Question 1

If the contribution margin ratio is 0.40,targeted net profit is $50 000,and fixed costs are $75 000,then sales volume in dollars is:

Accepted Answer

A) $250 000. 
B) $312 500. 
C) $350 000. 
D) $275 000. 
A) $250 000. 
B) $312 500. 
C) $350 000. 
D) $275 000.

Question 2

Answer the following questions using the information below:
Gundagai Company sells several products.Information of average revenue and costs is as follows:
 $\begin{array}{lr}
\text { Selling price per unit } & \$ 28.50 \
\text { Variable costs per unit: } & \
\quad \text { Direct material } & \$ 5.25 \
\text { Direct manufacturing labour } & \$ 1.15 \
\text { Manufacturing overhead } & \$ 0.25 \
\quad \text { Selling costs } & \$ 1.85 \
\text { Annual fixed costs } & \$ 110000
\end{array}$
-The number of units that Gundagai must sell annually to make a profit of $90 000 is:

Accepted Answer

A) 10 000 units. 
B) 12 000 units. 
C) 15 000 units. 
D) 20 000 units. 
A) 10 000 units. 
B) 12 000 units. 
C) 15 000 units. 
D) 20 000 units.

Question 3

'Uncertainty' may be defined as:

Accepted Answer

A) the possibility that an actual amount will be the same as an expected amount. 
B) the possibility that a budgeted amount will be higher than the estimated amount. 
C) the possibility that a budgeted amount will be lower than the estimated amount. 
D) the possibility that an actual amount will be either higher or lower than the expected amount. 
A) the possibility that an actual amount will be the same as an expected amount. 
B) the possibility that a budgeted amount will be higher than the estimated amount. 
C) the possibility that a budgeted amount will be lower than the estimated amount. 
D) the possibility that an actual amount will be either higher or lower than the expected amount.

Question 4

In CVP analysis,variable costs include direct variable costs,but do not include indirect variable costs.

Accepted Answer

A) True 
 B)False

Question 5

In multiproduct situations when sales mix shifts toward the product with the lowest contribution margin,the break-even quantity will decrease.

Accepted Answer

A) True 
 B)False

Question 6

If selling price per unit is $30,variable costs per unit are $20,total fixed costs are $10 000,the tax rate is 30%,and the company sells 6000 units,net profit after tax is:

Accepted Answer

A) $12 000. 
B) $40 000. 
C) $35 000. 
D) $14 000. 
A) $12 000. 
B) $40 000. 
C) $35 000. 
D) $14 000.

Question 7

Answer the following questions using the information below:
Assume the following cost information for Murray River Company:
 $\begin{array}{lr}
\text { Selling price } & \$ 240 \text { per unit } \
\text { Variable costs } & \$ 140 \text { per unit } \
\text { Total fixed costs } & \$ 140000 \
\text { Tax rate } & 40 \%
\end{array}$
-What is the number of units that must be sold to earn an after-tax net profit of $42 000?

Accepted Answer

A) 2100 units 
B) 3050 units 
C) 1875 units 
D) 4625 units 
A) 2100 units 
B) 3050 units 
C) 1875 units 
D) 4625 units

Question 8

The break-even point decreases if:

Accepted Answer

A) the selling price per unit decreases. 
B) the variable cost per unit increases. 
C) the contribution margin per unit decreases. 
D) total fixed costs decrease. 
A) the selling price per unit decreases. 
B) the variable cost per unit increases. 
C) the contribution margin per unit decreases. 
D) total fixed costs decrease.

Question 9

Answer the following questions using the information below:
Stephanie's Bridal Shoppe sells wedding dresses.The average selling price of each dress is $1000,variable costs are $400,and fixed costs are $90 000.
-What is the Bridal Shoppe's operating profit when 200 dresses are sold?

Accepted Answer

A) $30 000 
B) $80 000 
C) $200 000 
D) $100 000 
A) $30 000 
B) $80 000 
C) $200 000 
D) $100 000

Question 10

If Johnson's Manufacturing presented a Financial Accounting Income Statement showing operating profit of $18 000,a Contribution Income Statement would show a different operating profit.

Accepted Answer

A) True 
 B)False

Question 11

Archie Jackson Inc. ,sells a single product.The company's most recent income statement is given below.
 $$\begin{array} { l r } 
\text { Sales } & \$ 200000 \
\text { Less variable expenses } & ( 120000 ) \
\text { Contribution margin } & 80000 \
\text { Less fixed expenses } & ( 50000 ) \
\text { Net profit } & \$ 30000
\end{array}$$ 
 Required:
a. Contribution margin ratio is $\quad $ $\quad $$\underline{\quad\quad}$ $\%$
b. Break-even point in total sales dollars is $\quad $ $\quad $$\$$$\underline{\quad\quad}$
c. To achieve $\$ 40000$ in net profit, sales must total $\quad $ $\quad $$\$$$\underline{\quad\quad}$
d. If sales increase by $\$ 50000$, net profit will increase by $\quad $ $\quad $$\$$$\underline{\quad\quad}$  
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.Contribution margin ratio is $80 000/$

Question 12

Sensitivity analysis helps to evaluate the risk associated with decisions.

Accepted Answer

A) True 
 B)False

Question 13

Companies with a greater proportion of fixed costs have a greater risk of loss than companies with a greater proportion of variable costs.

Accepted Answer

A) True 
 B)False

Question 14

Lauren had been a manager of a major hotel chain for 15 years.Due to a hotel owner's illness,Lauren was offered the opportunity to purchase a hotel near a holiday area she had often visited.After obtaining a lawyer and an accountant to assist her,Lauren did an analysis of the business and evaluated several contingencies relating to various scenarios that might occur based on economic and weather season circumstances.Since the expected monetary value of the various scenarios was much higher than the price of the hotel,she decided to purchase the hotel.She resigned her position,obtained a loan,and purchased the hotel.The following year,there was a severe economic downturn and also a very bad weather season that reduced the number of guests and also caused a resulting mould situation in the hotel building that required expensive repair work.Lauren ran short of cash,became emotionally distraught,and eventually had to sell the hotel at a significant loss.Was it a bad decision for her to purchase the hotel instead of keeping her other managerial position? Explain.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

It was not necessarily a bad decision fo

Question 15

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 margin of safety assuming 100 procedures are budgeted?

Accepted Answer

A) $100 000 or 100 times 
B) $40 000 or 40 times 
C) $60 000 or 60 times 
D) $50 000 or 50 times 
A) $100 000 or 100 times 
B) $40 000 or 40 times 
C) $60 000 or 60 times 
D) $50 000 or 50 times

Question 16

A planned increase in advertising would be considered an increase in fixed costs in CVP analysis.

Accepted Answer

A) True 
 B)False

Question 17

What effect,and why,would a decrease in the tax rate have on a company's break-even point?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

A decrease in the tax rate would have no

Question 18

Answer the following questions using the information below:
Ghan Manufacturing produces a single product that sells for $80.Variable costs per unit equal $32.The company expects total fixed costs to be $72 000 for the next month at the projected sales level of 2000 units.In an attempt to improve performance,management is considering a number of alternative actions.Each situation is to be evaluated separately.
-Suppose management believes that a $32 000 increase in the monthly advertising expense will result in a considerable increase in sales.Sales must increase by how much to justify this additional expenditure?

Accepted Answer

A) 400 units 
B) 667 units 
C) 800 units 
D) None of these answers are correct. 
A) 400 units 
B) 667 units 
C) 800 units 
D) None of these answers are correct.

Question 19

A company with sales of $100 000,variable costs of $70 000,and fixed costs of $50 000 will reach its break-even point if sales are increased by $20 000.

Accepted Answer

A) True 
 B)False

Question 20

Break-even point is:

Accepted Answer

A) fixed costs divided by contribution margin per unit. 
B) total costs divided by variable costs per unit. 
C) contribution margin per unit divided by revenue per unit. 
D) the sum of fixed and variable costs divided by contribution margin per unit. 
A) fixed costs divided by contribution margin per unit. 
B) total costs divided by variable costs per unit. 
C) contribution margin per unit divided by revenue per unit. 
D) the sum of fixed and variable costs divided by contribution margin per unit.

If the contribution margin ratio is 0.40,targeted net profit is $50 000,and fixed costs are $75 000,then sales volume in dollars is:

'Uncertainty' may be defined as:

In CVP analysis,variable costs include direct variable costs,but do not include indirect variable costs.

In multiproduct situations when sales mix shifts toward the product with the lowest contribution margin,the break-even quantity will decrease.

If selling price per unit is $30,variable costs per unit are $20,total fixed costs are $10 000,the tax rate is 30%,and the company sells 6000 units,net profit after tax is:

The break-even point decreases if:

Answer the following questions using the information below: Stephanie's Bridal Shoppe sells wedding dresses.The average selling price of each dress is $1000,variable costs are $400,and fixed costs are $90 000. -What is the Bridal Shoppe's operating profit when 200 dresses are sold?

If Johnson's Manufacturing presented a Financial Accounting Income Statement showing operating profit of $18 000,a Contribution Income Statement would show a different operating profit.

Sensitivity analysis helps to evaluate the risk associated with decisions.

Companies with a greater proportion of fixed costs have a greater risk of loss than companies with a greater proportion of variable costs.

A planned increase in advertising would be considered an increase in fixed costs in CVP analysis.

What effect,and why,would a decrease in the tax rate have on a company's break-even point? _ _

A company with sales of $100 000,variable costs of $70 000,and fixed costs of $50 000 will reach its break-even point if sales are increased by $20 000.

Break-even point is:

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

If the contribution margin ratio is 0.40,targeted net profit is $50 000,and fixed costs are $75 000,then sales volume in dollars is:

'Uncertainty' may be defined as:

In CVP analysis,variable costs include direct variable costs,but do not include indirect variable costs.

In multiproduct situations when sales mix shifts toward the product with the lowest contribution margin,the break-even quantity will decrease.

If selling price per unit is $30,variable costs per unit are $20,total fixed costs are $10 000,the tax rate is 30%,and the company sells 6000 units,net profit after tax is:

The break-even point decreases if:

Answer the following questions using the information below: Stephanie's Bridal Shoppe sells wedding dresses.The average selling price of each dress is $1000,variable costs are $400,and fixed costs are $90 000. -What is the Bridal Shoppe's operating profit when 200 dresses are sold?

If Johnson's Manufacturing presented a Financial Accounting Income Statement showing operating profit of $18 000,a Contribution Income Statement would show a different operating profit.

Sensitivity analysis helps to evaluate the risk associated with decisions.

Companies with a greater proportion of fixed costs have a greater risk of loss than companies with a greater proportion of variable costs.

A planned increase in advertising would be considered an increase in fixed costs in CVP analysis.

What effect,and why,would a decrease in the tax rate have on a company's break-even point? _____________________________________________________________________________________________ _____________________________________________________________________________________________

A company with sales of $100 000,variable costs of $70 000,and fixed costs of $50 000 will reach its break-even point if sales are increased by $20 000.

Break-even point is:

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

What effect,and why,would a decrease in the tax rate have on a company's break-even point? _ _