Question 1

If a company has a degree of operating leverage of 2.0 and sales increase by 25%,then:

Accepted Answer

A) profit will increase by 20% 
B) total variable costs will not change 
C) profit will increase by 50% 
D) total variable costs will increase by 50% 
A) profit will increase by 20% 
B) total variable costs will not change 
C) profit will increase by 50% 
D) total variable costs will increase by 50%

Question 2

In CVP analysis it is assumed the number of output units is the only revenue driver.

Accepted Answer

A) True 
 B)False

Question 3

The break-even point in CVP analysis is defined as:

Accepted Answer

A) revenues less variable costs equal operating profit. 
B) when the contribution margin percentage equals total revenues divided by variable costs. 
C) when fixed costs equal total revenues. 
D) fixed costs divided by the contribution margin per unit. 
A) revenues less variable costs equal operating profit. 
B) when the contribution margin percentage equals total revenues divided by variable costs. 
C) when fixed costs equal total revenues. 
D) fixed costs divided by the contribution margin per unit.

Question 4

If the sales mix shifts to four units of Product A and one unit of Product B,then the weighted-average contribution margin will:

Accepted Answer

A) stay the same. 
B) decrease per unit. 
C) increase per unit. 
D) be indeterminable. 
A) stay the same. 
B) decrease per unit. 
C) increase per unit. 
D) be indeterminable.

Question 5

Auto Tyres has been in the tyre business for four years.It rents a building but owns all of its equipment.All regular employees are paid a fixed salary.During the busy season (April-June),temporary help is hired and paid by the hour.Utilities and other operating charges remain fairly constant during each month except those in the busy season.
Selling prices per tyre average $75 except during the busy season when discounts run above average because a large number of customers buy tyres at this time.A 15% discount is given when two tyres are purchased at one time.During the busy months,selling prices per tyre average $60.
The CEO of Auto Tyres is somewhat displeased with the company's management accounting system because the cost behaviour patterns displayed by the monthly break-even charts are inconsistent;the busy months' charts are different from the other months of the year.The CEO is never sure if the company has a satisfactory margin of safety or if it is just above the break-even point.
Required:
a.What is wrong with the accountant's computations?
b.How can the information be presented in a better format for the CEO?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.The accounting system includes some as

Question 6

Answer the following questions using the information below:
The following information is for the Jeffries Corporation:
 $\begin{array}{cc}
\text { Product A: Revenue } & \$ 16.00 \
\text { Variable Cost } & \$ 12.00 \
& \
\text { Product B: Revenue } & \$ 24.00 \
\text { Variable Cost } & \$ 16.00 \
& \
\text { Total fixed costs } & \$ 75000
\end{array}$
-What is the operating profit,assuming actual sales total 25 000 units,and the sales mix is three units of Product A and one unit of Product B?

Accepted Answer

A) $50 000 
B) $60 000 
C) $75 000 
D) None of these answers are correct. 
A) $50 000 
B) $60 000 
C) $75 000 
D) None of these answers are correct.

Question 7

Multiple cost drivers:

Accepted Answer

A) have no unique break-even point. 
B) can utilise the simple CVP formula. 
C) have only one revenue driver. 
D) are the result of multiple products. 
A) have no unique break-even point. 
B) can utilise the simple CVP formula. 
C) have only one revenue driver. 
D) are the result of multiple products.

Question 8

A non-profit organisation aids the unemployed by supplementing their incomes by $3200 annually,while they seek new employment skills.The organisation has fixed costs of $240 000 and the budgeted appropriation for the year totals $800 000.How many individuals can receive financial assistance this year?

Accepted Answer

A) 175 people 
B) 75 people 
C) 130 people 
D) 100 people 
A) 175 people 
B) 75 people 
C) 130 people 
D) 100 people

Question 9

Dundee Crocodile Hunters will make $500 000 if the hunting season weather is good,$200 000 if the weather is fair,and would actually lose $50 000 if the weather is poor during the season.If the weather service gives a 40% probability of good weather,a 25% probability of fair weather,and a 35% probability of poor weather,what is the expected monetary value for Dundee Crocodile Hunters?

Accepted Answer

A) $200 000 
B) $232 500 
C) $267 500 
D) $500 000 
A) $200 000 
B) $232 500 
C) $267 500 
D) $500 000

Question 10

If variable costs decrease by $1 per unit,the new break-even point is:

Accepted Answer

A) 1539 units. 
B) 492 units. 
C) $11 765 in total sales dollars. 
D) None of these answers are correct. 
A) 1539 units. 
B) 492 units. 
C) $11 765 in total sales dollars. 
D) None of these answers are correct.

Question 11

Gross margin is a measure of how much a company can charge for its products over and above the cost of acquiring or producing them.

Accepted Answer

A) True 
 B)False

Question 12

The cost of goods sold in a manufacturing company include:

Accepted Answer

A) Fixed manufacturing costs. 
B) Fixed non-manufacturing costs. 
C) Fixed manufacturing and selling costs. 
D) All fixed and variable manufacturing costs. 
A) Fixed manufacturing costs. 
B) Fixed non-manufacturing costs. 
C) Fixed manufacturing and selling costs. 
D) All fixed and variable manufacturing costs.

Question 13

Explain why gross margin and contribution margin are often identical in the case of merchandising companies.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

One reason why gross margin and contribu

Question 14

Freddie's company has mostly fixed costs and Valerie's company has mostly variable costs.Which company has the greatest risk of a net loss? Explain why.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Freddie's company has the grea

Question 15

Answer the following questions using the information below:
Koscuiszko Chalet,Inc.sells burgers during the major ski season.During the current year 11 000 burgers were sold resulting in $220 000 of sales revenue,$55 000 of variable costs,and $24 000 of fixed costs.
-If sales increase by $40 000,operating profit will increase by:

Accepted Answer

A) $10 000. 
B) $20 000. 
C) $30 000. 
D) None of these answers are correct. 
A) $10 000. 
B) $20 000. 
C) $30 000. 
D) None of these answers are correct.

Question 16

If a company's sales mix is 2 units of product A for every 3 units of product B,and the company sells 1000 units in total of both products,only 200 units of product A will be sold.

Accepted Answer

A) True 
 B)False

Question 17

To perform cost-volume-profit analysis,a company must be able to separate costs into fixed and variable components.

Accepted Answer

A) True 
 B)False

Question 18

If unit outputs exceed the break-even point:

Accepted Answer

A) total sales revenue exceeds total costs. 
B) there is a profit. 
C) there is a loss. 
D) both total sales revenue exceeds total costs and there is a profit. 
A) total sales revenue exceeds total costs. 
B) there is a profit. 
C) there is a loss. 
D) both total sales revenue exceeds total costs and there is a profit.

Question 19

Dawn's Divewear Company sells only two products,Product A and Product B.
 $$\begin{array} { | l | c | c | c | } 
\hline & \text { Product A } & \text { Product B } & \text { Total } \
\hline \text { Selling price } & \$ 40 & \$ 50 & \
\hline \text { Variable cost per unit } & \$ 24 & \$ 40 & \
\hline \text { Total fixed costs } & & & \$ 840000 \
\hline
\end{array}$$ 
Dawn's Divewear sells two units of Product A for each unit it sells of Product B.Dawn's Divewear faces a tax rate of 30%.
Required:
a.What is the break-even point in units for each product assuming the sales mix is 2 units of Product A for each unit of Product B?
b.What is the break-even point if Dawn's Divewear's tax rate is reduced to 25%,assuming the sales mix is 2 units of Product A for each unit of Product B?
c.How many units of each product would be sold if Dawn's Divewear desired an after-tax net profit of $73 500,facing a tax rate of 30%?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.N = break-even in product B 2N = break

Question 20

In a company with low operating leverage:

Accepted Answer

A) less risk is assumed than in a highly leveraged firm. 
B) fixed costs are high and variable costs are low. 
C) large changes in sales volume result in small changes in net profit. 
D) there is a higher possibility of net loss than a higher-leveraged firm. 
A) less risk is assumed than in a highly leveraged firm. 
B) fixed costs are high and variable costs are low. 
C) large changes in sales volume result in small changes in net profit. 
D) there is a higher possibility of net loss than a higher-leveraged firm.

If a company has a degree of operating leverage of 2.0 and sales increase by 25%,then:

In CVP analysis it is assumed the number of output units is the only revenue driver.

The break-even point in CVP analysis is defined as:

If the sales mix shifts to four units of Product A and one unit of Product B,then the weighted-average contribution margin will:

Multiple cost drivers:

If variable costs decrease by $1 per unit,the new break-even point is:

Gross margin is a measure of how much a company can charge for its products over and above the cost of acquiring or producing them.

The cost of goods sold in a manufacturing company include:

Explain why gross margin and contribution margin are often identical in the case of merchandising companies. _ _

Freddie's company has mostly fixed costs and Valerie's company has mostly variable costs.Which company has the greatest risk of a net loss? Explain why. _ _

If a company's sales mix is 2 units of product A for every 3 units of product B,and the company sells 1000 units in total of both products,only 200 units of product A will be sold.

To perform cost-volume-profit analysis,a company must be able to separate costs into fixed and variable components.

If unit outputs exceed the break-even point:

In a company with low operating leverage:

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 a company has a degree of operating leverage of 2.0 and sales increase by 25%,then:

In CVP analysis it is assumed the number of output units is the only revenue driver.

The break-even point in CVP analysis is defined as:

If the sales mix shifts to four units of Product A and one unit of Product B,then the weighted-average contribution margin will:

Multiple cost drivers:

If variable costs decrease by $1 per unit,the new break-even point is:

Gross margin is a measure of how much a company can charge for its products over and above the cost of acquiring or producing them.

The cost of goods sold in a manufacturing company include:

Explain why gross margin and contribution margin are often identical in the case of merchandising companies. _____________________________________________________________________________________________ _____________________________________________________________________________________________

If a company's sales mix is 2 units of product A for every 3 units of product B,and the company sells 1000 units in total of both products,only 200 units of product A will be sold.

To perform cost-volume-profit analysis,a company must be able to separate costs into fixed and variable components.

If unit outputs exceed the break-even point:

In a company with low operating leverage:

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 why gross margin and contribution margin are often identical in the case of merchandising companies. _ _