Question 1

If a firm's forecasted sales are $250,000 and its break-even sales are $190,000, the margin of safety in dollars is:

Accepted Answer

A)  $60,000. 
B)  $250,000. 
C)  $440,000. 
D)  $24,000. 
E)  $190,000. 
A)  $60,000. 
B)  $250,000. 
C)  $440,000. 
D)  $24,000. 
E)  $190,000.

Question 2

The following information is available for a company's utility cost for operating its machines over the last four months. $\begin{array} { | l | r | r | } 
\hline \text { Month } & \text { Machine hours } & \text { Utility cost } \
\hline \text { January } & 900 & \$ 5,450 \
\hline \text { February } & 1,800 & \$ 6,900 \
\hline \text { March } & 2,400 & \$ 8,100 \
\hline \text { April } & 600 & \$ 3,600 \
\hline
\end{array}$
-
Using the high-low method, the estimated total fixed cost for utilities is:

Accepted Answer

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

Question 3

The method most likely to produce the most precise line of cost behavior and require the least amount of judgment is the scatter diagram.

Accepted Answer

A) True 
 B)False

Question 4

In Keegan Corporation's most recent fiscal year, the company reported pretax earnings of $215,000. Fixed costs totaled $325,800, the unit selling price of the firm's only product was $60, and the variable costs per unit were 40% of the selling price. Based on this information, the firm's break-even point in units was:

Accepted Answer

A)  8,750 units. 
B)  13,575 units. 
C)  9,050 units. 
D)  13,750 units. 
E)  15,023 units. 
A)  8,750 units. 
B)  13,575 units. 
C)  9,050 units. 
D)  13,750 units. 
E)  15,023 units.

Question 5

At Midland Company's break-even point of 9,000 units, fixed costs are $180,000 and variable costs are $540,000 in total. The unit sales price is:

Accepted Answer

A)  $60. 
B)  $20. 
C)  $80. 
D)  $100. 
E)  $40. 
A)  $60. 
B)  $20. 
C)  $80. 
D)  $100. 
E)  $40.

Question 6

A ________ cost is one that remains unchanged despite variations in the volume of activity within a relevant range. A ________ cost is one that changes in proportion to changes in volume of activity.

Accepted Answer

The answer of A ________ cost is one that remains...

Question 7

A method that estimates cost behavior by using just the highest and lowest volume levels is called the:

Accepted Answer

A)  High-low method. 
B)  Least-squares method. 
C)  Scatter method. 
D)  Break-even method. 
E)  Step-wise method. 
A)  High-low method. 
B)  Least-squares method. 
C)  Scatter method. 
D)  Break-even method. 
E)  Step-wise method.

Question 8

Benjamin Co. has three products A, B, and C, and its fixed costs are $69,000. The sales mix for its products are 3 units of A, 4 units of B, and 1 unit of C. Information about the three products follows:
A B C
 $$\begin{array} { l | l | l | l | l } 
\text { Projected sales in dollars..... } & \$ 192,000 & \$ 192,000 & \$ 64,000 \
\hline \text { Selling price per unit......... } & \$ 40 & \$ 30 & \$ 40 \
\hline \text { Contribution margin ratio ...... } & 30 \% & 35 \% & 35 \%
\end{array}$$ (a) Calculate the company's break-even point in composite units and sales dollars.
(b) Calculate the number of units of each individual product to be sold at the break-even point.

Accepted Answer

(a)
Break-even point in composite units

Question 9

Philadelphia Co. is considering the production and sale of a new product with the following sales and cost data: unit sales price, $300; unit variable costs, $180; total fixed costs, $270,000; and projected sales, $900,000. What is the margin of safety:
(a) In dollar sales? And (b) As a percent of sales?

Accepted Answer

Contribution margin ratio @#LAT-DLM& Breakeven poi

Question 10

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000. 
-Flannigan Company 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)  $2,991,004. 
B)  $3,378,378. 
C)  $4,812,500. 
D)  $2,612,613. 
E)  $5,640,000. 
A)  $2,991,004. 
B)  $3,378,378. 
C)  $4,812,500. 
D)  $2,612,613. 
E)  $5,640,000.

Question 11

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

Question 12

A product sells for $200 per unit, and its variable costs per unit are $130. The fixed costs are $420,000. If the firm wants to earn $35,000 pretax income, how many units must be sold?

Accepted Answer

A)  5,500. 
B)  6,500. 
C)  5,000. 
D)  6,000. 
E)  500. 
A)  5,500. 
B)  6,500. 
C)  5,000. 
D)  6,000. 
E)  500.

Question 13

Fielder Productions reports the following information:
Total Contribution Margin…………………..$32,000 Total Fixed Costs……………………………. $28,000
Required:
(a) Calculate Fielder's degree of operating leverage (DOL).
(b) Fielder Productions forecasts a 6% increase in sales. What is the expected effect in percent on pretax income?

Accepted Answer

\[\begin{array} { l | l | l } 
\text { (

Question 14

Cost-volume-profit analysis can be used to compute expected income from predicted sales and cost levels.

Accepted Answer

A) True 
 B)False

Question 15

While the total amount of fixed cost remains constant with the level of production, fixed cost per
unit changes as volume changes.

Accepted Answer

A) True 
 B)False

Question 16

Isaacson Co. has total fixed costs of $240,000 and a contribution margin ratio of 40%. If rent expense increases by $5,000, how much will total sales revenue have to increase to cover this increase in costs?

Accepted Answer

To cover the cost increase, the increase

Question 17

Kent Manufacturing produces a product that sells for $50.00 and has variable costs of $24.00 per unit. Fixed costs are $260,000. Kent can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. 
-Compute the contribution margin per unit if the machine is purchased.

Accepted Answer

A)  $26.00. 
B)  $22.50. 
C)  $28.50. 
D)  $29.50. 
E)  $27.50. 
A)  $26.00. 
B)  $22.50. 
C)  $28.50. 
D)  $29.50. 
E)  $27.50.

Question 18

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500.
- Compute the break-even point in composite units.

Accepted Answer

A)  1,395. 
B)  1,550. 
C)  2,092. 
D)  3,805. 
E)  1,350. 
A)  1,395. 
B)  1,550. 
C)  2,092. 
D)  3,805. 
E)  1,350.

Question 19

What is the high-low method? Briefly describe how it is applied.

Accepted Answer

The high-low method is a way to estimate

Question 20

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

If a firm's forecasted sales are $250,000 and its break-even sales are $190,000, the margin of safety in dollars is:

The method most likely to produce the most precise line of cost behavior and require the least amount of judgment is the scatter diagram.

At Midland Company's break-even point of 9,000 units, fixed costs are $180,000 and variable costs are $540,000 in total. The unit sales price is:

A cost is one that remains unchanged despite variations in the volume of activity within a relevant range. A cost is one that changes in proportion to changes in volume of activity.

A method that estimates cost behavior by using just the highest and lowest volume levels is called the:

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:

A product sells for $200 per unit, and its variable costs per unit are $130. The fixed costs are $420,000. If the firm wants to earn $35,000 pretax income, how many units must be sold?

Cost-volume-profit analysis can be used to compute expected income from predicted sales and cost levels.

While the total amount of fixed cost remains constant with the level of production, fixed cost per unit changes as volume changes.

Isaacson Co. has total fixed costs of $240,000 and a contribution margin ratio of 40%. If rent expense increases by $5,000, how much will total sales revenue have to increase to cover this increase in costs?

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. - Compute the break-even point in composite units.

What is the high-low method? Briefly describe how it is applied.

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

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

Exam 21: Cost-Volume-Profit Analysis

If a firm's forecasted sales are $250,000 and its break-even sales are $190,000, the margin of safety in dollars is:

The method most likely to produce the most precise line of cost behavior and require the least amount of judgment is the scatter diagram.

At Midland Company's break-even point of 9,000 units, fixed costs are $180,000 and variable costs are $540,000 in total. The unit sales price is:

A ________ cost is one that remains unchanged despite variations in the volume of activity within a relevant range. A ________ cost is one that changes in proportion to changes in volume of activity.

A method that estimates cost behavior by using just the highest and lowest volume levels is called the:

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:

A product sells for $200 per unit, and its variable costs per unit are $130. The fixed costs are $420,000. If the firm wants to earn $35,000 pretax income, how many units must be sold?

Cost-volume-profit analysis can be used to compute expected income from predicted sales and cost levels.

While the total amount of fixed cost remains constant with the level of production, fixed cost per unit changes as volume changes.

Isaacson Co. has total fixed costs of $240,000 and a contribution margin ratio of 40%. If rent expense increases by $5,000, how much will total sales revenue have to increase to cover this increase in costs?

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. - Compute the break-even point in composite units.

What is the high-low method? Briefly describe how it is applied.

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

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

A cost is one that remains unchanged despite variations in the volume of activity within a relevant range. A cost is one that changes in proportion to changes in volume of activity.