Question 1

Sales total $200,000 when variable costs total $150,000 and fixed costs total $30,000. The break-even point in sales dollars is

Accepted Answer

A)  $200,000. 
B)  $120,000. 
C)  $40,000. 
D)  $30,000. 
E)  $180,000. 
A)  $200,000. 
B)  $120,000. 
C)  $40,000. 
D)  $30,000. 
E)  $180,000.

Question 2

The Holiday Card Company, a producer of specialty cards, has asked you to complete several
calculations based upon the following information:
   Required:
a. What is the break-even point in cards?
b. What sales volume is needed to earn an after-tax net income of $13,028.40?
c. How many cards must be sold to earn an after-tax net income of $18,480?

Accepted Answer

a. $46,200/($6.60 - $5.28) = 3

Question 3

Changes in product quality could be considered an example of a revenue driver.

Accepted Answer

A) True 
 B)False

Question 4

Companies with a greater proportion of fixed costs have a greater risk of loss from changes in demand than companies with a greater proportion of variable costs.

Accepted Answer

A) True 
 B)False

Question 5

What is the budgeted contribution margin assuming the procedure is performed 200 times?

Accepted Answer

A)  $20,000 
B)  $30,000 
C)  $8,000 
D)  $80,000 
E)  $40,000 
A)  $20,000 
B)  $30,000 
C)  $8,000 
D)  $80,000 
E)  $40,000

Question 6

Information Inc., sells accounting software. Each unit's cost may be separated as follows: selling price of $100 and variable costs of $30. Fixed costs are $10,000. What is Information Inc.'s operating income assuming 1,000 units are sold?

Accepted Answer

A)  $100,000 
B)  $90,000 
C)  $60,000 
D)  $40,000 
E)  $20,000 
A)  $100,000 
B)  $90,000 
C)  $60,000 
D)  $40,000 
E)  $20,000

Question 7

Which of the following statements is true concerning operating leverage?

Accepted Answer

A)  It summarizes the risk-return tradeoff across alternate revenue possibilities. 
B)  It measures the change in operating income when costs change proportionately with the change in the number of units sold. 
C)  The degree of operating leverage increases inversely to the number of units sold. 
D)  The degree of operating leverage remains constant (in the relevant range) when there is a change in the number of units sold. 
E)  The degree of operating leverage equals contribution margin divided by operating income, at any specific sales level. 
A)  It summarizes the risk-return tradeoff across alternate revenue possibilities. 
B)  It measures the change in operating income when costs change proportionately with the change in the number of units sold. 
C)  The degree of operating leverage increases inversely to the number of units sold. 
D)  The degree of operating leverage remains constant (in the relevant range) when there is a change in the number of units sold. 
E)  The degree of operating leverage equals contribution margin divided by operating income, at any specific sales level.

Question 8

To calculate the break-even point in a multi-product situation, one must assume that the sales mix of the various products remains constant.

Accepted Answer

A) True 
 B)False

Question 9

Events, as distinguished from actions, would include

Accepted Answer

A)  personnel policy options. 
B)  decisions on time schedules. 
C)  decisions on direct material vendors. 
D)  a financial recession. 
E)  price changes of the company's products. 
A)  personnel policy options. 
B)  decisions on time schedules. 
C)  decisions on direct material vendors. 
D)  a financial recession. 
E)  price changes of the company's products.

Question 10

What is the margin of safety assuming the procedure is performed 200 times?

Accepted Answer

A)  $80,000 
B)  $64,000 
C)  $40,000 
D)  $32,000 
E)  $16,000 
A)  $80,000 
B)  $64,000 
C)  $40,000 
D)  $32,000 
E)  $16,000

Question 11

Use the information below to answer the following question(s).
The following information is for Winnie Company:
  
-What is the break-even point assuming the sales mix consists of two units of Product A and one unit of Product B?

Accepted Answer

A)  2,000 units of B and 4,000 units of A 
B)  2,025 units of B and 4,050 units of A 
C)  4,025 units of B and 8,050 units of A 
D)  4,000 units of B and 4,000 units of A 
E)  4,000 units of B and 8,000 units of A 
A)  2,000 units of B and 4,000 units of A 
B)  2,025 units of B and 4,050 units of A 
C)  4,025 units of B and 8,050 units of A 
D)  4,000 units of B and 4,000 units of A 
E)  4,000 units of B and 8,000 units of A

Question 12

Which of the following factors would be relevant in classifying costs as fixed or variable in a specific decision situation?

Accepted Answer

A)  if the time horizon is short or long 
B)  the relevant range of the next best alternative situation 
C)  the mix of revenues 
D)  the sales mix 
E)  if the time horizon is shorter in another alternative 
A)  if the time horizon is short or long 
B)  the relevant range of the next best alternative situation 
C)  the mix of revenues 
D)  the sales mix 
E)  if the time horizon is shorter in another alternative

Question 13

Pennsylvania Valve Company makes three types of valves: Speedy Flow, Sure Flow, and Fine Flow. Each of the three products has a different contribution margin, and the proportions of the three products sold have remained steady over the years. How could Pennsylvania valve compute a break-even point given this situation?

Accepted Answer

Pennsylvania Valve could consider that i

Question 14

Answer the following question(s) using the information below.
The following information is for the Jeffries Corporation:
  
-If the sales mix shifts to four units of Product A and one unit of Product B, then the weighted-average contribution margin will be

Accepted Answer

A)  $30. 
B)  $16. 
C)  $20. 
D)  $12. 
E)  $24. 
A)  $30. 
B)  $16. 
C)  $20. 
D)  $12. 
E)  $24.

Question 15

What is the budgeted revenue assuming the procedure is performed 200 times?

Accepted Answer

A)  $40,000 
B)  $80,000 
C)  $120,000 
D)  $160,000 
E)  $320,000 
A)  $40,000 
B)  $80,000 
C)  $120,000 
D)  $160,000 
E)  $320,000

Question 16

Answer the following question(s) using the information below.
Southwestern College is planning to hold a fund raising banquet at one of the local country clubs. It has two options for the banquet:
   Southwestern College has budgeted $1,800 for administrative and marketing expenses. It plans to hire a band which will cost another $800. Tickets are expected to be $30 per person. Local business supporters will donate any other items required for the event.
-What is the degree of operating leverage for both options if 600 people attend?

Accepted Answer

A)  1.37 and 1.75 times respectively 
B)  1.5 times and 1.74 times respectively 
C)  1.10 and 1.29 times respectively 
D)  0.75 and 1.07 times respectively 
E)  Operating leverage is indeterminable. 
A)  1.37 and 1.75 times respectively 
B)  1.5 times and 1.74 times respectively 
C)  1.10 and 1.29 times respectively 
D)  0.75 and 1.07 times respectively 
E)  Operating leverage is indeterminable.

Question 17

What is meant by the term break-even point? Why should a manager be concerned about the break-even point?

Accepted Answer

The break-even point is the level of pro

Question 18

Use the information below to answer the following question(s).
Big Sports University is planning to hold a fund raising banquet at one of the local country clubs. It has two options for the banquet:
1. Foothills Country Club
   2. Downhill Country Club
   Big Sports has budgeted $900 for administrative and marketing expenses. It plans to hire a band, which will cost another $400. Tickets are expected to be $40 per person. Any other items required for the event will be donated by its local business supporters.
-What is the "operating income" assuming 250 people attend and option one is chosen?

Accepted Answer

A)  $4,400 
B)  $4,350 
C)  $4,000 
D)  $6,250 
E)  $4,750 
A)  $4,400 
B)  $4,350 
C)  $4,000 
D)  $6,250 
E)  $4,750

Question 19

Total revenues less total fixed costs equal the contribution margin.

Accepted Answer

A) True 
 B)False

Question 20

Query Company sells pillows for $25.00 each. The manufacturing cost, all variable, is $10 per pillow. The company is planning on renting an exhibition booth at the annual crafts and art convention. The convention coordinator allows three options for each participating company. They are:
1. paying a fixed booth fee of $5,010, or;
2. paying an $4,000 fee plus 10% of revenue made at the convention, or;
3. paying 20% of revenue made at the convention.
Required:
a. Compute the break-even sales in pillows of each option.
b. Which option should Query Company choose, assuming sales are expected to be 800 pillows?
c. Calculate the margin of safety for Option 1 if sales are expected to be 300 pillows.

Accepted Answer

a. Option 1 N = Break-even in

Sales total $200,000 when variable costs total $150,000 and fixed costs total $30,000. The break-even point in sales dollars is

Changes in product quality could be considered an example of a revenue driver.

Companies with a greater proportion of fixed costs have a greater risk of loss from changes in demand than companies with a greater proportion of variable costs.

What is the budgeted contribution margin assuming the procedure is performed 200 times?

Information Inc., sells accounting software. Each unit's cost may be separated as follows: selling price of $100 and variable costs of $30. Fixed costs are $10,000. What is Information Inc.'s operating income assuming 1,000 units are sold?

Which of the following statements is true concerning operating leverage?

To calculate the break-even point in a multi-product situation, one must assume that the sales mix of the various products remains constant.

Events, as distinguished from actions, would include

What is the margin of safety assuming the procedure is performed 200 times?

Use the information below to answer the following question(s). The following information is for Winnie Company: -What is the break-even point assuming the sales mix consists of two units of Product A and one unit of Product B?

Which of the following factors would be relevant in classifying costs as fixed or variable in a specific decision situation?

Answer the following question(s) using the information below. The following information is for the Jeffries Corporation: -If the sales mix shifts to four units of Product A and one unit of Product B, then the weighted-average contribution margin will be

What is the budgeted revenue assuming the procedure is performed 200 times?

What is meant by the term break-even point? Why should a manager be concerned about the break-even point?

Total revenues less total fixed costs equal the contribution margin.

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Flexible Budgets, Variances, and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Quantitative Analyses of Cost Functions

Decision Making and Relevant Information

Pricing Decisions, Product Profitability Decisions, and Cost Management

Strategy, Balanced Scorecard, and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, Rework, and Scrap

Cost Management: Quality, Time, and the Theory of Constraints

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Capital Budgeting: a Closer Look

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

Exam 3: Cost-Volume-Profit Analysis

Sales total $200,000 when variable costs total $150,000 and fixed costs total $30,000. The break-even point in sales dollars is

Changes in product quality could be considered an example of a revenue driver.

Companies with a greater proportion of fixed costs have a greater risk of loss from changes in demand than companies with a greater proportion of variable costs.

What is the budgeted contribution margin assuming the procedure is performed 200 times?

Information Inc., sells accounting software. Each unit's cost may be separated as follows: selling price of $100 and variable costs of $30. Fixed costs are $10,000. What is Information Inc.'s operating income assuming 1,000 units are sold?

Which of the following statements is true concerning operating leverage?

To calculate the break-even point in a multi-product situation, one must assume that the sales mix of the various products remains constant.

Events, as distinguished from actions, would include

What is the margin of safety assuming the procedure is performed 200 times?

Use the information below to answer the following question(s). The following information is for Winnie Company: -What is the break-even point assuming the sales mix consists of two units of Product A and one unit of Product B?

Which of the following factors would be relevant in classifying costs as fixed or variable in a specific decision situation?

Answer the following question(s) using the information below. The following information is for the Jeffries Corporation: -If the sales mix shifts to four units of Product A and one unit of Product B, then the weighted-average contribution margin will be

What is the budgeted revenue assuming the procedure is performed 200 times?

What is meant by the term break-even point? Why should a manager be concerned about the break-even point?

Total revenues less total fixed costs equal the contribution margin.

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Flexible Budgets, Variances, and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Quantitative Analyses of Cost Functions

Decision Making and Relevant Information

Pricing Decisions, Product Profitability Decisions, and Cost Management

Strategy, Balanced Scorecard, and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, Rework, and Scrap

Cost Management: Quality, Time, and the Theory of Constraints

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Capital Budgeting: a Closer Look

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters