Question 1

Degree of operating leverage (DOL)is defined as total contribution margin in dollars divided by pretax income.

Accepted Answer

A) True 
 B)False

Question 2

A company's product sells at $12 per unit and has a $5 per unit variable cost.The company's total fixed costs are $98,000.The contribution margin per unit is:

Accepted Answer

A) $5.00. 
B) $7.00. 
C) $8.17. 
D) $12.00. 
E) $17.00. 
A) $5.00. 
B) $7.00. 
C) $8.17. 
D) $12.00. 
E) $17.00.

Question 3

The sales level at which a company neither earns a profit nor incurs a loss is the:

Accepted Answer

A) Relevant range. 
B) Margin of safety. 
C) Step-wise variable level. 
D) Break-even point. 
E) Contribution margin. 
A) Relevant range. 
B) Margin of safety. 
C) Step-wise variable level. 
D) Break-even point. 
E) Contribution margin.

Question 4

A company has fixed costs of $90,000.Its contribution margin ratio is 30% and the product sells for $75 per unit.What is the company's break-even point in dollar sales?

Accepted Answer

A) $60,000. 
B) $128,571. 
C) $180,000. 
D) $210,000. 
E) $300,000. 
A) $60,000. 
B) $128,571. 
C) $180,000. 
D) $210,000. 
E) $300,000.

Question 5

A company's product sells at $12 per unit and has a $5 per unit variable cost.The company's total fixed costs are $98,000.The break-even point in units is:

Accepted Answer

A) 5,158. 
B) 7,000. 
C) 8,167. 
D) 14,000. 
E) 19,600. 
A) 5,158. 
B) 7,000. 
C) 8,167. 
D) 14,000. 
E) 19,600.

Question 6

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.Management targets an annual pre-tax income of $1,125,000.
-Compute the dollar sales to earn the target pre-tax net income.

Accepted Answer

A) $5,640,000. 
B) $4,812,500. 
C) $3,378,378. 
D) $2,991,004. 
E) $2,612,613. 
A) $5,640,000. 
B) $4,812,500. 
C) $3,378,378. 
D) $2,991,004. 
E) $2,612,613.

Question 7

A firm expects to sell 25,000 units of its product at $11 per unit.Pretax income is predicted to be $60,000.If the variable costs per unit are $5,total fixed costs must be:

Accepted Answer

A) $65,000. 
B) $90,000. 
C) $125,000. 
D) $215,000. 
E) $275,000. 
A) $65,000. 
B) $90,000. 
C) $125,000. 
D) $215,000. 
E) $275,000.

Question 8

Carver Packing Company reports total contribution margin of $72,000 and pretax net income of $24,000 for the current month.In the next month,the company expects sales volume to increase by 8%.The degree of operating leverage and the expected percent change in income,respectively,are:

Accepted Answer

A) 4.0 and 32% 
B) 0.33 and 8% 
C) 0.33 and 2.7% 
D) 3.0 and 8% 
E) 3.0 and 24% 
A) 4.0 and 32% 
B) 0.33 and 8% 
C) 0.33 and 2.7% 
D) 3.0 and 8% 
E) 3.0 and 24%

Question 9

One aid in measuring cost behavior involves creating a display of the data about past costs in graphical form.Such a visual display is called a ________.

Accepted Answer

The answer of One aid in measuring cost behavior involves...

Question 10

What are the unit contribution margin and the contribution margin ratio? What do these measures reveal about a company's cost structure?

Accepted Answer

The unit contribution margin is the sale

Question 11

Management anticipates fixed costs of $72,500 and variable costs equal to 40% of sales.What will pretax income equal if sales are $325,000?

Accepted Answer

A) $57,500. 
B) $122,500. 
C) $130,000. 
D) $181,250. 
E) $252,500. 
A) $57,500. 
B) $122,500. 
C) $130,000. 
D) $181,250. 
E) $252,500.

Question 12

The contribution margin per unit expressed as a percentage of the product's selling price is the:

Accepted Answer

A) Volume variance. 
B) Margin of safety. 
C) Contribution margin ratio. 
D) Break-even point. 
E) Rate of return on sales. 
A) Volume variance. 
B) Margin of safety. 
C) Contribution margin ratio. 
D) Break-even point. 
E) Rate of return on sales.

Question 13

A firm sells two products,Regular and Ultra.For every unit of Regular sold,two units of Ultra are sold.The firm's total fixed costs are $1,612,000.Selling prices and cost information for both products follow.What is the firm's break-even point in units of Regular and Ultra?

Accepted Answer

A) 31,000 Regular units and 31,000 Ultra units. 
B) 31,000 Regular units and 62,000 Ultra units. 
C) 10,333 Regular units and 20,667 Ultra units. 
D) 36,167 Regular units and 72,333 Ultra units. 
E) 62,000 Regular units and 31,000 Ultra units. 
A) 31,000 Regular units and 31,000 Ultra units. 
B) 31,000 Regular units and 62,000 Ultra units. 
C) 10,333 Regular units and 20,667 Ultra units. 
D) 36,167 Regular units and 72,333 Ultra units. 
E) 62,000 Regular units and 31,000 Ultra units.

Question 14

A statistical method for identifying cost behavior is the:

Accepted Answer

A) Scatter diagram method. 
B) High-low method. 
C) Composite method. 
D) CVP charting method. 
E) Least-squares regression method. 
A) Scatter diagram method. 
B) High-low method. 
C) Composite method. 
D) CVP charting method. 
E) Least-squares regression method.

Question 15

Total variable costs change in proportion to changes in volume of activity.

Accepted Answer

A) True 
 B)False

Question 16

Solving problems to determine the relationship of cost,volume,and profit often starts with measuring the ________ point.Further analysis emphasizing profitability may be accomplished by measuring the ________ and ________.

Accepted Answer

break-even; margin o

Question 17

Johnston Co.anticipates total fixed costs of $120,000 and variable costs equal to 40% of sales.What is the pretax income if sales are $650,000?

Accepted Answer

Pretax Income = $650

Question 18

A cost-volume-profit chart is also known as a(n)

Accepted Answer

A) Operating profit chart. 
B) Operating leverage chart. 
C) Break-even chart. 
D) Margin of safety chart. 
E) Sales chart. 
A) Operating profit chart. 
B) Operating leverage chart. 
C) Break-even chart. 
D) Margin of safety chart. 
E) Sales chart.

Question 19

A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials,$10 per unit,Direct labor,$6 per unit,Variable overhead,$70,000,and Fixed overhead,$120,000.
-The total product cost per unit under variable costing is:

Accepted Answer

A) $16 per unit. 
B) $23 per unit. 
C) $35 per unit. 
D) $28 per unit. 
E) $17 per unit. 
A) $16 per unit. 
B) $23 per unit. 
C) $35 per unit. 
D) $28 per unit. 
E) $17 per unit.

Question 20

Forrester Company is considering buying new equipment that would increase monthly fixed costs from $120,000 to $150,000 and would decrease the current variable costs of $70 by $10 per unit.The selling price of $100 is not expected to change.Forrester's current break-even sales are $400,000 and current break-even units are 4,000.If Forrester purchases this new equipment,the revised break-even point in dollars would be:

Accepted Answer

A) $300,000. 
B) $400,000. 
C) $325,000. 
D) $500,000. 
E) $375,000. 
A) $300,000. 
B) $400,000. 
C) $325,000. 
D) $500,000. 
E) $375,000.

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

Degree of operating leverage (DOL)is defined as total contribution margin in dollars divided by pretax income.

A company's product sells at $12 per unit and has a $5 per unit variable cost.The company's total fixed costs are $98,000.The contribution margin per unit is:

The sales level at which a company neither earns a profit nor incurs a loss is the:

A company has fixed costs of $90,000.Its contribution margin ratio is 30% and the product sells for $75 per unit.What is the company's break-even point in dollar sales?

A company's product sells at $12 per unit and has a $5 per unit variable cost.The company's total fixed costs are $98,000.The break-even point in units is:

A firm expects to sell 25,000 units of its product at $11 per unit.Pretax income is predicted to be $60,000.If the variable costs per unit are $5,total fixed costs must be:

Carver Packing Company reports total contribution margin of $72,000 and pretax net income of $24,000 for the current month.In the next month,the company expects sales volume to increase by 8%.The degree of operating leverage and the expected percent change in income,respectively,are:

One aid in measuring cost behavior involves creating a display of the data about past costs in graphical form.Such a visual display is called a ________.

What are the unit contribution margin and the contribution margin ratio? What do these measures reveal about a company's cost structure?

Management anticipates fixed costs of $72,500 and variable costs equal to 40% of sales.What will pretax income equal if sales are $325,000?

The contribution margin per unit expressed as a percentage of the product's selling price is the:

A firm sells two products,Regular and Ultra.For every unit of Regular sold,two units of Ultra are sold.The firm's total fixed costs are $1,612,000.Selling prices and cost information for both products follow.What is the firm's break-even point in units of Regular and Ultra?

A statistical method for identifying cost behavior is the:

Total variable costs change in proportion to changes in volume of activity.

Solving problems to determine the relationship of cost,volume,and profit often starts with measuring the ________ point.Further analysis emphasizing profitability may be accomplished by measuring the ________ and ________.

Johnston Co.anticipates total fixed costs of $120,000 and variable costs equal to 40% of sales.What is the pretax income if sales are $650,000?

A cost-volume-profit chart is also known as a(n)

A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials,$10 per unit,Direct labor,$6 per unit,Variable overhead,$70,000,and Fixed overhead,$120,000. -The total product cost per unit under variable costing is:

Accounting in Business

Accounting for Business Transactions

Adjusting Accounts for Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash,fraud,and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Time Value of Money

Investments

Lean Principles and Accounting

Filters

Solving problems to determine the relationship of cost,volume,and profit often starts with measuring the point.Further analysis emphasizing profitability may be accomplished by measuring the and .