Question 1

A cost that changes in proportion to changes in volume of activity is a(n):

Accepted Answer

A)  Incremental cost. 
B)  Product cost. 
C)  Fixed cost. 
D)  Variable cost. 
E)  Differential cost. 
A)  Incremental cost. 
B)  Product cost. 
C)  Fixed cost. 
D)  Variable cost. 
E)  Differential cost.

Question 2

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

Accepted Answer

unit contr

Question 3

Describe and compare the three cost estimation methods used to develop a cost equation.

Accepted Answer

The three methods are scatter diagram, t

Question 4

Use the following information to determine the contribution margin ratio:$\begin{array} { | l r | } 
\hline \text { Unit sales } & 50,000 \text { Units } \
\text { Unit selling price } & \$ 14.50 \
\text { Unit variable cost } & \$ 7.50 \
\text { Fixed costs } & \$ 204,000 \
\hline
\end{array}$

Accepted Answer

A)  24.5%. 
B)  48.3%. 
C)  34.1%. 
D)  6.9%. 
E)  51.7%. 
A)  24.5%. 
B)  48.3%. 
C)  34.1%. 
D)  6.9%. 
E)  51.7%.

Question 5

The following information is available for a company's cost of sales over the last five months.
 $\begin{array} { | l | l | l | } 
\hline \text { Month } & \text { Units sold } & \text { Cost of sales } \
\hline \text { January } & 400 & 31,00 \
\hline \text { February } & 800 & 37,000 \
\hline \text { March } & 1,600 & 49,000 \
\hline \text { April } & 2,400 & 61,000 \
\hline
\end{array}$
- 
Using the high-low method, the estimated total fixed cost is:

Accepted Answer

A)  $100,000. 
B)  $13,692. 
C)  $25,000. 
D)  $50,000. 
E)  $30,000. 
A)  $100,000. 
B)  $13,692. 
C)  $25,000. 
D)  $50,000. 
E)  $30,000.

Question 6

What are the basic assumptions of CVP analysis with regard to variable cost, fixed cost, and selling price per unit? (Assume a single product).

Accepted Answer

Variable costs per unit are co

Question 7

In cost-volume-profit analysis, the unit contribution margin is:

Accepted Answer

A)  The same as the contribution margin ratio. 
B)  Sales price per unit less unit total cost per unit. 
C)  Sales price per unit less total variable cost per unit. 
D)  Sales price per unit less cost of goods sold per unit. 
E)  Sales price per unit less unit fixed cost per unit. 
A)  The same as the contribution margin ratio. 
B)  Sales price per unit less unit total cost per unit. 
C)  Sales price per unit less total variable cost per unit. 
D)  Sales price per unit less cost of goods sold per unit. 
E)  Sales price per unit less unit fixed cost per unit.

Question 8

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

Accepted Answer

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

Question 9

The margin of safety is the excess of:

Accepted Answer

A)  Break-even sales over expected sales. 
B)  Expected sales over variable costs. 
C)  Fixed costs over expected sales. 
D)  Expected sales over break-even sales. 
E)  Expected sales over fixed costs. 
A)  Break-even sales over expected sales. 
B)  Expected sales over variable costs. 
C)  Fixed costs over expected sales. 
D)  Expected sales over break-even sales. 
E)  Expected sales over fixed costs.

Question 10

A target income refers to:

Accepted Answer

A)  Income planned for a future period. 
B)  Income at the break-even point. 
C)  Income only in a multiproduct environment. 
D)  Income at the minimum contribution margin. 
E)  Income from the most recent period. 
A)  Income planned for a future period. 
B)  Income at the break-even point. 
C)  Income only in a multiproduct environment. 
D)  Income at the minimum contribution margin. 
E)  Income from the most recent period.

Question 11

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

Question 12

A company has fixed costs of $320,000 and a contribution margin per unit of $15. If the firm wants to earn a target $40,000 pretax income, how many units must be sold (rounded to the nearest whole unit)?

Accepted Answer

A)  21,333. 
B)  2,667. 
C)  20,000. 
D)  18,666. 
E)  24,000. 
A)  21,333. 
B)  2,667. 
C)  20,000. 
D)  18,666. 
E)  24,000.

Question 13

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 14

Match between columns
                        Premises:  The amount that the sale of one unit contributes toward covering fixed costs and generating profit.
 A cost that changes in total in proportion to changes in volume of activity.
 A cost that includes both fixed and variable cost components.
 A cost that changes as volume changes, but at a nonconstant rate.
 A line drawn on a graph to fit the relation between cost and unit volume.
 A statistical method for identifying cost behavior that is more precise than the high-low method and a scatter diagram.
 A company's normal operating range of production volume; excludes extremely high and low operating levels that are unlikely to recur.
 A cost that remains constant over limited ranges of volumes of activity but shifts to another level when volume changes significantly.
 A business planning tool that helps managers predict how changes in costs and sales levels affect profit.
 A cost that remains unchanged in total amount despite variations in the volume of activity within a relevant range.

Accepted Answer

The Answer of Mixed cost and Fixed cost and Contribution is...

Question 15

Examining strategies that impact several estimates in the CVP analysis is known as ________.

Accepted Answer

sensitivit

Question 16

When graphing cost-volume-profit data on a CVP chart:

Accepted Answer

A)  Both units and costs are plotted on the horizontal axis. 
B)  Data points always represent expected future points. 
C)  Units are plotted on the horizontal axis; costs on the vertical axis. 
D)  Both units and cost are plotted on the vertical axis. 
E)  Units are plotted on the vertical axis; costs on the horizontal axis. 
A)  Both units and costs are plotted on the horizontal axis. 
B)  Data points always represent expected future points. 
C)  Units are plotted on the horizontal axis; costs on the vertical axis. 
D)  Both units and cost are plotted on the vertical axis. 
E)  Units are plotted on the vertical axis; costs on the horizontal axis.

Question 17

The absorption costing method is required for external financial reporting.

Accepted Answer

A) True 
 B)False

Question 18

A cost with a flat cost line within a relevant range that shifts to another level when volume significantly changes is a(n):

Accepted Answer

A)  Flat line cost. 
B)  Step-wise cost. 
C)  Curvilinear cost. 
D)  Incremental cost. 
E)  Fixed cost. 
A)  Flat line cost. 
B)  Step-wise cost. 
C)  Curvilinear cost. 
D)  Incremental cost. 
E)  Fixed cost.

Question 19

A firm sells two products, Regular and Ultra. For every unit of Regular the firm sells, 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. The contribution margin per composite unit is: Product
$\begin{array} { l r r r } 
& \text { Unit Sales } & \text { Variable Cost Per } \
\text { Product } & \text { Price } & \text { Unit } & \
\text { Regular } & \$ 20 & & \$ 8 \
\text { Ultra } & 24 & & 4
\end{array}$

Accepted Answer

A)  $52. 
B)  $32. 
C)  $20. 
D)  $12. 
E)  $44. 
A)  $52. 
B)  $32. 
C)  $20. 
D)  $12. 
E)  $44.

Question 20

The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. Compute the number of units that must be sold in order to achieve a target pretax income of $130,000.
$\begin{array}{ll}
\text { Sales $ (50,000 $ units)}&&\$1,000,000\
\text { Costs:}\
\text { Direct materials } & \$ 270,000 \
\text { Direct labor } & 240,000 \
\text { Fixed factory overhead } & 100,000 \
\text { Variable factory overhead } & 150,000 \
\text { Fixed marketing costs } & 110,000 \
\text { Variable marketing costs } &  \underline{50,000}& \underline{920,000} \
\text { Pretax income }&& \underline{\$80,000}
\end{array}$

Accepted Answer

A)  81,250. 
B)  50,000. 
C)  58,621. 
D)  53,165. 
E)  36,207. 
A)  81,250. 
B)  50,000. 
C)  58,621. 
D)  53,165. 
E)  36,207.

Exam 21: Cost-Volume-Profit Analysis

A cost that changes in proportion to changes in volume of activity is a(n):

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

Describe and compare the three cost estimation methods used to develop a cost equation.

Use the following information to determine the contribution margin ratio: Unit sales 50,000 Units Unit selling price \ 14.50 Unit variable cost \ 7.50 Fixed costs \ 204,000

The following information is available for a company's cost of sales over the last five months. Month Units sold Cost of sales January 400 31,00 February 800 37,000 March 1,600 49,000 April 2,400 61,000 - Using the high-low method, the estimated total fixed cost is:

What are the basic assumptions of CVP analysis with regard to variable cost, fixed cost, and selling price per unit? (Assume a single product).

In cost-volume-profit analysis, the unit contribution margin is:

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

The margin of safety is the excess of:

A target income refers to:

A company has fixed costs of $320,000 and a contribution margin per unit of $15. If the firm wants to earn a target $40,000 pretax income, how many units must be sold (rounded to the nearest whole unit)?

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

Examining strategies that impact several estimates in the CVP analysis is known as ________.

When graphing cost-volume-profit data on a CVP chart:

The absorption costing method is required for external financial reporting.

A cost with a flat cost line within a relevant range that shifts to another level when volume significantly changes is a(n):

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

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