Question 1

Which of the following items is NOT an assumption of CVP analysis?

Accepted Answer

A) Proportions of different products will remain constant when multiple products are sold. 
B) Total revenues and total costs are linear in relation to output units. 
C) Unit selling price and unit fixed costs are known and remain constant. 
D) Costs may be separated into separate fixed and variable components. 
A) Proportions of different products will remain constant when multiple products are sold. 
B) Total revenues and total costs are linear in relation to output units. 
C) Unit selling price and unit fixed costs are known and remain constant. 
D) Costs may be separated into separate fixed and variable components.

Question 2

Which of the following statements about determining the break-even point is FALSE?

Accepted Answer

A) Revenues equal fixed costs plus variable costs. 
B) Break-even revenues equal fixed costs divided by the variable cost per unit. 
C) Contribution margin - fixed costs is equal to zero. 
D) Operating profit is equal to zero. 
A) Revenues equal fixed costs plus variable costs. 
B) Break-even revenues equal fixed costs divided by the variable cost per unit. 
C) Contribution margin - fixed costs is equal to zero. 
D) Operating profit is equal to zero.

Question 3

Fixed costs:

Accepted Answer

A) reduce the risk of loss 
B) are considered variable costs over the long run 
C) are graphed as a steeply sloped line 
D) provide less operating leverage 
A) reduce the risk of loss 
B) are considered variable costs over the long run 
C) are graphed as a steeply sloped line 
D) provide less operating leverage

Question 4

If planned net profit after tax is $21 000 and the tax rate is 30%,then planned operating profit before tax would be $27 300.

Accepted Answer

A) True 
 B)False

Question 5

All of the following are assumed in the above analysis EXCEPT:

Accepted Answer

A) a constant product mix. 
B) cost and revenue relationships are reflected accurately. 
C) per unit variable costs increase when activity increases. 
D) all costs can be classified as either fixed or variable. 
A) a constant product mix. 
B) cost and revenue relationships are reflected accurately. 
C) per unit variable costs increase when activity increases. 
D) all costs can be classified as either fixed or variable.

Question 6

The selling price per unit is $30,variable cost per unit $20,and fixed cost per unit is $3.When this company operates above the break-even point,the sale of one more unit will increase net profit by $7.

Accepted Answer

A) True 
 B)False

Question 7

Queensland 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 Queensland Valves compute a break-even point given this situation?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Queensland Valves could consider that it

Question 8

Answer the following questions using the information below:
Alice Springs University is planning to hold a fundraising banquet at one of the local golf clubs.It has two options for the banquet:
OPTION 1:	Crestview Golf Club
	a. Fixed rental cost of $1000
	b. $12 per person for food

OPTION 2:	Tallgrass Golf Club
	a. Fixed rental cost of $3000
	b. A caterer who charges $8.00 per person for food

-Option 1: Fixed costs of $10 000 and a break-even point of 500 units.
Option 2: Fixed costs of $20 000 and a break-even point of 700 units.
Which option should you choose if you are expecting to produce 600 units?

Accepted Answer

A) Option one 
B) Option two 
C) Both options are equally desirable. 
D) The best option is indeterminable. 
A) Option one 
B) Option two 
C) Both options are equally desirable. 
D) The best option is indeterminable.

Question 9

Cost-volume-profit analysis is used PRIMARILY by management:

Accepted Answer

A) to prepare external financial statements. 
B) as a planning tool. 
C) to attain accurate financial results. 
D) for control purposes. 
A) to prepare external financial statements. 
B) as a planning tool. 
C) to attain accurate financial results. 
D) for control purposes.

Question 10

Answer the following questions using the information below:
Campesi intends to sell his customers a special round-trip airline ticket package.He is able to purchase the package from the airline carrier for $250 each.The round-trip tickets will be sold for $300 each and the airline intends to reimburse Campesi for any unsold ticket packages.Fixed costs include $7500 in advertising costs.
-What is the contribution margin per ticket package?

Accepted Answer

A) $50 
B) $100 
C) $150 
D) $200 
A) $50 
B) $100 
C) $150 
D) $200

Question 11

Answer the following questions using the information below:
Warne's Flipper Company sells several products.Information of average revenue and costs is as follows:
 $\begin{array}{lr}
\text { Selling price per unit } & \$ 25.00 \
\text { Variable costs per unit: } & \
\text { Direct material } & \$ 5.00 \
\text { Direct manufacturing labour } & \$ 1.80 \
\text { Manufacturing overhead } & \$ 0.80 \
\text { Selling costs } & \$ 2.00 \
\text { Annual fixed costs } & \$ 96000
\end{array}$
-The contribution margin per unit is:

Accepted Answer

A) $8.80. 
B) $11.00. 
C) $15.40. 
D) $16.44. 
A) $8.80. 
B) $11.00. 
C) $15.40. 
D) $16.44.

Question 12

Casuarina Corporation gathered the following information:
 $$\begin{array} { l r } 
\text { Variable costs } & \$ 945000 \
\text { Income tax rate } & 40 \% \
\text { Contribution-margin ratio } & 30 \%
\end{array}$$ 
Required:
a.Compute total fixed costs assuming a break-even volume in dollars of $1 350 000.
b.Compute sales volume in dollars to produce an after-tax net profit of $108 000.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.$1 350 000 × 0.30

Question 13

If the contribution margin ratio is 0.25,targeted net profit is $25 000,and targeted sales volume in dollars is $200 000,then total fixed costs are:

Accepted Answer

A) $75 000. 
B) $100 000. 
C) $50 000. 
D) $25 000. 
A) $75 000. 
B) $100 000. 
C) $50 000. 
D) $25 000.

Question 14

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 15

How many units would have to be sold to yield a target operating profit of $44 000,assuming variable costs are $30 per unit,total fixed costs are $4000,and the unit selling price is $40?

Accepted Answer

A) 4800 units 
B) 4400 units 
C) 4000 units 
D) 3600 units 
A) 4800 units 
B) 4400 units 
C) 4000 units 
D) 3600 units

Question 16

AFL Boots sells only two products,Product X and Product Y.
 $\begin{array}{|l|c|c|c|} 
\hline& \text { Product } X & \text { Product } Y & \text { Total } \
\hline \text { Selling price } & \$ 25 & \$ 45 & \
\hline \text { Variable cost per unit } & \$ 20 & \$ 35 & \
\hline \text { Total fixed costs } & & & \$ 350000 \
\hline
\end{array}$ 
AFL Boots sells three units of Product X for each two units it sells of Product Y.The company has a tax rate of 25%.
Required:
a.What is the break-even point in units for each product,assuming the sales mix is 3 units of Product X for each two units of Product Y?
b.How many units of each product would be sold if AFL Boots desired an after-tax net profit of $210 000,using its tax rate of 25%?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.3N = breakeven in product X 2N = break

Question 17

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 18

Ponsford's Cellular sells phones for $100.The unit variable cost per phone is $50 plus a selling commission of 10%.Fixed manufacturing costs total $1250 per month,while fixed selling and administrative costs total $2500.
Required:
a.What is the contribution margin per phone?
b.What is the break-even point in phones?
c.How many phones must be sold to earn pre-tax profit of $7500?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.CM per phone = $100 - $50 - 0.1($100)=

Question 19

In multiproduct situations,when sales mix shifts toward the product with the highest contribution margin then:

Accepted Answer

A) total revenues will decrease. 
B) operating profit will increase. 
C) break-even quantity will increase. 
D) total contribution margin will decrease. 
A) total revenues will decrease. 
B) operating profit will increase. 
C) break-even quantity will increase. 
D) total contribution margin will decrease.

Question 20

Assume only the specified parameters change in a CVP analysis.The contribution margin percentage increases when:

Accepted Answer

A) variable costs per unit increase. 
B) variable costs per unit decrease. 
C) total fixed costs increase. 
D) total fixed costs decrease. 
A) variable costs per unit increase. 
B) variable costs per unit decrease. 
C) total fixed costs increase. 
D) total fixed costs decrease.

Which of the following items is NOT an assumption of CVP analysis?

Which of the following statements about determining the break-even point is FALSE?

Fixed costs:

If planned net profit after tax is $21 000 and the tax rate is 30%,then planned operating profit before tax would be $27 300.

All of the following are assumed in the above analysis EXCEPT:

The selling price per unit is $30,variable cost per unit $20,and fixed cost per unit is $3.When this company operates above the break-even point,the sale of one more unit will increase net profit by $7.

Cost-volume-profit analysis is used PRIMARILY by management:

If the contribution margin ratio is 0.25,targeted net profit is $25 000,and targeted sales volume in dollars is $200 000,then total fixed costs are:

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

How many units would have to be sold to yield a target operating profit of $44 000,assuming variable costs are $30 per unit,total fixed costs are $4000,and the unit selling price is $40?

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

In multiproduct situations,when sales mix shifts toward the product with the highest contribution margin then:

Assume only the specified parameters change in a CVP analysis.The contribution margin percentage increases when:

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

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

Measuring and Reporting Sustainability

Filters

Exam 4: Costvolumeprofit Analysis

Which of the following items is NOT an assumption of CVP analysis?

Which of the following statements about determining the break-even point is FALSE?

Fixed costs:

If planned net profit after tax is $21 000 and the tax rate is 30%,then planned operating profit before tax would be $27 300.

All of the following are assumed in the above analysis EXCEPT:

The selling price per unit is $30,variable cost per unit $20,and fixed cost per unit is $3.When this company operates above the break-even point,the sale of one more unit will increase net profit by $7.

Cost-volume-profit analysis is used PRIMARILY by management:

If the contribution margin ratio is 0.25,targeted net profit is $25 000,and targeted sales volume in dollars is $200 000,then total fixed costs are:

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

How many units would have to be sold to yield a target operating profit of $44 000,assuming variable costs are $30 per unit,total fixed costs are $4000,and the unit selling price is $40?

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

In multiproduct situations,when sales mix shifts toward the product with the highest contribution margin then:

Assume only the specified parameters change in a CVP analysis.The contribution margin percentage increases when:

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

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

Measuring and Reporting Sustainability

Filters