $ 20,000. 
B) $289,000. 
C) $400,000. 
D) $629,000. 
E) $740,000.

Question 7

The dollar amount of sales needed to achieve a target income is computed by dividing the sum of fixed costs plus the target pretax income by the contribution margin ratio.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is the correct interpretation of a degree of operating leverage of 5?

Accepted Answer

A) Operating leverage of 5 means that sales can decrease by 5% before the firm's current level of sales will hit the break-even point. 
B) Operating leverage of 5 means that if sales increase by 5% the firm will hit its break-even point. 
C) Operating leverage of 5 means that if sales increase by 5%,there will be a 25% increase in the firm's pretax profit. 
D) Operating leverage of 5 measures the degree of debt employed by the firm's debt structure. 
E) Operating leverage of 5 means that the company would need to increase sales by 5 times in order to hit its break-even point. 
A) Operating leverage of 5 means that sales can decrease by 5% before the firm's current level of sales will hit the break-even point. 
B) Operating leverage of 5 means that if sales increase by 5% the firm will hit its break-even point. 
C) Operating leverage of 5 means that if sales increase by 5%,there will be a 25% increase in the firm's pretax profit. 
D) Operating leverage of 5 measures the degree of debt employed by the firm's debt structure. 
E) Operating leverage of 5 means that the company would need to increase sales by 5 times in order to hit its break-even point.

Question 9

The following information is available for a company's utility cost for operating its machines over the last four months.   Using the high-low method,the estimated total fixed cost for utilities is:

Accepted Answer

A) $1,500. 
B) $3,600. 
C) $6,000. 
D) $3,300. 
E) $2,100. 
A) $1,500. 
B) $3,600. 
C) $6,000. 
D) $3,300. 
E) $2,100.

Question 10

Madison Corporation sells three products (M,N,and O)in the following mix: 3:1:2.Unit price and cost data are:  Total fixed costs are $340,000.
-The selling price per composite unit for the current sales mix (rounded to the nearest cent)is:

Accepted Answer

A) $17.00. 
B) $ 5.67. 
C) $20.00. 
D) $37.00. 
E) $25.00. 
A) $17.00. 
B) $ 5.67. 
C) $20.00. 
D) $37.00. 
E) $25.00.

Question 11

Proctor Company has fixed costs of $315,000 and a contribution margin ratio of 24%.If sales are expected to be $1,500,000,what is the margin of safety,in percent?

Accepted Answer

Break-even point in dollars sa

Question 12

Wang Co.manufactures and sells a single product that sells for $450 per unit; variable costs are $270 per unit.Annual fixed costs are $800,000.Current sales volume is $4,200,000.
-Compute the contribution margin per unit.

Accepted Answer

A) $450. 
B) $270. 
C) $200. 
D) $190. 
E) $180. 
A) $450. 
B) $270. 
C) $200. 
D) $190. 
E) $180.

Question 13

A firm expects to sell 25,000 units of its product at $11 per unit and to incur variable costs per unit of $6.Total fixed costs are $70,000.The pretax net income is:

Accepted Answer

A) $55,000. 
B) $90,000. 
C) $125,000. 
D) $150,000. 
E) $380,000. 
A) $55,000. 
B) $90,000. 
C) $125,000. 
D) $150,000. 
E) $380,000.

Question 14

The following information is available for a company's utility cost for operating its machines over the last four months.   Using the high-low method,the estimated variable cost per machine hour for utilities is:

Accepted Answer

A) $3.38. 
B) $6.00. 
C) $2.50. 
D) $4.22. 
E) $6.17. 
A) $3.38. 
B) $6.00. 
C) $2.50. 
D) $4.22. 
E) $6.17.

Question 15

The difference between the unit sales price and the unit variable cost of an item is defined as the ________.

Accepted Answer

unit contr

Question 16

Barclay Bikes manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500.The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models.If the firm's annual fixed costs total $6,500,000,calculate the firm's contribution margin per composite unit.

Accepted Answer

A) $1,055. 
B) $1,950. 
C) $1,255. 
D) $7,575. 
E) $1,500. 
A) $1,055. 
B) $1,950. 
C) $1,255. 
D) $7,575. 
E) $1,500.

Question 17

A graph used to analyze past cost behaviors by displaying costs and unit data for each period as points on a diagram is called a:

Accepted Answer

A) Least-squares diagram. 
B) Step-wise diagram. 
C) Scatter diagram. 
D) Break-even diagram. 
E) Composite diagram. 
A) Least-squares diagram. 
B) Step-wise diagram. 
C) Scatter diagram. 
D) Break-even diagram. 
E) Composite diagram.

Question 18

A company has fixed costs of $270,000,a unit contribution margin of $14,and a contribution margin ratio of 55%.If the company wants to earn a target $60,000 pretax income,what amount of sales must it make (rounded to the nearest whole dollar)?

Accepted Answer

A) 490,909. 
B) 330,000. 
C) 109,090. 
D) 381,818. 
E) 600,000. 
A) 490,909. 
B) 330,000. 
C) 109,090. 
D) 381,818. 
E) 600,000.

Question 19

Madison Corporation sells three products (M,N,and O)in the following mix: 3:1:2.Unit price and cost data are:  Total fixed costs are $340,000.
-The contribution margin per composite unit for the current sales mix (round to the nearest cent)is:

Accepted Answer

A) $17.00. 
B) $ 5.67. 
C) $20.00. 
D) $37.00. 
E) $25.00. 
A) $17.00. 
B) $ 5.67. 
C) $20.00. 
D) $37.00. 
E) $25.00.

Question 20

During March,a firm expects its total sales to be $160,000,its total variable costs to be $95,000,and its total fixed costs to be $25,000.The contribution margin for March is:

Accepted Answer

A) $65,000. 
B) $90,000. 
C) $120,000. 
D) $40,000. 
E) $25,000. 
A) $65,000. 
B) $90,000. 
C) $120,000. 
D) $40,000. 
E) $25,000.

Exam 18: Cost Behavior and Cost-Volume-Profit Analysis

The break-even point is the sales level at which a company neither earns a profit nor incurs a loss.

Maroon Company's contribution margin ratio is 24%.Total fixed costs are $84,000.What is Maroon's break-even point in sales dollars?

There are only two methods to derive an estimated line of cost behavior; the high-low method and the scatter diagram.

Whiting Company sells a mix of three related products.Total fixed costs are $144,000.The following additional information is available for Whiting Company. Determine the company's break-even point in composite units.

The high-low method of deriving an estimated cost line uses all the data points available.

Madison Corporation sells three products (M,N,and O)in the following mix: 3:1:2.Unit price and cost data are: Total fixed costs are $340,000. -The break-even point in sales dollars for the current sales mix is (round to the nearest thousand):

The dollar amount of sales needed to achieve a target income is computed by dividing the sum of fixed costs plus the target pretax income by the contribution margin ratio.

Which of the following is the correct interpretation of a degree of operating leverage of 5?

The following information is available for a company's utility cost for operating its machines over the last four months. Using the high-low method,the estimated total fixed cost for utilities is:

Madison Corporation sells three products (M,N,and O)in the following mix: 3:1:2.Unit price and cost data are: Total fixed costs are $340,000. -The selling price per composite unit for the current sales mix (rounded to the nearest cent)is:

Proctor Company has fixed costs of $315,000 and a contribution margin ratio of 24%.If sales are expected to be $1,500,000,what is the margin of safety,in percent?

Wang Co.manufactures and sells a single product that sells for $450 per unit; variable costs are $270 per unit.Annual fixed costs are $800,000.Current sales volume is $4,200,000. -Compute the contribution margin per unit.

A firm expects to sell 25,000 units of its product at $11 per unit and to incur variable costs per unit of $6.Total fixed costs are $70,000.The pretax net income is:

The following information is available for a company's utility cost for operating its machines over the last four months. Using the high-low method,the estimated variable cost per machine hour for utilities is:

The difference between the unit sales price and the unit variable cost of an item is defined as the ________.

A graph used to analyze past cost behaviors by displaying costs and unit data for each period as points on a diagram is called a:

A company has fixed costs of $270,000,a unit contribution margin of $14,and a contribution margin ratio of 55%.If the company wants to earn a target $60,000 pretax income,what amount of sales must it make (rounded to the nearest whole dollar)?

Madison Corporation sells three products (M,N,and O)in the following mix: 3:1:2.Unit price and cost data are: Total fixed costs are $340,000. -The contribution margin per composite unit for the current sales mix (round to the nearest cent)is:

During March,a firm expects its total sales to be $160,000,its total variable costs to be $95,000,and its total fixed costs to be $25,000.The contribution margin for March is:

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