Question 1

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 2

A product has a contribution margin per unit of $17 and sells at $25 per unit. If the break-even point is 82,000 units, calculate (a) the variable costs per unit and (b) the total fixed costs.

Accepted Answer

(a) Variable costs per unit = $25.00 - $

Question 3

Madison Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are: $\begin{array}{lrrrr}
&\text {M}&\text {N}&\text {O}\
\text { Unit sales price } & \$ 7 & \$ 4 & \$ 6 \
\text { Unit variable costs } & 3 & 2 & 3
\end{array}$

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

Question 4

A firm produces and sells a product with a contribution margin of $32 per unit. The firm is presently selling 90,000 units and earning $320,000 in pre-tax income. If the firm desires to increase its pre-tax income to $ 400,000, how many more units must it sell?

Accepted Answer

Target increase in p

Question 5

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

Question 6

The basic form of cost-volume-profit analysis is often called break-even analysis.

Accepted Answer

A) True 
 B)False

Question 7

To determine the slope of the variable cost from a scatter diagram, divide the change in cost by the change in units.

Accepted Answer

A) True 
 B)False

Question 8

The sales mix of Desert Springs Company is 5 units of A, 3 units of B, and 1 unit of C. Per unit sales prices for each product are $30, $40, and $50, respectively. Variable costs per unit are $14,
$24, and $34, respectively. Fixed costs are $597,600. What is the break-even point in composite units and in units of A, B, and C?

Accepted Answer

\[\begin{array} { l | l } 
5 \text { uni

Question 9

Scatter diagrams plot volume (units) on the horizontal axis and cost on the vertical axis.

Accepted Answer

A) True 
 B)False

Question 10

Three important assumptions in cost-volume-profit analysis is that (1) ________ per unit is constant, (2) ________ per unit is constant, and (3) ________ are constant in total.

Accepted Answer

selling pr

Question 11

The contribution margin ratio is the percent of each sales dollar that remains after deducting the total unit variable cost.

Accepted Answer

A) True 
 B)False

Question 12

Portal Manufacturing has total fixed costs of $520,000. A unit of product sells for $15 and variable costs per unit are $11.
a) Prepare a contribution margin income statement showing predicted net income (loss) if Portal sells 100,000 units for the year ended December 31.
b) At a minimum, how many units must Portal sell in order not to incur a loss?

Accepted Answer

a)
b) $520

Question 13

Which of the following costs are most likely to be classified as fixed?

Accepted Answer

A)  Property taxes 
B)  Shipping costs 
C)  Sales commissions 
D)  Direct labor 
E)  Direct materials 
A)  Property taxes 
B)  Shipping costs 
C)  Sales commissions 
D)  Direct labor 
E)  Direct materials

Question 14

The high-low method is used to derive the variable cost per unit and total fixed costs using just the highest and lowest volume levels.

Accepted Answer

A) True 
 B)False

Question 15

The ratio (proportion) of the sales volumes of the various products sold by a company is called the
________.

Accepted Answer

The answer of The ratio (proportion) of the sales volumes...

Question 16

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 17

Parker Co. is preparing next period's forecasts. Total fixed costs are expected to be $300,000 and the contribution margin ratio is expected to be 30%.
(a) Calculate the company's break-even point in dollar sales.
(b) If sales are $1,800,000 above the break-even point, what will Parker's pretax income be?

Accepted Answer

(a) Break-even point in dollars = Fixed

Question 18

Discuss how CVP analysis can be useful in planning.

Accepted Answer

One of the first steps in planning is to

Question 19

Use the following information to determine the margin of safety in dollars: $\begin{array} { l c } 
\text { Unit sales } & 50,000 \text { Units } \
\text { Dollar sales } & \$ 500,000 \
\text { Fixed costs } & \$ 204,000 \
\text { Variable costs } & \$ 187,500
\end{array}$

Accepted Answer

A)  $173,600. 
B)  $500,000. 
C)  $108,500. 
D)  $88,500. 
E)  $326,400. 
A)  $173,600. 
B)  $500,000. 
C)  $108,500. 
D)  $88,500. 
E)  $326,400.

Question 20

The contribution margin per unit is the price at which a unit must be sold in order for the company to break even.

Accepted Answer

A) True 
 B)False

Exam 21: Cost-Volume-Profit Analysis

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 product has a contribution margin per unit of $17 and sells at $25 per unit. If the break-even point is 82,000 units, calculate (a) the variable costs per unit and (b) the total fixed costs.

A firm produces and sells a product with a contribution margin of $32 per unit. The firm is presently selling 90,000 units and earning $320,000 in pre-tax income. If the firm desires to increase its pre-tax income to $ 400,000, how many more units must it sell?

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 basic form of cost-volume-profit analysis is often called break-even analysis.

To determine the slope of the variable cost from a scatter diagram, divide the change in cost by the change in units.

Scatter diagrams plot volume (units) on the horizontal axis and cost on the vertical axis.

Three important assumptions in cost-volume-profit analysis is that (1) ________ per unit is constant, (2) ________ per unit is constant, and (3) ________ are constant in total.

The contribution margin ratio is the percent of each sales dollar that remains after deducting the total unit variable cost.

Which of the following costs are most likely to be classified as fixed?

The high-low method is used to derive the variable cost per unit and total fixed costs using just the highest and lowest volume levels.

The ratio (proportion) of the sales volumes of the various products sold by a company is called the ________.

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.

Discuss how CVP analysis can be useful in planning.

Use the following information to determine the margin of safety in dollars: Unit sales 50,000 Units Dollar sales \ 500,000 Fixed costs \ 204,000 Variable costs \ 187,500

The contribution margin per unit is the price at which a unit must be sold in order for the company to break even.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

Filters

Three important assumptions in cost-volume-profit analysis is that (1) per unit is constant, (2) per unit is constant, and (3) are constant in total.