Question 1

If a company can produce and sell 500 units at $10 each and its variable costs are $6 per unit, expected profit using the profit equation will be $2,000.

Accepted Answer

A) True 
 B)False

Question 2

SXF Corporation sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows: Point B is best described as

Accepted Answer

A)  Fixed cost 
B)  Margin of safety 
C)  Estimated profit at actual volume 
D)  Breakeven point 
A)  Fixed cost 
B)  Margin of safety 
C)  Estimated profit at actual volume 
D)  Breakeven point

Question 3

Assumptions and limitations are irrelevant when using CVP analysis.

Accepted Answer

A) True 
 B)False

Question 4

When the assumption of linearity is applied to revenue in CVP analyses

Accepted Answer

A)  Fixed cost per unit increases as revenue decreases 
B)  Variable cost per unit is linear with respect to total revenue 
C)  The sales mix and all of the prices remain constant 
D)  The sales mix remains constant, but prices decrease as volumes increase 
A)  Fixed cost per unit increases as revenue decreases 
B)  Variable cost per unit is linear with respect to total revenue 
C)  The sales mix and all of the prices remain constant 
D)  The sales mix remains constant, but prices decrease as volumes increase

Question 5

The breakeven point for a service organisation will decrease if

Accepted Answer

A)  Volume increases 
B)  The variable cost ratio decreases 
C)  Fixed costs increase 
D)  The contribution margin ratio decreases 
A)  Volume increases 
B)  The variable cost ratio decreases 
C)  Fixed costs increase 
D)  The contribution margin ratio decreases

Question 6

At the breakeven point

Accepted Answer

A)  Sales will be equal to variable costs plus target profit 
B)  Sales will be equal to variable costs plus fixed costs 
C)  Sales will be equal to fixed costs plus target profit 
D)  Fixed costs will be equal to variable costs 
A)  Sales will be equal to variable costs plus target profit 
B)  Sales will be equal to variable costs plus fixed costs 
C)  Sales will be equal to fixed costs plus target profit 
D)  Fixed costs will be equal to variable costs

Question 7

Howe Hinges manufactures and sells a single product. This product has the following operational data:

Accepted Answer

A)  $365,000 
B)  $547,500 
C)  $630,000 
D)  $447,500 
A)  $365,000 
B)  $547,500 
C)  $630,000 
D)  $447,500

Question 8

The Nunn Co. produces a single product. Its cost structure is:   If the firm sells 5,000 units per period, what price should be charged to earn $35,000?

Accepted Answer

A)  $44 
B)  $45 
C)  $50 
D)  $51 
A)  $44 
B)  $45 
C)  $50 
D)  $51

Question 9

Nelson Co. incurs $568,000 in fixed costs while producing three products with the following characteristics:   What is the selling price of Product T?

Accepted Answer

A)  $1,200 
B)  $1,143 
C)  $2,000 
D)  $1,500 
A)  $1,200 
B)  $1,143 
C)  $2,000 
D)  $1,500

Question 10

Which of the following is not an assumption in CVP analysis?

Accepted Answer

A)  Actual costs will be exactly the amount that we predict in the analysis 
B)  Operations are within the relevant range 
C)  The revenue function is linear 
D)  The cost function is linear 
A)  Actual costs will be exactly the amount that we predict in the analysis 
B)  Operations are within the relevant range 
C)  The revenue function is linear 
D)  The cost function is linear

Question 11

The assumption of cost function linearity means I Fixed costs remain fixed.
II Sales mix remains constant.
III The average cost per unit remains constant.

Accepted Answer

A)  I only 
B)  I and II only 
C)  I, II, and III 
D)  III only 
A)  I only 
B)  I and II only 
C)  I, II, and III 
D)  III only

Question 12

When an organisation produces and sells a number of different products or services, the weighted average contribution margin per unit is used to determine the breakeven point or target profit in units.

Accepted Answer

A) True 
 B)False

Question 13

If the total contribution margin decreases and fixed costs do not change, pretax profit

Accepted Answer

A)  Decreases by an equal amount 
B)  Increases by an equal amount 
C)  Does not change 
D)  Increases by some other amount 
A)  Decreases by an equal amount 
B)  Increases by an equal amount 
C)  Does not change 
D)  Increases by some other amount

Question 14

SXF Corporation sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows:   Point A is best described as

Accepted Answer

A)  Fixed cost 
B)  Margin of safety 
C)  Estimated profit at actual volume 
D)  Breakeven point 
A)  Fixed cost 
B)  Margin of safety 
C)  Estimated profit at actual volume 
D)  Breakeven point

Question 15

Data extracted from the accounting information system of TXC Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x.   The area to the left of the point where the two lines intersect, where the dashed line is below the solid line, shows where TXC

Accepted Answer

A)  Operates at a loss 
B)  Operates at a profit 
C)  Breaks even if product mix remains constant 
D)  Cannot be determined 
A)  Operates at a loss 
B)  Operates at a profit 
C)  Breaks even if product mix remains constant 
D)  Cannot be determined

Question 16

Ryan Company manufactures a single product. The product sells for $10. The variable manufacturing cost per unit is $2 and the variable selling cost is $2 per unit. Ryan incurs monthly fixed costs of $100,000 for manufacturing and $140,000 for administration and selling. Ryan is considering changes to its production and distribution procedures. If the changes are made, total variable costs (manufacturing and selling) will be $3 and total fixed costs (manufacturing, administration, and selling) will be $350,000 per month. The selling price will remain at $10. If the changes are made, the number of units required to break even will be

Accepted Answer

A)  Greater than before 
B)  The same as before 
C)  Less than before 
D)  Cannot be determined 
A)  Greater than before 
B)  The same as before 
C)  Less than before 
D)  Cannot be determined

Question 17

On a cost-volume-profit graph, the breakeven point is located where the fixed cost line intersects the x-axis.

Accepted Answer

A) True 
 B)False

Question 18

A limiting assumption in CVP analysis is that

Accepted Answer

A)  The behavior of both revenues and costs is linear throughout the entire relevant range 
B)  Inventories change in breakeven computations 
C)  The sales mix is not constant 
D)  Efficiency in operations is not constant 
A)  The behavior of both revenues and costs is linear throughout the entire relevant range 
B)  Inventories change in breakeven computations 
C)  The sales mix is not constant 
D)  Efficiency in operations is not constant

Question 19

In CVP analysis, managers usually assume that the revenue function is linear. Which of the following equations best represents a linear revenue function if the cost is a variable cost?

Accepted Answer

A)  y = $200 + $60x 
B)  y = $60x2 
C)  y = $60x 
D)  y = $200 
A)  y = $200 + $60x 
B)  y = $60x2 
C)  y = $60x 
D)  y = $200

Question 20

A larger margin of safety gives managers greater confidence in making plans such as incurring additional fixed costs.

Accepted Answer

A) True 
 B)False

If a company can produce and sell 500 units at $10 each and its variable costs are $6 per unit, expected profit using the profit equation will be $2,000.

SXF Corporation sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows: Point B is best described as

Assumptions and limitations are irrelevant when using CVP analysis.

When the assumption of linearity is applied to revenue in CVP analyses

The breakeven point for a service organisation will decrease if

At the breakeven point

Howe Hinges manufactures and sells a single product. This product has the following operational data:

The Nunn Co. produces a single product. Its cost structure is: If the firm sells 5,000 units per period, what price should be charged to earn $35,000?

Nelson Co. incurs $568,000 in fixed costs while producing three products with the following characteristics: What is the selling price of Product T?

Which of the following is not an assumption in CVP analysis?

The assumption of cost function linearity means I Fixed costs remain fixed. II Sales mix remains constant. III The average cost per unit remains constant.

When an organisation produces and sells a number of different products or services, the weighted average contribution margin per unit is used to determine the breakeven point or target profit in units.

If the total contribution margin decreases and fixed costs do not change, pretax profit

SXF Corporation sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows: Point A is best described as

On a cost-volume-profit graph, the breakeven point is located where the fixed cost line intersects the x-axis.

A limiting assumption in CVP analysis is that

In CVP analysis, managers usually assume that the revenue function is linear. Which of the following equations best represents a linear revenue function if the cost is a variable cost?

A larger margin of safety gives managers greater confidence in making plans such as incurring additional fixed costs.

The Role of Accounting Information in Management Decision Making

Cost Concepts, Behaviour and Estimation

A Costing Framework and Cost Allocation

Job Costing Systems

Process Costing Systems

Absorption, Variable and Throughput Costing

Activity Analysis: Costing and Management

Relevant Costs for Decision Making

Standard Costs, Flexible Budgets and Variance Analysis

Operational Budgets

Strategy and Control

Planning and Budgeting for Strategic Success

Capital Budgeting and Strategic Investment Decisions

The Strategic Management of Costs and Revenues

Strategic Management Control: a Lean Perspective

Responsibility Accounting, Performance Evaluation and Transfer Pricing

The Balanced Scorecard and Strategy Maps

Rewards, Incentives and Risk Management

Sustainability Management Accounting

Filters

Exam 4: Cost-Volume-Profit Cvp Analysis

If a company can produce and sell 500 units at $10 each and its variable costs are $6 per unit, expected profit using the profit equation will be $2,000.

SXF Corporation sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows: Point B is best described as

Assumptions and limitations are irrelevant when using CVP analysis.

When the assumption of linearity is applied to revenue in CVP analyses

The breakeven point for a service organisation will decrease if

At the breakeven point

Howe Hinges manufactures and sells a single product. This product has the following operational data:

The Nunn Co. produces a single product. Its cost structure is: If the firm sells 5,000 units per period, what price should be charged to earn $35,000?

Nelson Co. incurs $568,000 in fixed costs while producing three products with the following characteristics: What is the selling price of Product T?

Which of the following is not an assumption in CVP analysis?

The assumption of cost function linearity means I Fixed costs remain fixed. II Sales mix remains constant. III The average cost per unit remains constant.

When an organisation produces and sells a number of different products or services, the weighted average contribution margin per unit is used to determine the breakeven point or target profit in units.

If the total contribution margin decreases and fixed costs do not change, pretax profit

SXF Corporation sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows: Point A is best described as

On a cost-volume-profit graph, the breakeven point is located where the fixed cost line intersects the x-axis.

A limiting assumption in CVP analysis is that

In CVP analysis, managers usually assume that the revenue function is linear. Which of the following equations best represents a linear revenue function if the cost is a variable cost?

A larger margin of safety gives managers greater confidence in making plans such as incurring additional fixed costs.

The Role of Accounting Information in Management Decision Making

Cost Concepts, Behaviour and Estimation

A Costing Framework and Cost Allocation

Job Costing Systems

Process Costing Systems

Absorption, Variable and Throughput Costing

Activity Analysis: Costing and Management

Relevant Costs for Decision Making

Standard Costs, Flexible Budgets and Variance Analysis

Operational Budgets

Strategy and Control

Planning and Budgeting for Strategic Success

Capital Budgeting and Strategic Investment Decisions

The Strategic Management of Costs and Revenues

Strategic Management Control: a Lean Perspective

Responsibility Accounting, Performance Evaluation and Transfer Pricing

The Balanced Scorecard and Strategy Maps

Rewards, Incentives and Risk Management

Sustainability Management Accounting

Filters