Question 1

Stephanie's Stuffed Animals reported the following:
   
Required:
a.Compute contribution margin.
b.Compute gross margin.
c.Compute operating income.

Accepted Answer

a.Contribution margin $1,000 -

Question 2

Total revenues less total fixed costs equal the contribution margin.

Accepted Answer

A) True 
 B)False

Question 3

Operating costs include

Accepted Answer

A) interest costs. 
B) income taxes. 
C) only cost of goods sold. 
D) all fixed and variable costs. 
E) operating expenses and cost of goods sold. 
A) interest costs. 
B) income taxes. 
C) only cost of goods sold. 
D) all fixed and variable costs. 
E) operating expenses and cost of goods sold.

Question 4

CVP analysis requires the time value of money to be factored into formula when comparing revenues and costs.

Accepted Answer

A) True 
 B)False

Question 5

Use the information below to answer the following question(s).
Brian O'Neil intends to sell his customers a special round-trip airline ticket package.He is able to purchase the package from the airline carrier for $400 each.The airline intends to reimburse Brian for any unsold ticket packages.The round-trip tickets will be sold for $500 each.Brian has a tax rate of 30% on his business income.
-What is the dollar amount of sales required for Brian to earn an after-tax profit of $7,000 if fixed costs are $10,000?

Accepted Answer

A) $17,000 
B) $50,000 
C) $70,588 
D) $85,000 
E) $100,000 
A) $17,000 
B) $50,000 
C) $70,588 
D) $85,000 
E) $100,000

Question 6

Which of the following statements about sensitivity analysis is TRUE?

Accepted Answer

A) It is a technique which is used to examine past results. 
B) It can be used in CVP to show changes in operating income if variable costs per unit change. 
C) It examines the relationship between production and service departments. 
D) It shows the impact of a manager's behaviour. 
E) It is relevant for isolating conversion costs. 
A) It is a technique which is used to examine past results. 
B) It can be used in CVP to show changes in operating income if variable costs per unit change. 
C) It examines the relationship between production and service departments. 
D) It shows the impact of a manager's behaviour. 
E) It is relevant for isolating conversion costs.

Question 7

The agency supervisor of a non-profit organization wants to know how many individuals may receive financial assistance during the year.The organization has fixed costs of $600,000.They aid the unemployed by supplementing their incomes by $8,000 annually,while they seek new employment skills.The budgeted appropriation for the year is $2,000,000.Based on this financial data,how many individuals can receive financial assistance?

Accepted Answer

A) 175 people 
B) 130 people 
C) 100 people 
D) 75 people 
E) 50 people 
A) 175 people 
B) 130 people 
C) 100 people 
D) 75 people 
E) 50 people

Question 8

Capital intensive companies have less risk because their relatively lower operating leverage suggests that they have already made large investments in capital assets.

Accepted Answer

A) True 
 B)False

Question 9

Use the information below to answer the following question(s).
Dr.Mickey Finn performs a certain procedure for $400.00.The fixed costs are $8,000 and variable costs are $200.00 per procedure.
-What is the budgeted revenue assuming the procedure is performed 200 times?

Accepted Answer

A) $40,000 
B) $80,000 
C) $120,000 
D) $160,000 
E) $320,000 
A) $40,000 
B) $80,000 
C) $120,000 
D) $160,000 
E) $320,000

Question 10

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 11

Big Ben Golf Accessories makes novelty electronic equipment for golf enthusiasts.One of their most popular accessories is the "Putting Magician." This electronic device analyses puts and provides instruction on the direction and pace of a put.Although not allowed under the rules amateur golfers have purchased or received as a gift 17,300 of these last year from a total production of 18,000 units.The recommended retail price is $139 and the wholesale price received by Big Ben Golf Accessories is $90.
The company's variable production costs are $62 per unit.Per unit fixed manufacturing costs are $7.Other fixed costs are $65,000 for rent;$290,000 in salaries;$75,000 for a product endorsement.The tax rate is 25%.
Required:
a.How many units must be sold to breakeven?
b.What is the amount of sales in dollars required to earn an after-tax profit of $300,000?

Accepted Answer

a.Breakeven in units
CM = $90 - $62 = $2

Question 12

The Holiday Card Company,a producer of specialty cards,has asked you to complete several
calculations based upon the following information:
   
Required:
a.What is the break-even point in cards?
b.What sales volume is needed to earn an after-tax net income of $13,028.40?
c.How many cards must be sold to earn an after-tax net income of $18,480?

Accepted Answer

a.$46,200/($6.60 - $5.28)= 35,000 units

Question 13

In a company with low operating leverage

Accepted Answer

A) fixed costs are high and variable costs are low. 
B) small increases in sales lead to large increases in operating income. 
C) there is a higher possibility of net loss than a higher-leveraged firm. 
D) less risk is assumed than in a highly leveraged firm. 
E) companies follow the strategy of replacing variable costs with fixed costs. 
A) fixed costs are high and variable costs are low. 
B) small increases in sales lead to large increases in operating income. 
C) there is a higher possibility of net loss than a higher-leveraged firm. 
D) less risk is assumed than in a highly leveraged firm. 
E) companies follow the strategy of replacing variable costs with fixed costs.

Question 14

Alex Miller,Inc. ,sells car batteries to service stations for an average of $30 each.The variable cost of each battery is $20 and monthly fixed manufacturing costs total $10,000.Other monthly fixed costs of the company total $8,000.
Required:
a.What is the breakeven point in batteries?
b.What is the margin of safety,assuming sales total $60,000?
c.What is the breakeven level in batteries,assuming variable costs increase by 20%?
d.What is the breakeven level in batteries,assuming the selling price goes up by 10%,fixed manufacturing costs decline by 10%,and other fixed costs decline by $100?

Accepted Answer

The answer of Alex Miller,Inc. ,sells car batteries to service...

Question 15

Answer the following question(s)using the information below.
The following information is for the Jeffries Corporation:
  
-What is the operating income,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) $300,000 
B) $60,000 
C) $225,000 
D) $50,000 
E) $75,000 
A) $300,000 
B) $60,000 
C) $225,000 
D) $50,000 
E) $75,000

Question 16

If the tax rate is t,it is possible to calculate planned operating income by

Accepted Answer

A) dividing net operating income by t. 
B) dividing net operating income by 1 - t. 
C) multiplying net operating income by t. 
D) multiplying net operating income by 1 - t. 
E) dividing net operating income by t - 1. 
A) dividing net operating income by t. 
B) dividing net operating income by 1 - t. 
C) multiplying net operating income by t. 
D) multiplying net operating income by 1 - t. 
E) dividing net operating income by t - 1.

Question 17

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 18

If unit sales exceed the break-even point when using the graph method

Accepted Answer

A) there is a loss because the total cost line exceeds the total revenue line. 
B) total sales exceed total costs. 
C) there is a profit because the total cost line exceeds the total revenue line. 
D) expenses are extremely high relative to revenues. 
E) operating income is negative (an operating loss). 
A) there is a loss because the total cost line exceeds the total revenue line. 
B) total sales exceed total costs. 
C) there is a profit because the total cost line exceeds the total revenue line. 
D) expenses are extremely high relative to revenues. 
E) operating income is negative (an operating loss).

Question 19

Which of the following are necessary assumptions when using the contribution margin method of determining the break-even point?

Accepted Answer

A) Average unit costs must be known. 
B) There must be an input-related cost driver. 
C) Fixed costs are irrelevant. 
D) Total variable cost must be known. 
E) Unit selling price and unit variable cost must be known. 
A) Average unit costs must be known. 
B) There must be an input-related cost driver. 
C) Fixed costs are irrelevant. 
D) Total variable cost must be known. 
E) Unit selling price and unit variable cost must be known.

Question 20

In CVP analysis,an assumption is made that the total revenues are linear with respect to output units,but that total costs are non-linear with respect to output units.

Accepted Answer

A) True 
 B)False

Stephanie's Stuffed Animals reported the following: Required: a.Compute contribution margin. b.Compute gross margin. c.Compute operating income.

Total revenues less total fixed costs equal the contribution margin.

Operating costs include

CVP analysis requires the time value of money to be factored into formula when comparing revenues and costs.

Which of the following statements about sensitivity analysis is TRUE?

Capital intensive companies have less risk because their relatively lower operating leverage suggests that they have already made large investments in capital assets.

Use the information below to answer the following question(s). Dr.Mickey Finn performs a certain procedure for $400.00.The fixed costs are $8,000 and variable costs are $200.00 per procedure. -What is the budgeted revenue assuming the procedure is performed 200 times?

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.

In a company with low operating leverage

Answer the following question(s)using the information below. The following information is for the Jeffries Corporation: -What is the operating income,assuming actual sales total 25,000 units,and the sales mix is three units of Product A and one unit of Product B?

If the tax rate is t,it is possible to calculate planned operating income by

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

If unit sales exceed the break-even point when using the graph method

Which of the following are necessary assumptions when using the contribution margin method of determining the break-even point?

In CVP analysis,an assumption is made that the total revenues are linear with respect to output units,but that total costs are non-linear with respect to output units.

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets,variances,and Management Control: I

Flexible Budgets,variances,and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Analysis of Cost Behaviour

Decision Making and Relevant Information

Pricing Decisions, product Profitability Decisions, and Cost Management

Strategy,balanced Scorecard,and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, rework, and Scrap

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

Exam 3: Cost-Volume-Profit Analysis

Stephanie's Stuffed Animals reported the following: Required: a.Compute contribution margin. b.Compute gross margin. c.Compute operating income.

Total revenues less total fixed costs equal the contribution margin.

Operating costs include

CVP analysis requires the time value of money to be factored into formula when comparing revenues and costs.

Which of the following statements about sensitivity analysis is TRUE?

Capital intensive companies have less risk because their relatively lower operating leverage suggests that they have already made large investments in capital assets.

Use the information below to answer the following question(s). Dr.Mickey Finn performs a certain procedure for $400.00.The fixed costs are $8,000 and variable costs are $200.00 per procedure. -What is the budgeted revenue assuming the procedure is performed 200 times?

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.

In a company with low operating leverage

Answer the following question(s)using the information below. The following information is for the Jeffries Corporation: -What is the operating income,assuming actual sales total 25,000 units,and the sales mix is three units of Product A and one unit of Product B?

If the tax rate is t,it is possible to calculate planned operating income by

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

If unit sales exceed the break-even point when using the graph method

Which of the following are necessary assumptions when using the contribution margin method of determining the break-even point?

In CVP analysis,an assumption is made that the total revenues are linear with respect to output units,but that total costs are non-linear with respect to output units.

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets,variances,and Management Control: I

Flexible Budgets,variances,and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Analysis of Cost Behaviour

Decision Making and Relevant Information

Pricing Decisions, product Profitability Decisions, and Cost Management

Strategy,balanced Scorecard,and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, rework, and Scrap

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters