Question 1

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

Accepted Answer

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

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

During its most recent fiscal year, Dover, Inc. had total sales of $3,200,000. Contribution margin amounted to $1,500,000 and pretax income was $400,000.
- What amount should have been reported as fixed costs in the company's contribution margin income statement for the year in question?

Accepted Answer

A)  $1,900,000. 
B)  $2,800,000. 
C)  $1,100,000. 
D)  $1,300,000. 
E)  $1,700,000. 
A)  $1,900,000. 
B)  $2,800,000. 
C)  $1,100,000. 
D)  $1,300,000. 
E)  $1,700,000.

Question 4

Shown below are terms or phrases preceded by letters a through j followed by a list of definitions. Match the terms or phrases 1 through 10 with the correct definitions by placing the letter of the term or phrase in the answer space provided at the beginning of each definition.
(a) Mixed cost
(b) Fixed cost
(c) Contribution margin per unit
(d) Curvilinear cost
(e) Variable cost
(f) Step-wise cost
(g) Relevant range of operations
(h) Estimated line of cost behavior
(i) Least-squares regression
(j) Cost-volume-profit analysis
________ (1) The amount that the sale of one unit contributes toward covering fixed costs and generating profit.
________ (2) A cost that changes in total in proportion to changes in volume of activity.
________ (3) A cost that includes both fixed and variable cost components.
________ (4) A cost that changes as volume changes, but at a nonconstant rate.
________ (5) A line drawn on a graph to fit the relation between cost and unit volume.
________ (6) A statistical method for identifying cost behavior that is more precise than the high-low method and a scatter diagram.
________ (7) A company's normal operating range of production volume; excludes extremely high and low operating levels that are unlikely to recur.
________ (8) A cost that remains constant over limited ranges of volumes of activity but shifts to another level when volume changes significantly.
________ (9) A business planning tool that helps managers predict how changes in costs and sales levels affect profit.
________ (10) A cost that remains unchanged in total amount despite variations in the volume of activity within a relevant range.

Accepted Answer

1. C; 2. E; 3. A; 4.

Question 5

A cost that includes both fixed and variable cost components is called a:

Accepted Answer

A)  Step-variable cost. 
B)  Mixed cost. 
C)  Curvilinear cost. 
D)  Differential cost. 
E)  Composite cost. 
A)  Step-variable cost. 
B)  Mixed cost. 
C)  Curvilinear cost. 
D)  Differential cost. 
E)  Composite cost.

Question 6

The following information describes a product expected to be produced and sold by Quark Corporation:
$\begin{array}{llr}
  \text {  Selling price} & \text {\$ 33 per unit  } \
 \text {Variable costs  } & \text { \$ 27 per unit } \
 \text { Total Fixed costs  } & \text {\$ 855,000 per year  } 
\end{array}$

Required:
(a) Calculate the contribution margin per unit.
(b) Calculate the break-even point in units.

Accepted Answer

(a) Contribution margin = $33

Question 7

Fuschia Company's contribution margin per unit is $12. Total fixed costs are $84,000. What is Fuschia's break-even point in units?

Accepted Answer

A)  5,760. 
B)  7,000. 
C)  26,520. 
D)  70,000. 
E)  57,600. 
A)  5,760. 
B)  7,000. 
C)  26,520. 
D)  70,000. 
E)  57,600.

Question 8

The proportion of sales volumes for various products in a multiproduct company is known as the sales mix.

Accepted Answer

A) True 
 B)False

Question 9

Use the following information to determine the break-even point in units (rounded to the nearest whole unit):$\begin{array} { | l | r | } 
\hline \text { Unit sales } & 50.000 \text { Unit } \
\hline \text { Units selling price } & \$ 14.50 \
\hline \text { Unit variable cost } & \$ 7.50 \
\hline \text { Fixed costs } & \$ 185,000 \
\hline
\end{array}$

Accepted Answer

A)  46,667 
B)  8,455 
C)  12,828 
D)  24,800 
E)  26,571 
A)  46,667 
B)  8,455 
C)  12,828 
D)  24,800 
E)  26,571

Question 10

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 number of units of Product A McCoy must sell to break even.

Accepted Answer

A)  2,700. 
B)  6,750. 
C)  1,350. 
D)  6,200. 
E)  10,463. 
A)  2,700. 
B)  6,750. 
C)  1,350. 
D)  6,200. 
E)  10,463.

Question 11

Barclay Enterprises 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 break-even point in composite units (rounded to the nearest whole unit).

Accepted Answer

A)  7,575 composite units. 
B)  429 composite units. 
C)  15,150 composite units. 
D)  858 composite units. 
E)  6,161 composite units. 
A)  7,575 composite units. 
B)  429 composite units. 
C)  15,150 composite units. 
D)  858 composite units. 
E)  6,161 composite units.

Question 12

A company manufactures and sells searchlights. Each searchlight sells for $345. The variable cost per unit is $198, and the company's total fixed costs are $635,000. Predicted sales are 15,000 units. What is the contribution margin per unit?

Accepted Answer

Contributi

Question 13

A cost-volume-profit (CVP) chart is a graph that plots number of units produced on the horizontal axis and dollars of costs and sales on the vertical axis.

Accepted Answer

A) True 
 B)False

Question 14

Under absorption costing, fixed overhead costs are excluded from product costs.

Accepted Answer

A) True 
 B)False

Question 15

Kent Manufacturing produces a product that sells for $50.00. Fixed costs are $260,000 and variable costs are $24.00 per unit. 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. 
-What effect would the purchase of the new machine have on Kent's break-even point in units?

Accepted Answer

A)  800 unit decrease. 
B)  4,444 unit decrease. 
C)  5,714 unit increase. 
D)  No effect on the break-even point in units. 
E)  800 unit increase. 
A)  800 unit decrease. 
B)  4,444 unit decrease. 
C)  5,714 unit increase. 
D)  No effect on the break-even point in units. 
E)  800 unit increase.

Question 16

The difference between sales price per unit and variable cost per unit is the:

Accepted Answer

A)  Gross margin per unit. 
B)  Contribution margin per unit. 
C)  Fixed cost per unit. 
D)  Gross profit from sales. 
E)  Margin of safety per unit. 
A)  Gross margin per unit. 
B)  Contribution margin per unit. 
C)  Fixed cost per unit. 
D)  Gross profit from sales. 
E)  Margin of safety per unit.

Question 17

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 break-even point in composite units for the current sales mix (round to the nearest unit) is:

Accepted Answer

A)  102,000 
B)  20,000 
C)  34,000 
D)  17,000 
E)  51,000 
A)  102,000 
B)  20,000 
C)  34,000 
D)  17,000 
E)  51,000

Question 18

Clockworks Co. reports the following data for the current year: $\begin{array} { l r } 
\text { Units Sold } & 1,200 \
\text { Unit Sales Price } & \$ 30 \
\text { Unit Variable Cost } & \$ 10 \
\text { Total Fixed Cost } & \$ 18,000
\end{array}$
Required:
(a) Calculate Clockworks' pretax income.
(b) Calculate Clockworks' degree of operating leverage.

Accepted Answer

(a)
Sales (1,200 units * $30 each) $36,0

Question 19

On a typical cost-volume-profit graph, unit sales are shown on the horizontal axis and both dollars of sales and dollars of costs are represented on the vertical axis.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

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

Exam 21: Cost-Volume-Profit Analysis

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

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

During its most recent fiscal year, Dover, Inc. had total sales of $3,200,000. Contribution margin amounted to $1,500,000 and pretax income was $400,000. - What amount should have been reported as fixed costs in the company's contribution margin income statement for the year in question?

A cost that includes both fixed and variable cost components is called a:

The following information describes a product expected to be produced and sold by Quark Corporation: Selling price \ 33 per unit Variable costs \ 27 per unit Total Fixed costs \ 855,000 per year Required: (a) Calculate the contribution margin per unit. (b) Calculate the break-even point in units.

Fuschia Company's contribution margin per unit is $12. Total fixed costs are $84,000. What is Fuschia's break-even point in units?

The proportion of sales volumes for various products in a multiproduct company is known as the sales mix.

Use the following information to determine the break-even point in units (rounded to the nearest whole unit): Unit sales 50.000 Unit Units selling price \ 14.50 Unit variable cost \ 7.50 Fixed costs \ 185,000

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 number of units of Product A McCoy must sell to break even.

A company manufactures and sells searchlights. Each searchlight sells for $345. The variable cost per unit is $198, and the company's total fixed costs are $635,000. Predicted sales are 15,000 units. What is the contribution margin per unit?

A cost-volume-profit (CVP) chart is a graph that plots number of units produced on the horizontal axis and dollars of costs and sales on the vertical axis.

Under absorption costing, fixed overhead costs are excluded from product costs.

The difference between sales price per unit and variable cost per unit is the:

Clockworks Co. reports the following data for the current year: Units Sold 1,200 Unit Sales Price \ 30 Unit Variable Cost \ 10 Total Fixed Cost \ 18,000 Required: (a) Calculate Clockworks' pretax income. (b) Calculate Clockworks' degree of operating leverage.

On a typical cost-volume-profit graph, unit sales are shown on the horizontal axis and both dollars of sales and dollars of costs are represented on the vertical axis.

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

Accounting in Business

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Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

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Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

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Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

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Present and Future Values in Accounting

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