Question 1

Contribution margin is the amount that contributes to covering variable costs.

Accepted Answer

A) True 
 B)False  False

Question 2

Which of the following costs do NOT change in total despite changes in volume within the relevant range?

Accepted Answer

A)  fixed costs 
B)  variable costs 
C)  mixed costs 
D)  total production costs 
A)  fixed costs 
B)  variable costs 
C)  mixed costs 
D)  total production costs A

Question 3

Which of the following is an assumption of cost-volume-profit (CVP)analysis?

Accepted Answer

A)  the price per unit does not change as volume changes 
B)  mangers classify all costs as mixed 
C)  total fixed costs change in the relevant range 
D)  the number of products produced exceeds the number of products sold 
A)  the price per unit does not change as volume changes 
B)  mangers classify all costs as mixed 
C)  total fixed costs change in the relevant range 
D)  the number of products produced exceeds the number of products sold A

Question 4

How is the contribution margin ratio calculated?

Accepted Answer

Contribution Margin

Question 5

Sensitivity analysis empowers managers with better information for decision making by analyzing how various business strategies will affect profits earned by the company.

Accepted Answer

A) True 
 B)False

Question 6

From the graph given below,identify the fixed costs line.

Accepted Answer

A)  OB 
B)  AC 
C)  AD 
D)  AE 
A)  OB 
B)  AC 
C)  AD 
D)  AE

Question 7

Petrous Company incurs both fixed and variable production costs.Assuming that production is within the relevant range,if volume goes up by 28%,then the total variable costs would ________.

Accepted Answer

A)  increase by 28% 
B)  remain the same 
C)  increase by an amount less than 28% 
D)  decrease by 28% 
A)  increase by 28% 
B)  remain the same 
C)  increase by an amount less than 28% 
D)  decrease by 28%

Question 8

How is the unit contribution margin calculated?

Accepted Answer

Unit Contribution Ma

Question 9

Under absorption costing,the more fixed manufacturing overhead in ending Finished Goods Inventory,the larger the Cost of Goods Sold.

Accepted Answer

A) True 
 B)False

Question 10

Managers can use contribution margin to predict the change in operating income when volume changes.

Accepted Answer

A) True 
 B)False

Question 11

Drenning Manufacturing produces flooring material.The monthly fixed costs are $10,000 per month.The unit sales price is $75,and variable cost per unit is $35.Drenning wishes to earn an operating income of $25,000.Using the contribution margin ratio,calculate the total sales revenue that is needed.(Round intermediate calculations to five decimal places.)

Accepted Answer

Required sales in dollars = (Fixed costs

Question 12

Choice Creations,Inc.sells hand sewn shirts at $58.00 per shirt.It incurs monthly fixed costs of $8000.The contribution margin ratio is calculated to be 30%.What is the variable cost per shirt? (Round any intermediate calculations and your final answer to two decimal places.)

Accepted Answer

A)  $40.60 per shirt 
B)  $75.40 per shirt 
C)  $58.00 per shirt 
D)  $17.40 per shirt 
A)  $40.60 per shirt 
B)  $75.40 per shirt 
C)  $58.00 per shirt 
D)  $17.40 per shirt

Question 13

Aqua Primavera,Inc.has provided the following information for the year. $$\begin{array} { | l | r | c | } 
\hline \text { Units produced } & 11,000 & \text { units } \
\hline \text { Sales price } & \$ 400 & \text { per unit } \
\hline \text { Direct materials } & \$ 20 & \text { per unit } \
\hline \text { Direct labor } & \$ 35 & \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 70 & \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 470,000 & \text { per year } \
\hline \text { Variable selling and administration costs } & \$ 90 & \text { per unit } \
\hline \text { Fixed selling and administration costs } & \$ 240,000 & \text { per year } \
\hline
\end{array}$$ What is the unit product cost using variable costing?

Accepted Answer

A)  $55 
B)  $105 
C)  $125 
D)  $168 
A)  $55 
B)  $105 
C)  $125 
D)  $168

Question 14

Absorption costing is required by the Generally Accepted Accounting Principles (GAAP)for financial statements issued to investors,creditors,and other external users.

Accepted Answer

A) True 
 B)False

Question 15

Emerald Pools,Inc.has provided the following information for the year. $$\begin{array} { | l | l | l | } 
\hline \text { Units produced } & 14,000 & \text { units } \
\hline \text { Sales price } & \$ 400 & \text { per unit } \
\hline \text { Direct materials } & \$ 45 & \text { per unit } \
\hline \text { Direct labor } & \$ 20 & \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 65 & \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 500,000 & \text { per year } \
\hline \text { Variable selling and administration costs } & \$ 85 & \text { per unit } \
\hline \text { Fixed selling and administration costs } & \$ 270,000 & \text { per year } \
\hline
\end{array}$$ What is the unit product cost using absorption costing? (Round any intermediate calculations and your final answer to the nearest dollar.)

Accepted Answer

A)  $65 
B)  $166 
C)  $150 
D)  $130 
A)  $65 
B)  $166 
C)  $150 
D)  $130

Question 16

Advantage,Inc.,a tennis equipment manufacturer,has variable costs of $0.60 per unit of product.In August,the volume of production was 27,000 units,and units sold were 21,800.The total production costs incurred were $30,600.What are the fixed costs per month?

Accepted Answer

A)  $14,400 
B)  $17,520 
C)  $3600 
D)  $16,200 
A)  $14,400 
B)  $17,520 
C)  $3600 
D)  $16,200

Question 17

The highest value of total cost was $800,000 in June for Horchata Beverages,Inc.Its lowest value of total cost was $510,000 in December.The company makes a single product.The production volume in June and December were 13,000 and 8000 units,respectively.What is the fixed cost per month? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)

Accepted Answer

A)  $510,000 
B)  $290,000 
C)  $46,000 
D)  $8000 
A)  $510,000 
B)  $290,000 
C)  $46,000 
D)  $8000

Question 18

Cost-volume-profit analysis is NOT useful in ________.

Accepted Answer

A)  calculating operating expenses 
B)  setting selling prices 
C)  determining the appropriate sales mix 
D)  optimizing production facilities 
A)  calculating operating expenses 
B)  setting selling prices 
C)  determining the appropriate sales mix 
D)  optimizing production facilities

Question 19

Variable costing considers only ________ costs when determining product costs.

Accepted Answer

A)  fixed manufacturing 
B)  variable manufacturing 
C)  variable selling and administrative 
D)  fixed selling and administrative 
A)  fixed manufacturing 
B)  variable manufacturing 
C)  variable selling and administrative 
D)  fixed selling and administrative

Question 20

Which of the following is considered a period cost in absorption costing?

Accepted Answer

A)  variable manufacturing overhead costs 
B)  fixed selling and administrative costs 
C)  fixed manufacturing overhead costs 
D)  semi-variable manufacturing overhead costs 
A)  variable manufacturing overhead costs 
B)  fixed selling and administrative costs 
C)  fixed manufacturing overhead costs 
D)  semi-variable manufacturing overhead costs

Exam 21: Cost-Volume-Profit Analysis

Contribution margin is the amount that contributes to covering variable costs.

Which of the following costs do NOT change in total despite changes in volume within the relevant range?

Which of the following is an assumption of cost-volume-profit (CVP)analysis?

How is the contribution margin ratio calculated?

Sensitivity analysis empowers managers with better information for decision making by analyzing how various business strategies will affect profits earned by the company.

From the graph given below,identify the fixed costs line.

Petrous Company incurs both fixed and variable production costs.Assuming that production is within the relevant range,if volume goes up by 28%,then the total variable costs would ________.

How is the unit contribution margin calculated?

Under absorption costing,the more fixed manufacturing overhead in ending Finished Goods Inventory,the larger the Cost of Goods Sold.

Managers can use contribution margin to predict the change in operating income when volume changes.

Choice Creations,Inc.sells hand sewn shirts at $58.00 per shirt.It incurs monthly fixed costs of $8000.The contribution margin ratio is calculated to be 30%.What is the variable cost per shirt? (Round any intermediate calculations and your final answer to two decimal places.)

Absorption costing is required by the Generally Accepted Accounting Principles (GAAP)for financial statements issued to investors,creditors,and other external users.

Advantage,Inc.,a tennis equipment manufacturer,has variable costs of $0.60 per unit of product.In August,the volume of production was 27,000 units,and units sold were 21,800.The total production costs incurred were $30,600.What are the fixed costs per month?

Cost-volume-profit analysis is NOT useful in ________.

Variable costing considers only ________ costs when determining product costs.

Which of the following is considered a period cost in absorption costing?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets,natural Resources,and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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