Question 1

Cost-volume-profit models assume that

Accepted Answer

A)  the sales mix may vary among multiple products. 
B)  unit selling prices are constant. 
C)  inventories are dynamic and subject to change. 
D)  the total cost function is quadratic. 
A)  the sales mix may vary among multiple products. 
B)  unit selling prices are constant. 
C)  inventories are dynamic and subject to change. 
D)  the total cost function is quadratic.

Question 2

Camp Gordon has annual fixed operating costs of £150,000 and variable cost of £550 per camper. Total fees charged to campers amount to £500 each. The camp expects 350 campers next summer. Projected government grants are £95,000. How much must Camp Gordon raise from other sources to break even?

Accepted Answer

A)  £45,000 
B)  £37,500 
C)  £97,500 
D)  £72,500 
A)  £45,000 
B)  £37,500 
C)  £97,500 
D)  £72,500

Question 3

A profit-volume graph

Accepted Answer

A)  measures profit or loss on the horizontal axis. 
B)  illustrates total revenues, total cost, and profits at various sales volumes. 
C)  is not subject to the same limiting assumptions as cost-volume-profit graphs. 
D)  illustrates the relationship between volume and profits. 
A)  measures profit or loss on the horizontal axis. 
B)  illustrates total revenues, total cost, and profits at various sales volumes. 
C)  is not subject to the same limiting assumptions as cost-volume-profit graphs. 
D)  illustrates the relationship between volume and profits.

Question 4

Describe the cost-volume-profit analysis. Discuss how this analysis can be useful.

Accepted Answer

Cost-Volume-Profit analysis is a techniq

Question 5

Patricia Company produces two products, X and Y, which account for 60 percent and 40 percent, respectively, of total monetary sales. Contribution margin ratios are 50 percent for X and 25 percent for Y. Total fixed costs are £120,000. What is Patricia's break-even point in monetary sales?

Accepted Answer

A)  £300,000 
B)  £328,767 
C)  £342,856 
D)  £375,000 
A)  £300,000 
B)  £328,767 
C)  £342,856 
D)  £375,000

Question 6

As the volume of activity increases within the relevant range, the variable cost per unit

Accepted Answer

A)  decreases. 
B)  decreases at first, then increases. 
C)  remains the same. 
D)  increases. 
A)  decreases. 
B)  decreases at first, then increases. 
C)  remains the same. 
D)  increases.

Question 7

The following diagram is a cost-volume-profit graph for a manufacturing company: The formula to determine the Y-axis value (£) at point D on the graph is as follows:

Accepted Answer

A)  Fixed costs + (Variable costs per unit × Number of units) 
B)  ΣXY - bΣX 
C)  Fixed costs/Unit contribution margin 
D)  Fixed costs/Contribution margin ratio 
A)  Fixed costs + (Variable costs per unit × Number of units) 
B)  ΣXY - bΣX 
C)  Fixed costs/Unit contribution margin 
D)  Fixed costs/Contribution margin ratio

Question 8

At a monthly volume of £25,000, a company incurs variable cost of £19,000 and fixed costs of £6,000.
Required:
Determine each of the following values:
a.
Variable cost ratio
b.
Contribution margin ratio
c.
Monthly break-even pound sales volume
d.
Monthly margin of safety in monetary terms

Accepted Answer

The answer of At a monthly volume of £25,000, a...

Question 9

Information about two products is as follows: The firm expects 60 percent of its sales (in units) to be Product C (a sales mix of 6:4). Fixed costs are expected to be £82,000. Break-even in units would be

Accepted Answer

A)  1,200 units 800 units 
B)  2,460 units 1,312 units 
C)  18,000 units 14,000 units 
D)  6,000 units 4,000 units 
A)  1,200 units 800 units 
B)  2,460 units 1,312 units 
C)  18,000 units 14,000 units 
D)  6,000 units 4,000 units

Question 10

For each of the following situations, draw a graph that best describes the cost behaviour pattern. The vertical axis represents costs, and the horizontal axis represents volume.
a.
Direct materials per unit
b.
Depreciation expense on a building per unit
c.
An employee paid £50 per hour with a guaranteed salary of £1,000 per week
d.
A consultant paid £100 per hour with a maximum fee of £2,000
e.
Salaries of teachers where each teacher can handle a maximum of 15 students

Accepted Answer

The answer of For each of the following situations, draw...

Question 11

A decrease in the sales price in the basic cost-volume-profit model would

Accepted Answer

A)  require a recomputation of the gross profit per unit. 
B)  be offset by an increase in unit costs. 
C)  decrease the break-even volume. 
D)  increase the break-even volume. 
A)  require a recomputation of the gross profit per unit. 
B)  be offset by an increase in unit costs. 
C)  decrease the break-even volume. 
D)  increase the break-even volume.

Question 12

Sarah Smith, a sole proprietor, has the following projected figures for next year: What selling price per unit is needed to obtain a before-tax profit of £270,000 at a volume of 4,000 units?

Accepted Answer

A)  £150.00 
B)  £330.00 
C)  £225.00 
D)  £105.00 
A)  £150.00 
B)  £330.00 
C)  £225.00 
D)  £105.00

Question 13

Explain the limitation of basic cost-volume-profit analysis as it relates to an organization's sales mix.

Accepted Answer

Sales mix refers to the relative portion

Question 14

Malone Printing Company projected the following information for next year: How many units must be sold to obtain an after-tax profit of £67,500?

Accepted Answer

A)  3,750 units 
B)  7,750 units 
C)  5,625 units 
D)  5,167 units 
A)  3,750 units 
B)  7,750 units 
C)  5,625 units 
D)  5,167 units

Question 15

Cost behaviour is necessary in providing cost information for

Accepted Answer

A)  budgeting 
B)  cost control 
C)  decision making 
D)  all of the above 
A)  budgeting 
B)  cost control 
C)  decision making 
D)  all of the above

Question 16

At a price of £32, the estimated monthly sales of a product are 12,000 units. Variable costs include manufacturing costs of £18 and distribution costs of £6. Fixed costs are £40,000 per month.
Required:
Determine each of the following values:
a.
Unit contribution margin
b.
Monthly break-even unit sales volume
c.
Before-tax monthly profit
d.
Monthly margin of safety in units

Accepted Answer

The answer of At a price of £32, the estimated...

Question 17

Information about the Harmon Company's two products includes: If the sales mix in units is 50 percent Product X and 50 percent Product Y, the monthly break-even total monetary sales is

Accepted Answer

A)  £150,000. 
B)  £450,000. 
C)  £510,000. 
D)  £630,000. 
A)  £150,000. 
B)  £450,000. 
C)  £510,000. 
D)  £630,000.

Question 18

Which of the following equations is CORRECT?

Accepted Answer

A)  Sales revenues = Variable expenses - (Fixed expenses + Operating income) 
B)  Sales revenues - Variable expenses - Fixed expenses = Operating income 
C)  Sales revenues + Variable expenses + Fixed expenses = Operating income 
D)  Sales revenues - Fixed expenses = Variable expenses - Operating income 
A)  Sales revenues = Variable expenses - (Fixed expenses + Operating income) 
B)  Sales revenues - Variable expenses - Fixed expenses = Operating income 
C)  Sales revenues + Variable expenses + Fixed expenses = Operating income 
D)  Sales revenues - Fixed expenses = Variable expenses - Operating income

Question 19

The Young Manufacturing Company produces the following three products:
Fixed costs are £76,000 per year.
Fifty percent of all sales in units are hammers, 30 percent are screwdrivers, and 20 percent are saws.
Required:
Calculate the following values:
   
a.
Break-even point in total units
b.
Number of hammers that will be sold at break-even
c.
Total sales in units to obtain a before-tax profit of £19,000

Accepted Answer

The answer of The Young Manufacturing Company produces the following...

Question 20

Thomas Company had the following information: What is the break-even point in units using ABC?

Accepted Answer

A)  30,000 units 
B)  45,000 units 
C)  15,000 units 
D)  75,000 units 
A)  30,000 units 
B)  45,000 units 
C)  15,000 units 
D)  75,000 units

Cost-volume-profit models assume that

Camp Gordon has annual fixed operating costs of £150,000 and variable cost of £550 per camper. Total fees charged to campers amount to £500 each. The camp expects 350 campers next summer. Projected government grants are £95,000. How much must Camp Gordon raise from other sources to break even?

A profit-volume graph

Describe the cost-volume-profit analysis. Discuss how this analysis can be useful.

Patricia Company produces two products, X and Y, which account for 60 percent and 40 percent, respectively, of total monetary sales. Contribution margin ratios are 50 percent for X and 25 percent for Y. Total fixed costs are £120,000. What is Patricia's break-even point in monetary sales?

As the volume of activity increases within the relevant range, the variable cost per unit

The following diagram is a cost-volume-profit graph for a manufacturing company: The formula to determine the Y-axis value (£) at point D on the graph is as follows:

At a monthly volume of £25,000, a company incurs variable cost of £19,000 and fixed costs of £6,000. Required: Determine each of the following values: a. Variable cost ratio b. Contribution margin ratio c. Monthly break-even pound sales volume d. Monthly margin of safety in monetary terms

Information about two products is as follows: The firm expects 60 percent of its sales (in units) to be Product C (a sales mix of 6:4). Fixed costs are expected to be £82,000. Break-even in units would be

A decrease in the sales price in the basic cost-volume-profit model would

Sarah Smith, a sole proprietor, has the following projected figures for next year: What selling price per unit is needed to obtain a before-tax profit of £270,000 at a volume of 4,000 units?

Explain the limitation of basic cost-volume-profit analysis as it relates to an organization's sales mix.

Malone Printing Company projected the following information for next year: How many units must be sold to obtain an after-tax profit of £67,500?

Cost behaviour is necessary in providing cost information for

Information about the Harmon Company's two products includes: If the sales mix in units is 50 percent Product X and 50 percent Product Y, the monthly break-even total monetary sales is

Which of the following equations is CORRECT?

Thomas Company had the following information: What is the break-even point in units using ABC?

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

Cost-volume-profit models assume that

Camp Gordon has annual fixed operating costs of £150,000 and variable cost of £550 per camper. Total fees charged to campers amount to £500 each. The camp expects 350 campers next summer. Projected government grants are £95,000. How much must Camp Gordon raise from other sources to break even?

A profit-volume graph

Describe the cost-volume-profit analysis. Discuss how this analysis can be useful.

Patricia Company produces two products, X and Y, which account for 60 percent and 40 percent, respectively, of total monetary sales. Contribution margin ratios are 50 percent for X and 25 percent for Y. Total fixed costs are £120,000. What is Patricia's break-even point in monetary sales?

As the volume of activity increases within the relevant range, the variable cost per unit

The following diagram is a cost-volume-profit graph for a manufacturing company: The formula to determine the Y-axis value (£) at point D on the graph is as follows:

At a monthly volume of £25,000, a company incurs variable cost of £19,000 and fixed costs of £6,000. Required: Determine each of the following values: a. Variable cost ratio b. Contribution margin ratio c. Monthly break-even pound sales volume d. Monthly margin of safety in monetary terms

Information about two products is as follows: The firm expects 60 percent of its sales (in units) to be Product C (a sales mix of 6:4). Fixed costs are expected to be £82,000. Break-even in units would be

A decrease in the sales price in the basic cost-volume-profit model would

Sarah Smith, a sole proprietor, has the following projected figures for next year: What selling price per unit is needed to obtain a before-tax profit of £270,000 at a volume of 4,000 units?

Explain the limitation of basic cost-volume-profit analysis as it relates to an organization's sales mix.

Malone Printing Company projected the following information for next year: How many units must be sold to obtain an after-tax profit of £67,500?

Cost behaviour is necessary in providing cost information for

Information about the Harmon Company's two products includes: If the sales mix in units is 50 percent Product X and 50 percent Product Y, the monthly break-even total monetary sales is

Which of the following equations is CORRECT?

Thomas Company had the following information: What is the break-even point in units using ABC?

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