Question 1

Multiple cost drivers ________.

Accepted Answer

A)  have only one revenue driver 
B)  can utilize the simple CVP formula 
C)  have no unique breakeven point 
D)  are the result of multiple products 
A)  have only one revenue driver 
B)  can utilize the simple CVP formula 
C)  have no unique breakeven point 
D)  are the result of multiple products

Question 2

Answer the following questions using the information below:
Bell Company sells several products. Information of average revenue and costs is as follows:
 $\begin{array}{lr}
\text { Selling price per unit } & \$ 28.50 \
\text { Variable costs per unit: } & \
\text { Direct material } & \$ 5.25 \
\text { Direct manufacturing labor } & \$ 1.15 \
\text { Manufacturing overhead } & \$ 0.25 \
\quad \text { Selling costs } & \$ 1.85 \
\text { Annual fixed costs } & \$ 110,000
\end{array}$
$\text { The company sells } 10,000 \text { units. }$
-The contribution margin per unit is ________.

Accepted Answer

A)  $15 
B)  $20 
C)  $22 
D)  $125 
A)  $15 
B)  $20 
C)  $22 
D)  $125

Question 3

Gross Margin will always be greater than contribution margin.

Accepted Answer

A) True 
 B)False

Question 4

Atlanta Radio Supply sells only two products,Product X and Product Y.
 $$\begin{array} { | l | c | c | c | } 
\hline & \text { Product } X & \text { Product } Y & \text { Total } \
\hline \text { Selling price } & \$ 25 & \$ 45 & \
\hline \text { Variable cost per unit } & \$ 20 & \$ 35 & \
\hline \text { Total fixed costs } & & & \$ 350,000 \
\hline
\end{array}$$ Atlanta Radio Supply sells three units of Product X for each two units it sells of Product Y.Atlanta Radio Supply has a tax rate of 25%.
Required:
a.What is the breakeven point in units for each product,assuming the sales mix is 3 units of Product X for each two units of Product Y?
b.How many units of each product would be sold if Atlanta Radio Supply desired an after-tax net income of $210,000,using its tax rate of 25%?

Accepted Answer

a.3N = breakeven in product X 2N = break

Question 5

For every $25,000 of ticket packages sold,operating income will increase by ________.

Accepted Answer

A)  $6,250 
B)  $12,500 
C)  $18,750 
D)  $15,000 
A)  $6,250 
B)  $12,500 
C)  $18,750 
D)  $15,000

Question 6

Sales mix is the quantities or proportion of various products or services that constitute a company's total unit sales.

Accepted Answer

A) True 
 B)False

Question 7

Bovous Stores,Inc.,sells several products.Information of average revenue and costs is as follows: $\begin{array}{lr}
\text { Selling price per unit } & \$ 20.00 \
\text { Variable costs per unit: } & \
\text { Direct material } & \$ 4.00 \
\text { Direct manufacturing labor } & \$ 1.60 \
\text { Manufacturing overhead } & \$ 0.40 \
\text { Selling costs } & \$ 2.00 \
\text { Annual fixed costs } & \$ 96,000
\end{array}$ 
What is the contribution margin percentage?

Accepted Answer

A)  60% 
B)  66% 
C)  33% 
D)  55% 
A)  60% 
B)  66% 
C)  33% 
D)  55%

Question 8

The difference between total revenues and total variable costs is called profit margin.

Accepted Answer

A) True 
 B)False

Question 9

Breakeven point is the point at which operating income is zero.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is an assumption of CVP analysis?

Accepted Answer

A)  Total costs can be divided into a fixed component and a component that is variable with respect to the level of output. 
B)  When graphed, total costs curve upward. 
C)  The unit-selling price is variable as it is subject to demand and supply. 
D)  Total costs can be divided into inventoriable and period costs with respect to the level of output. 
A)  Total costs can be divided into a fixed component and a component that is variable with respect to the level of output. 
B)  When graphed, total costs curve upward. 
C)  The unit-selling price is variable as it is subject to demand and supply. 
D)  Total costs can be divided into inventoriable and period costs with respect to the level of output.

Question 11

A revenue driver is defined as ________.

Accepted Answer

A)  any factor that affects costs and revenues 
B)  any factor that affects revenues 
C)  the only factor that can influence a change in selling price 
D)  the only factor that can influence a change in demand 
A)  any factor that affects costs and revenues 
B)  any factor that affects revenues 
C)  the only factor that can influence a change in selling price 
D)  the only factor that can influence a change in demand

Question 12

Operating income plus total fixed costs equals the contribution margin.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

a.The accounting system includes some as

Question 14

Answer the following questions using the information below:
Star Jewelry sells 500 units resulting in $75,000 of sales revenue, $28,000 of variable costs, and $18,000 of fixed costs.
-The number of units that must be sold to achieve $40,000 of operating income is ________.

Accepted Answer

A)  677 units 
B)  717 units 
C)  617 units 
D)  650 units 
A)  677 units 
B)  717 units 
C)  617 units 
D)  650 units

Question 15

If breakeven point is 1,000 units,each unit sells for $30,and fixed costs are $10,000,then on a graph the ________.

Accepted Answer

A)  total revenue line and the total cost line will intersect at $30,000 of revenue 
B)  total cost line will be zero at zero units sold 
C)  revenue line will start at $10,000 
D)  total revenue line and the total cost line will intersect at $40,000 of revenue 
A)  total revenue line and the total cost line will intersect at $30,000 of revenue 
B)  total cost line will be zero at zero units sold 
C)  revenue line will start at $10,000 
D)  total revenue line and the total cost line will intersect at $40,000 of revenue

Question 16

All else being equal,an increase in advertising expenditures will ________.

Accepted Answer

A)  reduce operating income 
B)  reduce contribution margin 
C)  increase variable costs 
D)  increase selling price 
A)  reduce operating income 
B)  reduce contribution margin 
C)  increase variable costs 
D)  increase selling price

Question 17

Sales total $400,000 when variable costs total $300,000 and fixed costs total $50,000.The breakeven point in sales dollars is ________.

Accepted Answer

A)  $200,000 
B)  $120,000 
C)  $170,000 
D)  $210,000 
A)  $200,000 
B)  $120,000 
C)  $170,000 
D)  $210,000

Question 18

If the sales mix shifts to four units of Product A and one unit of Product B,then the breakeven point will ________.

Accepted Answer

A)  increase 
B)  stay the same 
C)  decrease 
D)  either decrease or remain same 
A)  increase 
B)  stay the same 
C)  decrease 
D)  either decrease or remain same

Question 19

What would be the expected monetary value for Avalia Corp using the probability method? $$\begin{array} { c c } 
\text { Probability } & \text { Cash Inflows } \
0.20 & \$ 200,000 \
0.30 & \$ 160,000 \
0.15 & \$ 120,000 \
0.35 & \$ 50,000
\end{array}$$

Accepted Answer

A)  $40,000 
B)  $188,000 
C)  $123,500 
D)  $60,000 
A)  $40,000 
B)  $188,000 
C)  $123,500 
D)  $60,000

Question 20

Sensitivity analysis is a "what-if" technique that managers use to examine how a result will change if the originally predicted data are not achieved or if an underlying assumption changes.

Accepted Answer

A) True 
 B)False

Multiple cost drivers ________.

Gross Margin will always be greater than contribution margin.

For every $25,000 of ticket packages sold,operating income will increase by ________.

Sales mix is the quantities or proportion of various products or services that constitute a company's total unit sales.

The difference between total revenues and total variable costs is called profit margin.

Breakeven point is the point at which operating income is zero.

Which of the following is an assumption of CVP analysis?

A revenue driver is defined as ________.

Operating income plus total fixed costs equals the contribution margin.

Answer the following questions using the information below: Star Jewelry sells 500 units resulting in $75,000 of sales revenue, $28,000 of variable costs, and $18,000 of fixed costs. -The number of units that must be sold to achieve $40,000 of operating income is ________.

If breakeven point is 1,000 units,each unit sells for $30,and fixed costs are $10,000,then on a graph the ________.

All else being equal,an increase in advertising expenditures will ________.

Sales total $400,000 when variable costs total $300,000 and fixed costs total $50,000.The breakeven point in sales dollars is ________.

If the sales mix shifts to four units of Product A and one unit of Product B,then the breakeven point will ________.

What would be the expected monetary value for Avalia Corp using the probability method? Probability Cash Inflows 0.20 \ 200,000 0.30 \ 160,000 0.15 \ 120,000 0.35 \ 50,000

Sensitivity analysis is a "what-if" technique that managers use to examine how a result will change if the originally predicted data are not achieved or if an underlying assumption changes.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

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

Filters

Exam 3: Cost-Volume-Profit Analysis

Multiple cost drivers ________.

Gross Margin will always be greater than contribution margin.

For every $25,000 of ticket packages sold,operating income will increase by ________.

Sales mix is the quantities or proportion of various products or services that constitute a company's total unit sales.

The difference between total revenues and total variable costs is called profit margin.

Breakeven point is the point at which operating income is zero.

Which of the following is an assumption of CVP analysis?

A revenue driver is defined as ________.

Operating income plus total fixed costs equals the contribution margin.

Answer the following questions using the information below: Star Jewelry sells 500 units resulting in $75,000 of sales revenue, $28,000 of variable costs, and $18,000 of fixed costs. -The number of units that must be sold to achieve $40,000 of operating income is ________.

If breakeven point is 1,000 units,each unit sells for $30,and fixed costs are $10,000,then on a graph the ________.

All else being equal,an increase in advertising expenditures will ________.

Sales total $400,000 when variable costs total $300,000 and fixed costs total $50,000.The breakeven point in sales dollars is ________.

If the sales mix shifts to four units of Product A and one unit of Product B,then the breakeven point will ________.

What would be the expected monetary value for Avalia Corp using the probability method? Probability Cash Inflows 0.20 \ 200,000 0.30 \ 160,000 0.15 \ 120,000 0.35 \ 50,000

Sensitivity analysis is a "what-if" technique that managers use to examine how a result will change if the originally predicted data are not achieved or if an underlying assumption changes.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

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

Filters