Question 1

Assuming all other things are the same, selling price per unit must have _____ if there was a decrease in the break-even point.

Accepted Answer

A)  remained the same 
B)  increased first, then decreased 
C)  increased 
D)  decreased 
A)  remained the same 
B)  increased first, then decreased 
C)  increased 
D)  decreased C

Question 2

Assuming all other things are equal, fixed costs must have _____ if there was a decrease in the break-even point.

Accepted Answer

A)  remained the same 
B)  increased first, then decreased 
C)  increased 
D)  decreased 
A)  remained the same 
B)  increased first, then decreased 
C)  increased 
D)  decreased D

Question 3

Xi Company is the exclusive Iowa distributor of lawn mowers for a small manufacturing company. It sells only one model at £600 per unit and for which Xi pays £250. Xi's other variable costs amount to £50 per unit. Fixed costs are £2,000. In October, Xi sold 15 lawn mowers and it sold 20 in November.
Required:
Calculate the following values:
a.
Monthly break-even point in monetary sales
b.
Monthly break-even point in units
c.
Monthly income for October
d.
Monthly income for November
e.
Margin of safety for October

Accepted Answer

The answer of Xi Company is the exclusive Iowa distributor...

Question 4

Dirth Company sells only one product at a regular price of £7.50 per unit. Variable expenses are 60 percent of sales and fixed expenses are £30,000. Management has decided to decrease the selling price to £6.00 in hopes of increasing its volume of sales. What sales pound level is needed to obtain a before-tax profit of £60,000 when the selling price is £6.00 per unit?

Accepted Answer

A)  £360,000 
B)  £120,000 
C)  £72,000 
D)  £90,000 
A)  £360,000 
B)  £120,000 
C)  £72,000 
D)  £90,000

Question 5

Which of the following statements is true concerning the use of linear analysis at high activity levels (above the range for which the company's facility was designed)?

Accepted Answer

A)  Linear analysis is well suited for estimating total costs at high activity levels. 
B)  Linear analysis likely understates total costs at high activity levels. 
C)  Linear analysis likely overstates total costs at high activity levels. 
D)  Linear analysis of high activity levels fails to capture the fact that total fixed costs decrease as more units are produced. 
A)  Linear analysis is well suited for estimating total costs at high activity levels. 
B)  Linear analysis likely understates total costs at high activity levels. 
C)  Linear analysis likely overstates total costs at high activity levels. 
D)  Linear analysis of high activity levels fails to capture the fact that total fixed costs decrease as more units are produced.

Question 6

If at a given volume total costs and fixed costs are known, the variable costs per unit may be computed as follows:

Accepted Answer

A)  (Total costs - Fixed costs)/Unit volume 
B)  (Total costs/Unit volume) - Fixed costs 
C)  (Total costs × Unit volume) - (Fixed costs/Unit volume) 
D)  Total costs - (Fixed costs/Unit volume) 
A)  (Total costs - Fixed costs)/Unit volume 
B)  (Total costs/Unit volume) - Fixed costs 
C)  (Total costs × Unit volume) - (Fixed costs/Unit volume) 
D)  Total costs - (Fixed costs/Unit volume)

Question 7

Urban Company had the following information: Suppose Urban could reduce setup costs by £300 per setup and could reduce the number of engineering hours needed to 1,400 hours. How many units must be sold to break even in this case?

Accepted Answer

A)  10,670 units 
B)  21,340 units 
C)  6,350 units 
D)  7,500 units 
A)  10,670 units 
B)  21,340 units 
C)  6,350 units 
D)  7,500 units

Question 8

Sarah Smith, a sole proprietor, has the following projected figures for next year: How many units must be sold to obtain a target before-tax profit of £270,000?

Accepted Answer

A)  6,000 units 
B)  20,000 units 
C)  8,572 units 
D)  14,000 units 
A)  6,000 units 
B)  20,000 units 
C)  8,572 units 
D)  14,000 units

Question 9

The Barnes Company manufactures two products. Information about the two product lines is as follows:
The company expects fixed costs to be £189,000. The firm expects 60 percent of its sales (in units) to be Product K (a sales mix of 3:2).
Required:
   
a.
Calculate the contribution margin per package.
b.
Determine the break-even point in units for Product K and Product Y.
c.
Determine the level of sales (in pounds) necessary to generate a before-tax profit of £135,000.

Accepted Answer

The answer of The Barnes Company manufactures two products. Information...

Question 10

Enola, SA., manufactures a product that sells for £400. The variable costs per unit are as follows:
During the year, the budgeted fixed manufacturing overhead is estimated to be £500,000, and budgeted fixed selling and administrative costs are expected to be £250,000. Variable selling costs are £20 per unit.
Required:
   
a.
Determine the break-even point in units.
b.
Determine the number of units that must be sold to earn £300,000 in profit before taxes.
c.
Determine the number of units that must be sold to generate an after-tax profit of £90,000 if there is a 40 percent tax rate.

Accepted Answer

The answer of Enola, SA., manufactures a product that sells...

Question 11

The range of operations within which a linear cost function is valid is called:

Accepted Answer

A)  the linear average. 
B)  the relevant range. 
C)  the marginal range. 
D)  the functional range. 
A)  the linear average. 
B)  the relevant range. 
C)  the marginal range. 
D)  the functional range.

Question 12

The Allen Company had the following income statement for the month of July 2004: If the monthly sales volume increases by 450 units, Allen Company's monthly profits will increase by

Accepted Answer

A)  £9,450.00. 
B)  £1,282.50. 
C)  £13,500.00. 
D)  £14,175.00. 
A)  £9,450.00. 
B)  £1,282.50. 
C)  £13,500.00. 
D)  £14,175.00.

Question 13

The following data pertain to the three products produced by Alberts Ltd.: Fixed costs are £90,000 per month.
Sixty percent of all units sold are Product A, 30 percent are Product B, and 10 percent are Product C.
What is the monthly break-even point for total units?

Accepted Answer

A)  45,000 units 
B)  36,000 units 
C)  60,000 units 
D)  180,000 units 
A)  45,000 units 
B)  36,000 units 
C)  60,000 units 
D)  180,000 units

Question 14

The following diagram is a cost-volume-profit graph for a manufacturing company: Select the answer that best describes the labeled item on the diagram.

Accepted Answer

A)  Area CDE represents the area of net loss. 
B)  Line AC graphs total fixed costs. 
C)  Point D represents the point at which the contribution margin per unit increases. 
D)  Line AC graphs total costs. 
A)  Area CDE represents the area of net loss. 
B)  Line AC graphs total fixed costs. 
C)  Point D represents the point at which the contribution margin per unit increases. 
D)  Line AC graphs total costs.

Question 15

Gilbert Company had the following information:
Required:
   
a.
Calculate the break-even point in units using the traditional approach to CVP analysis.
b.
Calculate the break-even point in units using the activity-based costing approach to CVP analysis.
c.
Calculate the number of units that must be sold to earn a before-tax profit of £40,000.
d.
Suppose Gilbert could reduce setup costs by £300 per setup and could reduce the number of engineering hours needed to 900. How many units must be sold to break even in this case?

Accepted Answer

The answer of Gilbert Company had the following information:
Required:
 ...

Question 16

The income statement for Thomas Manufacturing Company for 2004 is as follows: What is the contribution margin per unit?

Accepted Answer

A)  £7.20 
B)  £1.20 
C)  £4.80 
D)  £120,000 
A)  £7.20 
B)  £1.20 
C)  £4.80 
D)  £120,000

Question 17

A "what if" technique that examines the impact of changes in underlying assumptions on an answer is

Accepted Answer

A)  degree of sensitivity 
B)  sensitivity analysis 
C)  sensitivity training 
D)  none of the above 
A)  degree of sensitivity 
B)  sensitivity analysis 
C)  sensitivity training 
D)  none of the above

Question 18

Total costs may be computed as follows:

Accepted Answer

A)  Fixed costs + (Variable costs per unit × Unit volume) 
B)  (Fixed costs per unit × Unit volume) + Variable costs 
C)  Fixed costs per unit + (Variable costs per unit × Unit volume) 
D)  (Fixed costs per unit × Unit volume) + Variable costs per unit 
A)  Fixed costs + (Variable costs per unit × Unit volume) 
B)  (Fixed costs per unit × Unit volume) + Variable costs 
C)  Fixed costs per unit + (Variable costs per unit × Unit volume) 
D)  (Fixed costs per unit × Unit volume) + Variable costs per unit

Question 19

The Kringel Company provides the following information: What is the break-even point in monetary sales for Kringel?

Accepted Answer

A)  £25,000 
B)  £83,333 
C)  £100,000 
D)  £250,000 
A)  £25,000 
B)  £83,333 
C)  £100,000 
D)  £250,000

Question 20

What is the first step in classifying costs according to behaviour?

Accepted Answer

A)  identify the resources needed and the output of the activity 
B)  measure the outputs and inputs 
C)  determine the time horizon 
D)  determine the impact of output changes on the activity cost 
A)  identify the resources needed and the output of the activity 
B)  measure the outputs and inputs 
C)  determine the time horizon 
D)  determine the impact of output changes on the activity cost

Assuming all other things are the same, selling price per unit must have _____ if there was a decrease in the break-even point.

Assuming all other things are equal, fixed costs must have _____ if there was a decrease in the break-even point.

Which of the following statements is true concerning the use of linear analysis at high activity levels (above the range for which the company's facility was designed)?

If at a given volume total costs and fixed costs are known, the variable costs per unit may be computed as follows:

Urban Company had the following information: Suppose Urban could reduce setup costs by £300 per setup and could reduce the number of engineering hours needed to 1,400 hours. How many units must be sold to break even in this case?

Sarah Smith, a sole proprietor, has the following projected figures for next year: How many units must be sold to obtain a target before-tax profit of £270,000?

The range of operations within which a linear cost function is valid is called:

The Allen Company had the following income statement for the month of July 2004: If the monthly sales volume increases by 450 units, Allen Company's monthly profits will increase by

The following data pertain to the three products produced by Alberts Ltd.: Fixed costs are £90,000 per month. Sixty percent of all units sold are Product A, 30 percent are Product B, and 10 percent are Product C. What is the monthly break-even point for total units?

The following diagram is a cost-volume-profit graph for a manufacturing company: Select the answer that best describes the labeled item on the diagram.

The income statement for Thomas Manufacturing Company for 2004 is as follows: What is the contribution margin per unit?

A "what if" technique that examines the impact of changes in underlying assumptions on an answer is

Total costs may be computed as follows:

The Kringel Company provides the following information: What is the break-even point in monetary sales for Kringel?

What is the first step in classifying costs according to behaviour?

Introduction to Management Accounting

An Introduction to Cost Terms and Concepts

Measuring Relevant Costs and Revenues for Decision-Making

Pricing Decisions and Profitability Analysis

Capital Investment Decisions

Cost Assignment

Activity-Based Costing

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis

Divisional Financial Performance Measurement

Transfer Pricing in Divisionalized Companies

Cost Management

Strategic Performance Management

Filters

Exam 3: Cost-Volume-Profit Analysis

Assuming all other things are the same, selling price per unit must have _____ if there was a decrease in the break-even point.

Assuming all other things are equal, fixed costs must have _____ if there was a decrease in the break-even point.

Which of the following statements is true concerning the use of linear analysis at high activity levels (above the range for which the company's facility was designed)?

If at a given volume total costs and fixed costs are known, the variable costs per unit may be computed as follows:

Urban Company had the following information: Suppose Urban could reduce setup costs by £300 per setup and could reduce the number of engineering hours needed to 1,400 hours. How many units must be sold to break even in this case?

Sarah Smith, a sole proprietor, has the following projected figures for next year: How many units must be sold to obtain a target before-tax profit of £270,000?

The range of operations within which a linear cost function is valid is called:

The Allen Company had the following income statement for the month of July 2004: If the monthly sales volume increases by 450 units, Allen Company's monthly profits will increase by

The following data pertain to the three products produced by Alberts Ltd.: Fixed costs are £90,000 per month. Sixty percent of all units sold are Product A, 30 percent are Product B, and 10 percent are Product C. What is the monthly break-even point for total units?

The following diagram is a cost-volume-profit graph for a manufacturing company: Select the answer that best describes the labeled item on the diagram.

The income statement for Thomas Manufacturing Company for 2004 is as follows: What is the contribution margin per unit?

A "what if" technique that examines the impact of changes in underlying assumptions on an answer is

Total costs may be computed as follows:

The Kringel Company provides the following information: What is the break-even point in monetary sales for Kringel?

What is the first step in classifying costs according to behaviour?

Introduction to Management Accounting

An Introduction to Cost Terms and Concepts

Measuring Relevant Costs and Revenues for Decision-Making

Pricing Decisions and Profitability Analysis

Capital Investment Decisions

Cost Assignment

Activity-Based Costing

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis

Divisional Financial Performance Measurement

Transfer Pricing in Divisionalized Companies

Cost Management

Strategic Performance Management

Filters