Question 1

In CVP analysis,focusing on target net profit after tax rather than operating profit before tax:

Accepted Answer

A) will increase the break-even point. 
B) will not change the break-even point. 
C) will decrease the break-even point. 
D) does not allow calculation of break-even point. 
A) will increase the break-even point. 
B) will not change the break-even point. 
C) will decrease the break-even point. 
D) does not allow calculation of break-even point.

Question 2

The strategy MOST likely to reduce the break-even point would be to:

Accepted Answer

A) decrease the fixed costs and increase the contribution margin. 
B) decrease both the fixed costs and the contribution margin. 
C) increase the fixed costs and decrease the contribution margin. 
D) increase both the fixed costs and the contribution margin. 
A) decrease the fixed costs and increase the contribution margin. 
B) decrease both the fixed costs and the contribution margin. 
C) increase the fixed costs and decrease the contribution margin. 
D) increase both the fixed costs and the contribution margin.

Question 3

To determine contribution margin use:

Accepted Answer

A) both variable and fixed manufacturing costs 
B) only fixed manufacturing costs 
C) only variable manufacturing costs 
D) both variable manufacturing costs and variable nonmanufacturing costs 
A) both variable and fixed manufacturing costs 
B) only fixed manufacturing costs 
C) only variable manufacturing costs 
D) both variable manufacturing costs and variable nonmanufacturing costs

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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 for both display and selling purposes 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 $5010,or
2.paying an $4000 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?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.Option 1 N = Break-even in pillows
$25

Question 6

Which of the following will increase a company's break-even point?

Accepted Answer

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

Question 7

Produce Company needs to know how many kilos of apples to have on hand each day.Each kilo of apples costs $0.50 and can be sold for $0.80.Unsold apples are worthless at the end of the day.The following demands were found after studying the last six months' sales:
200 kilos of apples 30% of the time
300 kilos of apples 40% of the time
400 kilos of apples 30% of the time
Required:
Determine whether Produce Company should order 200,300,or 400 kilos of apples.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

@#IMG-DLM& 
Demand example:300 units ordered;but d

Question 8

In 2017,Thorpe Company has sales of $1 600 000,variable costs of $400 000,and fixed costs of $600 000.In 2018,the company expects annual property taxes to decrease by $30 000.
Required:
a.Calculate operating profit and the break-even point for 2017.
b.Calculate the break-even point for 2018.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.In 2017,operating profit is $1 600 000

Question 9

Northern Territory Adventure Company operates on a contribution margin of 35% and currently has fixed costs of $400 000.Next year,sales are projected to be $2 000 000.An advertising campaign is being evaluated that costs an additional $70 000.How much would sales have to increase to justify the additional expenditure?

Accepted Answer

A) $300 000 
B) $140 000 
C) $200 000 
D) $70 000 
A) $300 000 
B) $140 000 
C) $200 000 
D) $70 000

Question 10

Answer the following questions using the information below:
Dr Charles Hunter,MD,performs a certain outpatient procedure for $1000.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 profit for the month assuming that Dr Hunter plans to perform the procedure 200 times?

Accepted Answer

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

Question 11

Contribution margin equals:

Accepted Answer

A) revenues minus product costs. 
B) revenues minus fixed costs. 
C) revenues minus period costs. 
D) revenues minus variable costs. 
A) revenues minus product costs. 
B) revenues minus fixed costs. 
C) revenues minus period costs. 
D) revenues minus variable costs.

Question 12

The Sports Drink Company,a producer of specialty drinks,has asked you to complete several calculations based upon the following information:
 $$\begin{array} { l r } 
\text { Income tax rate } & 30 \% \
\text { Selling price per unit } & \$ 66.00 \
\text { Variable cost per unit } & \$ 52.80 \
\text { Total fixed costs } & \$ 462000.00
\end{array}$$ 
Required:
a.What is the break-even point in drinks?
b.What sales volume is needed to earn an after-tax net profit of $130 284?
c.How many drinks must be sold to earn an after-tax net profit of $184 800?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.$462 000/($66.00 - $52.80)= 35 000 uni

Question 13

It is assumed in CVP analysis that the unit selling price,unit variable costs,and unit fixed costs are known and constant.

Accepted Answer

A) True 
 B)False

Question 14

An increase in the tax rate will increase the break-even point.

Accepted Answer

A) True 
 B)False

Question 15

Karen Hefner,a florist,operates retail stores in several shopping malls.The average selling price of an arrangement is $30 and the average cost of each sale is $18.A new mall is opening where Karen wants to locate a store,but the location manager is not sure about the rent method to accept.The mall operator offers the following three options for its retail store rentals:
1.paying a fixed rent of $15 000 a month,or
2.paying a base rent of $9000 plus 10% of revenue received,or
3.paying a base rent of $4800 plus 20% of revenue received up to a maximum rent of $25 000.
Required:
a.For each option,calculate the break-even sales and the monthly rent paid at break-even.
b.Beginning at zero sales,show the sales levels at which each option is preferable up to 5000 units.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.Option 1 N = Break-even units
$30N - $

Question 16

Risk of loss is low if,when sales are low,contribution margin is less then fixed costs.

Accepted Answer

A) True 
 B)False

Question 17

A 'revenue driver' is defined as:

Accepted Answer

A) any factor that affects revenues. 
B) only factors that can influence a change in selling price. 
C) any factor that affects costs and revenues. 
D) only factors that can influence a change in demand. 
A) any factor that affects revenues. 
B) only factors that can influence a change in selling price. 
C) any factor that affects costs and revenues. 
D) only factors that can influence a change in demand.

Question 18

If Kakadu Realtor plans a profit before tax of $105 000 and the tax rate is 30%,then Kakadu's planned net profit after tax should be:

Accepted Answer

A) $178 500. 
B) $73 500. 
C) $136 500. 
D) $31 500. 
A) $178 500. 
B) $73 500. 
C) $136 500. 
D) $31 500.

Question 19

Answer the following questions using the information below:
The following information is for Walters Corporation:
 $\begin{array}{cr}
\text { Product Q: Revenue } & \$ 10.00 \
\text { Variable Cost } & \$ 2.50\
\text { Product P: Revenue } & \$ 15.00 \
\text { Variable Cost } & \$ 5.00 \
\text { Total fixed costs } & \$ 50000
\end{array}$
-What is the operating profit,assuming actual sales total 150 000 units,and the sales mix is two units of Product Q and one unit of Product P?

Accepted Answer

A) $1 200 000 
B) $1 250 000 
C) $1 750 000 
D) None of these answers are correct. 
A) $1 200 000 
B) $1 250 000 
C) $1 750 000 
D) None of these answers are correct.

Question 20

Explain when a manager would use cost-volume-profit analysis and sensitivity analysis.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Cost-volume-profit analysis is helpful f

In CVP analysis,focusing on target net profit after tax rather than operating profit before tax:

The strategy MOST likely to reduce the break-even point would be to:

To determine contribution margin use:

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

Which of the following will increase a company's break-even point?

In 2017,Thorpe Company has sales of $1 600 000,variable costs of $400 000,and fixed costs of $600 000.In 2018,the company expects annual property taxes to decrease by $30 000. Required: a.Calculate operating profit and the break-even point for 2017. b.Calculate the break-even point for 2018. _ _

Contribution margin equals:

It is assumed in CVP analysis that the unit selling price,unit variable costs,and unit fixed costs are known and constant.

An increase in the tax rate will increase the break-even point.

Risk of loss is low if,when sales are low,contribution margin is less then fixed costs.

A 'revenue driver' is defined as:

If Kakadu Realtor plans a profit before tax of $105 000 and the tax rate is 30%,then Kakadu's planned net profit after tax should be:

Explain when a manager would use cost-volume-profit analysis and sensitivity analysis. _ _

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

In CVP analysis,focusing on target net profit after tax rather than operating profit before tax:

The strategy MOST likely to reduce the break-even point would be to:

To determine contribution margin use:

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

Which of the following will increase a company's break-even point?

Contribution margin equals:

It is assumed in CVP analysis that the unit selling price,unit variable costs,and unit fixed costs are known and constant.

An increase in the tax rate will increase the break-even point.

Risk of loss is low if,when sales are low,contribution margin is less then fixed costs.

A 'revenue driver' is defined as:

If Kakadu Realtor plans a profit before tax of $105 000 and the tax rate is 30%,then Kakadu's planned net profit after tax should be:

Explain when a manager would use cost-volume-profit analysis and sensitivity analysis. _____________________________________________________________________________________________ _____________________________________________________________________________________________

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

Explain when a manager would use cost-volume-profit analysis and sensitivity analysis. _ _