Question 1

Which of the following will increase a company's breakeven point?

Accepted Answer

A) increasing variable cost per unit 
B) increasing contribution margin per unit 
C) reducing its total fixed costs 
D) increasing the selling price per unit 
A) increasing variable cost per unit 
B) increasing contribution margin per unit 
C) reducing its total fixed costs 
D) increasing the selling price per unit

Question 2

Jacob's Manufacturing sales is equal to production. If Jacob's Manufacturing presented a Financial Accounting Income Statement emphasizing gross margin showing operating income of $180,000, a Contribution Income Statement emphasizing contribution margin would show a different operating income.

Accepted Answer

A) True 
 B)False

Question 3

If contribution margin decreases by $1 per unit, then operating profits will increase by $1 per unit.

Accepted Answer

A) True 
 B)False

Question 4

Passenger-miles are a potential measure of output for the airline industry.

Accepted Answer

A) True 
 B)False

Question 5

Contribution margin and gross margin are terms that can be used interchangeably.

Accepted Answer

A) True 
 B)False

Question 6

If breakeven point is 1,000 units, each unit sells for $30, and fixed costs are $10,000, then on a graph the:

Accepted Answer

A) total revenue line and the total cost line will intersect at $30,000 of revenue 
B) total cost line will be zero at zero units sold 
C) revenue line will start at $10,000 
D) All of these answers are correct. 
A) total revenue line and the total cost line will intersect at $30,000 of revenue 
B) total cost line will be zero at zero units sold 
C) revenue line will start at $10,000 
D) All of these answers are correct.

Question 7

Operating income calculations use:

Accepted Answer

A) net income 
B) income tax expense 
C) cost of goods sold and operating costs 
D) nonoperating revenues and nonoperating expenses 
A) net income 
B) income tax expense 
C) cost of goods sold and operating costs 
D) nonoperating revenues and nonoperating expenses

Question 8

If the breakeven point is 1,000 units and each unit sells for $50, then:

Accepted Answer

A) selling 1,250 units will result in a profit 
B) sales of $40,000 will result in a loss 
C) sales of $50,000 will result in zero profit 
D) All of these answers are correct. 
A) selling 1,250 units will result in a profit 
B) sales of $40,000 will result in a loss 
C) sales of $50,000 will result in zero profit 
D) All of these answers are correct.

Question 9

Answer the following questions using the information below:
Sherry's Custom Jewelry sells a single product. 700 units were sold resulting in $7,000 of sales revenue, $2,800 of variable costs, and $1,200 of fixed costs.
-Contribution margin per unit is:

Accepted Answer

A) $4.00 
B) $4.29 
C) $6.00 
D) None of these answers are correct. 
A) $4.00 
B) $4.29 
C) $6.00 
D) None of these answers are correct.

Question 10

Answer the following questions using the information below:
Ruben intends to sell his customers a special round-trip airline ticket package. He is able to purchase the package from the airline carrier for $150 each. The round-trip tickets will be sold for $200 each and the airline intends to reimburse Ruben for any unsold ticket packages. Fixed costs include $5,000 in advertising costs.
-For every $25,000 of ticket packages sold, operating income will increase by:

Accepted Answer

A) $6,250 
B) $12,500 
C) $18,750 
D) an indeterminable amount 
A) $6,250 
B) $12,500 
C) $18,750 
D) an indeterminable amount

Question 11

Answer the following questions using the information below:
The following information is for Barnett Corporation:
      
-If the sales mix shifts to one unit of Product X and two units of Product Y, then the weighted-average contribution margin will:

Accepted Answer

A) increase per unit 
B) stay the same 
C) decrease per unit 
D) be indeterminable 
A) increase per unit 
B) stay the same 
C) decrease per unit 
D) be indeterminable

Question 12

Answer the following questions using the information below:
Dr. Charles Hunter, MD, performs a certain outpatient procedure for $1,000. His fixed costs are $20,000, while his variable costs are $500 per procedure. Dr. Hunter currently plans to perform 200 procedures this month.
-What is the budgeted operating income for the month assuming that Dr. Hunter plans to perform the procedure 200 times?

Accepted Answer

A) $200,000 
B) $100,000 
C) $80,000 
D) $40,000 
A) $200,000 
B) $100,000 
C) $80,000 
D) $40,000

Question 13

A revenue driver is defined as a variable that causes changes in prices.

Accepted Answer

A) True 
 B)False

Question 14

If planned net income is $30,000 and the tax rate is 30%, then planned operating income would be $39,000.

Accepted Answer

A) True 
 B)False

Question 15

Answer the following questions using the information below:
The following information is for Nichols Company:
  
-If targeted operating income is $40,000, then targeted sales revenue is:

Accepted Answer

A) $350,000 
B) $233,333 
C) $166,667 
D) $250,000 
A) $350,000 
B) $233,333 
C) $166,667 
D) $250,000

Question 16

In a company with low operating leverage:

Accepted Answer

A) fixed costs are high and variable costs are low 
B) large changes in sales volume result in small changes in net income 
C) there is a higher possibility of net loss than a higher-leveraged firm 
D) less risk is assumed than in a highly leveraged firm 
A) fixed costs are high and variable costs are low 
B) large changes in sales volume result in small changes in net income 
C) there is a higher possibility of net loss than a higher-leveraged firm 
D) less risk is assumed than in a highly leveraged firm

Question 17

The selling price per unit is $25, variable cost per unit $15, and fixed cost per unit is $4. When this company operates above the breakeven point, the sale of one more unit will increase net income by $6.

Accepted Answer

A) True 
 B)False

Question 18

In multiproduct situations when sales mix shifts toward the product with the highest contribution margin, operating income will be higher.

Accepted Answer

A) True 
 B)False

Question 19

Whether the purchase cost of a machine is treated as fixed or variable depends heavily on the time horizon being considered.

Accepted Answer

A) True 
 B)False

Question 20

Assume only the specified parameters change in a cost-volume-profit analysis. If the contribution margin increases by $6 per unit, then operating profits will:

Accepted Answer

A) also increase by $6 per unit 
B) increase by less than $6 per unit 
C) decrease by $6 per unit 
D) be indeterminable 
A) also increase by $6 per unit 
B) increase by less than $6 per unit 
C) decrease by $6 per unit 
D) be indeterminable

Exam 3: Cost-Volume-Profit Analysis

Which of the following will increase a company's breakeven point?

Jacob's Manufacturing sales is equal to production. If Jacob's Manufacturing presented a Financial Accounting Income Statement emphasizing gross margin showing operating income of $180,000, a Contribution Income Statement emphasizing contribution margin would show a different operating income.

If contribution margin decreases by $1 per unit, then operating profits will increase by $1 per unit.

Passenger-miles are a potential measure of output for the airline industry.

Contribution margin and gross margin are terms that can be used interchangeably.

If breakeven point is 1,000 units, each unit sells for $30, and fixed costs are $10,000, then on a graph the:

Operating income calculations use:

If the breakeven point is 1,000 units and each unit sells for $50, then:

Answer the following questions using the information below: Sherry's Custom Jewelry sells a single product. 700 units were sold resulting in $7,000 of sales revenue, $2,800 of variable costs, and $1,200 of fixed costs. -Contribution margin per unit is:

Answer the following questions using the information below: The following information is for Barnett Corporation: -If the sales mix shifts to one unit of Product X and two units of Product Y, then the weighted-average contribution margin will:

A revenue driver is defined as a variable that causes changes in prices.

If planned net income is $30,000 and the tax rate is 30%, then planned operating income would be $39,000.

Answer the following questions using the information below: The following information is for Nichols Company: -If targeted operating income is $40,000, then targeted sales revenue is:

In a company with low operating leverage:

The selling price per unit is $25, variable cost per unit $15, and fixed cost per unit is $4. When this company operates above the breakeven point, the sale of one more unit will increase net income by $6.

In multiproduct situations when sales mix shifts toward the product with the highest contribution margin, operating income will be higher.

Whether the purchase cost of a machine is treated as fixed or variable depends heavily on the time horizon being considered.

Assume only the specified parameters change in a cost-volume-profit analysis. If the contribution margin increases by $6 per unit, then operating profits will:

The Accountants Role in the Organization

An Introduction to Cost Terms and Purposes

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

Inventory Management, Just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

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