Question 1

In the formula, Total cost = Fixed cost + (Variable rate x Output), variable cost refers to the

Accepted Answer

A)  slope parameter or b 
B)  intercept parameter or a 
C)  dependent variable 
D)  independent variable 
A)  slope parameter or b 
B)  intercept parameter or a 
C)  dependent variable 
D)  independent variable

Question 2

Product 1 has a contribution margin of £6.00 per unit, and Product 2 has a contribution margin of £7.50 per unit. Total fixed costs are £300,000. Sales mix and total volume varies from one period to another. Which of the following is TRUE?

Accepted Answer

A)  At a sales volume in excess of 25,000 units of 1 and 25,000 units of 2, operations will be profitable. 
B)  The ratio of net profit to total sales for 2 will be larger than the ratio of net profit to total sales for 1. 
C)  The contribution margin per unit of direct materials is lower for 1 than for 2. 
D)  The ratio of contribution to total sales always will be larger for 1 than for 2. 
A)  At a sales volume in excess of 25,000 units of 1 and 25,000 units of 2, operations will be profitable. 
B)  The ratio of net profit to total sales for 2 will be larger than the ratio of net profit to total sales for 1. 
C)  The contribution margin per unit of direct materials is lower for 1 than for 2. 
D)  The ratio of contribution to total sales always will be larger for 1 than for 2.

Question 3

In a cost-volume-profit graph, the slope of the total cost line represents

Accepted Answer

A)  the selling price per unit. 
B)  the contribution margin per unit. 
C)  the variable cost per unit. 
D)  total contribution margin. 
A)  the selling price per unit. 
B)  the contribution margin per unit. 
C)  the variable cost per unit. 
D)  total contribution margin.

Question 4

Boss Company currently leases a delivery van from Check Enterprises for a fee of £250 per month plus £0.40 per mile. Management is evaluating the desirability of switching to a modern, fuel-efficient van, which can be leased from David, SA., for a fee of £600 per month plus £0.05 per mile. All operating costs and fuel are included in the rental fees. In general,

Accepted Answer

A)  a lease from David, SA., is economically preferable to a lease from Check Enterprises regardless of the monthly use. 
B)  a lease from Check Enterprises is economically preferable below 1,000 miles per month. 
C)  a lease from Check Enterprises is economically preferable to a lease from David, SA., regardless of the monthly use. 
D)  a lease from Check Enterprises is economically preferable above 1,000 miles per month. 
A)  a lease from David, SA., is economically preferable to a lease from Check Enterprises regardless of the monthly use. 
B)  a lease from Check Enterprises is economically preferable below 1,000 miles per month. 
C)  a lease from Check Enterprises is economically preferable to a lease from David, SA., regardless of the monthly use. 
D)  a lease from Check Enterprises is economically preferable above 1,000 miles per month.

Question 5

The Waldo Company had the following functional income statement for the month of July 2004:
There were no beginning and ending inventories.
Required:
   
a.
Calculate the contribution margin per unit.
b.
Calculate the contribution margin ratio.
c.
What is the break-even point in units?
d.
What is the monetary amount of sales in needed to obtain a before-tax profit of £40,000?

Accepted Answer

The answer of The Waldo Company had the following functional...

Question 6

Which of the following assumptions is NOT necessary for cost-volume-profit analysis?

Accepted Answer

A)  Total variable costs are linear. 
B)  Total revenues increase when total costs increase. 
C)  Inventories are constant. 
D)  The product sales mix is constant. 
A)  Total variable costs are linear. 
B)  Total revenues increase when total costs increase. 
C)  Inventories are constant. 
D)  The product sales mix is constant.

Question 7

Assuming all other things are the same, contribution margin per unit must have _____ if there was an increase 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

Question 8

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 is the new break-even point in units for Dirth Company when the selling price is £6.00?

Accepted Answer

A)  10,000 units 
B)  6,667 units 
C)  4,000 units 
D)  20,000 units 
A)  10,000 units 
B)  6,667 units 
C)  4,000 units 
D)  20,000 units

Question 9

Which of the following equations is TRUE?

Accepted Answer

A)  Contribution margin = Sales revenue × Variable cost ratio 
B)  Contribution margin ratio = Contribution margin/Variable costs 
C)  Contribution margin = Fixed costs 
D)  Contribution margin ratio = 1 - Variable cost ratio 
A)  Contribution margin = Sales revenue × Variable cost ratio 
B)  Contribution margin ratio = Contribution margin/Variable costs 
C)  Contribution margin = Fixed costs 
D)  Contribution margin ratio = 1 - Variable cost ratio

Question 10

Total contribution margin is calculated by subtracting

Accepted Answer

A)  cost of goods sold from total revenues. 
B)  fixed costs from total revenues. 
C)  total manufacturing costs from total revenues. 
D)  total variable costs from total revenues. 
A)  cost of goods sold from total revenues. 
B)  fixed costs from total revenues. 
C)  total manufacturing costs from total revenues. 
D)  total variable costs from total revenues.

Question 11

Zachary Plumbing Company has the following information for 2004:
Required:
Prepare a profit-volume graph identifying the following items:
   
a.
Profit line
b.
Intersection of profit line and vertical axis
c.
Break-even point
d.
Profit area
e.
Loss area

Accepted Answer

*The break

Question 12

Using cost-volume-profit analysis, we can conclude that a 20 percent reduction in variable costs will

Accepted Answer

A)  reduce the break-even sales volume by 20 percent. 
B)  reduce total costs by 20 percent. 
C)  reduce the slope of the total cost line by 20 percent. 
D)  not affect the break-even sales volume if there is an offsetting 20 percent increase in fixed costs. 
A)  reduce the break-even sales volume by 20 percent. 
B)  reduce total costs by 20 percent. 
C)  reduce the slope of the total cost line by 20 percent. 
D)  not affect the break-even sales volume if there is an offsetting 20 percent increase in fixed costs.

Question 13

Arnold Ltd.has the following information for 2001:
Required:
Prepare a cost-volume-profit graph identifying the following items:
   a. Total costs line
b. Total fixed costs line
c. Total variable costs line
d. Total revenues line
e. Break-even point in monetary sales
f. Break-even point in units
g. Profit area
h. Loss area

Accepted Answer

The answer of Arnold Ltd.has the following information for 2001:
Required:
Prepare...

Question 14

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

Accepted Answer

A)  5,625 units 
B)  16,875 units 
C)  7,500 units 
D)  11,250 units 
A)  5,625 units 
B)  16,875 units 
C)  7,500 units 
D)  11,250 units

Question 15

Lewis Production Company had the following projected information for 2004: What is the profit when one unit more than the break-even point is sold?

Accepted Answer

A)  £150 
B)  £60 
C)  £1,500,150 
D)  £600,060 
A)  £150 
B)  £60 
C)  £1,500,150 
D)  £600,060

Question 16

In a cost-volume-profit graph, the slope of the total revenue line represents

Accepted Answer

A)  the selling price per unit. 
B)  the contribution margin per unit. 
C)  the variable cost per unit. 
D)  total contribution margin. 
A)  the selling price per unit. 
B)  the contribution margin per unit. 
C)  the variable cost per unit. 
D)  total contribution margin.

Question 17

The relevant range is

Accepted Answer

A)  a relatively wide range of sales where total variable costs remain the same. 
B)  a relatively wide range of sales where all costs remain the same. 
C)  a relatively narrow range of production where total variable costs remain the same. 
D)  a relatively wide span of production where total fixed costs are expected to remain the same. 
A)  a relatively wide range of sales where total variable costs remain the same. 
B)  a relatively wide range of sales where all costs remain the same. 
C)  a relatively narrow range of production where total variable costs remain the same. 
D)  a relatively wide span of production where total fixed costs are expected to remain the same.

Question 18

When the volume of activity increases within the relevant range, the fixed 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 19

Assume the following cost behaviour data for Portrait Company: What volume of monetary sales is required to earn a before-tax income of £27,000?

Accepted Answer

A)  £198,000 
B)  £180,000 
C)  £90,000 
D)  £270,000 
A)  £198,000 
B)  £180,000 
C)  £90,000 
D)  £270,000

Question 20

Which of the following assumptions does NOT pertain to cost-volume-profit analysis?

Accepted Answer

A)  The units produced will equal the units sold. 
B)  Inventories are constant. 
C)  All costs are classified as fixed or variable. 
D)  Sales mix may vary during the related period. 
A)  The units produced will equal the units sold. 
B)  Inventories are constant. 
C)  All costs are classified as fixed or variable. 
D)  Sales mix may vary during the related period.

In the formula, Total cost = Fixed cost + (Variable rate x Output), variable cost refers to the

Product 1 has a contribution margin of £6.00 per unit, and Product 2 has a contribution margin of £7.50 per unit. Total fixed costs are £300,000. Sales mix and total volume varies from one period to another. Which of the following is TRUE?

In a cost-volume-profit graph, the slope of the total cost line represents

Which of the following assumptions is NOT necessary for cost-volume-profit analysis?

Assuming all other things are the same, contribution margin per unit must have _____ if there was an increase in the break-even point.

Which of the following equations is TRUE?

Total contribution margin is calculated by subtracting

Zachary Plumbing Company has the following information for 2004: Required: Prepare a profit-volume graph identifying the following items: a. Profit line b. Intersection of profit line and vertical axis c. Break-even point d. Profit area e. Loss area

Using cost-volume-profit analysis, we can conclude that a 20 percent reduction in variable costs will

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

Lewis Production Company had the following projected information for 2004: What is the profit when one unit more than the break-even point is sold?

In a cost-volume-profit graph, the slope of the total revenue line represents

The relevant range is

When the volume of activity increases within the relevant range, the fixed cost per unit

Assume the following cost behaviour data for Portrait Company: What volume of monetary sales is required to earn a before-tax income of £27,000?

Which of the following assumptions does NOT pertain to cost-volume-profit analysis?

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

In the formula, Total cost = Fixed cost + (Variable rate x Output), variable cost refers to the

Product 1 has a contribution margin of £6.00 per unit, and Product 2 has a contribution margin of £7.50 per unit. Total fixed costs are £300,000. Sales mix and total volume varies from one period to another. Which of the following is TRUE?

In a cost-volume-profit graph, the slope of the total cost line represents

Which of the following assumptions is NOT necessary for cost-volume-profit analysis?

Assuming all other things are the same, contribution margin per unit must have _____ if there was an increase in the break-even point.

Which of the following equations is TRUE?

Total contribution margin is calculated by subtracting

Zachary Plumbing Company has the following information for 2004: Required: Prepare a profit-volume graph identifying the following items: a. Profit line b. Intersection of profit line and vertical axis c. Break-even point d. Profit area e. Loss area

Using cost-volume-profit analysis, we can conclude that a 20 percent reduction in variable costs will

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

Lewis Production Company had the following projected information for 2004: What is the profit when one unit more than the break-even point is sold?

In a cost-volume-profit graph, the slope of the total revenue line represents

The relevant range is

When the volume of activity increases within the relevant range, the fixed cost per unit

Assume the following cost behaviour data for Portrait Company: What volume of monetary sales is required to earn a before-tax income of £27,000?

Which of the following assumptions does NOT pertain to cost-volume-profit analysis?

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