Question 1

When the variable cost per unit increases,the contribution margin on each unit decreases.

Accepted Answer

A) True 
 B)False

Question 2

If variable costs go up,and all other factors remain the same,the margin of safety will become smaller.

Accepted Answer

A) True 
 B)False

Question 3

Torres Manufacturers produces flooring material.The monthly fixed costs are $10,000 per month.The unit selling price for the flooring is $95 and variable cost per unit is $35.If Torres' managers create a CVP graph from volume levels of zero to 500 units,at what sales level (in units)will the revenue and total cost lines intersect?

Accepted Answer

A) 167 units 
B) 106 units 
C) 77 units 
D) 286 units 
A) 167 units 
B) 106 units 
C) 77 units 
D) 286 units

Question 4

Caty Couture sells designer shirts for $43 per shirt.It incurs monthly fixed costs of $7,000.The contribution margin ratio is calculated to be 20%.What is the breakeven point in units?

Accepted Answer

A) 163 units 
B) 131 units 
C) 5,600 units 
D) 814 units 
A) 163 units 
B) 131 units 
C) 5,600 units 
D) 814 units

Question 5

Drenning Timber Products has estimated the following amounts for its next fiscal year:
 
What will happen to the breakeven point (in units)if Drenning can reduce fixed expenses by $22,500?

Accepted Answer

A) The breakeven point will decrease by 2,046 units. 
B) The breakeven point will decrease by 549 units. 
C) The breakeven point will decrease by 750 units. 
D) The breakeven point will increase by 549 units. 
A) The breakeven point will decrease by 2,046 units. 
B) The breakeven point will decrease by 549 units. 
C) The breakeven point will decrease by 750 units. 
D) The breakeven point will increase by 549 units.

Question 6

Fixed costs per unit decrease as production levels decrease.

Accepted Answer

A) True 
 B)False

Question 7

When the variable cost per unit increases,the total number of units required to breakeven also increases.

Accepted Answer

A) True 
 B)False

Question 8

Contribution margin is calculated by deducting ________ from sales revenue.

Accepted Answer

A) total product costs 
B) total selling and administrative costs 
C) total fixed costs 
D) total variable costs 
A) total product costs 
B) total selling and administrative costs 
C) total fixed costs 
D) total variable costs

Question 9

Zhou Company is facing a $7 increase in the variable cost of producing one of its products for the upcoming year.Because of this situation,the sales manager has made a proposal to increase the selling price of the product while increasing the advertising budget at the same time.The price increase will lower sales volume,but the other changes may help the company maintain its profit margins.Zhou has provided the following information regarding the current year results and the proposal made by the sales manager:
 
Relative to the current year,the sales manager's proposal will ________.

Accepted Answer

A) decrease operating income by $158,000 
B) increase contribution margin by $60,000 
C) decrease the unit breakeven point 
D) decrease operating income by $218,000 
A) decrease operating income by $158,000 
B) increase contribution margin by $60,000 
C) decrease the unit breakeven point 
D) decrease operating income by $218,000

Question 10

Joe's Tires,Inc.reports the following information for the year ended December 31:
 
The operating income calculated using variable costing and absorption costing amounted to $9,200 and $11,900,respectively.There were no beginning inventories.Determine the total fixed manufacturing overhead that will be expensed under absorption costing for the year.

Accepted Answer

A) $20,400 
B) $17,700 
C) $33,630 
D) $30,680 
A) $20,400 
B) $17,700 
C) $33,630 
D) $30,680

Question 11

Ito Company has provided the following information:
 
Calculate the contribution margin per unit.

Accepted Answer

A) $26 
B) $42 
C) $58 
D) $10 
A) $26 
B) $42 
C) $58 
D) $10

Question 12

If fixed costs go up,and all other factors remain the same,the margin of safety will become larger.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following costing methods charges all the manufacturing costs to the products?

Accepted Answer

A) variable costing 
B) direct costing 
C) absorption costing 
D) contribution costing 
A) variable costing 
B) direct costing 
C) absorption costing 
D) contribution costing

Question 14

Allentown Aqua,Inc.has provided the following information for the year.
 
What is the unit product cost using variable costing?

Accepted Answer

A) $55 
B) $80 
C) $105 
D) $154 
A) $55 
B) $80 
C) $105 
D) $154

Question 15

Which of the following will appear as a line item in the traditional format of an income statement?

Accepted Answer

A) contribution margin 
B) total variable costs (manufacturing and non-manufacturing) 
C) total fixed costs (manufacturing and non-manufacturing) 
D) gross profit 
A) contribution margin 
B) total variable costs (manufacturing and non-manufacturing) 
C) total fixed costs (manufacturing and non-manufacturing) 
D) gross profit

Question 16

Sequoah Company sells its product for $60 and has variable costs of $31 per unit.The total fixed costs are $35,000.What will be the effect on the breakeven point in units if variable costs increase by $6 due to an increase in the cost of direct materials?

Accepted Answer

A) It will increase by 315 units. 
B) It will decrease by 315 units. 
C) It will decrease by 207 units. 
D) It will increase by 207 units. 
A) It will increase by 315 units. 
B) It will decrease by 315 units. 
C) It will decrease by 207 units. 
D) It will increase by 207 units.

Question 17

When there are no units in the beginning Finished Goods Inventory and the units produced are more than the units sold,the operating income will be higher under absorption costing than variable costing.

Accepted Answer

A) True 
 B)False

Question 18

When all of the units produced are sold,the operating income is the same under both the absorption and variable costing methods.Assume no beginning and ending inventories.Which of the following gives the correct reason for the above statement?

Accepted Answer

A) All costs incurred have been recorded as expenses. 
B) A portion of the fixed manufacturing overhead is still in the Finished Goods Inventory account. 
C) All selling and administrative expenses have been recorded as period costs. 
D) Fixed manufacturing costs have not been considered when calculating the operating incomes. 
A) All costs incurred have been recorded as expenses. 
B) A portion of the fixed manufacturing overhead is still in the Finished Goods Inventory account. 
C) All selling and administrative expenses have been recorded as period costs. 
D) Fixed manufacturing costs have not been considered when calculating the operating incomes.

Question 19

Zest Soda,a local convenience store,sells soft drinks.It sells two large drinks for every small drink.A large drink sells for $1.70 with a variable cost of $0.40.A small drink sells for $1.10 with a variable cost of $0.30.What is the weighted average contribution margin? (Round your intermediate calculations and final answer to two decimal places. )

Accepted Answer

A) $1.70 per drink 
B) $3.40 per drink 
C) $1.13 per drink 
D) $0.40 per drink 
A) $1.70 per drink 
B) $3.40 per drink 
C) $1.13 per drink 
D) $0.40 per drink

Question 20

Fontana Pizza Company sells pizzas in two different sizes-medium and large.The two products sell in equal numbers.The contribution margin of a medium pizza is $14 and the contribution margin of a large pizza is $18.The weighted average contribution margin is $16.

Accepted Answer

A) True 
 B)False

Exam 21: Cost-Volume-Profit Analysis

When the variable cost per unit increases,the contribution margin on each unit decreases.

If variable costs go up,and all other factors remain the same,the margin of safety will become smaller.

Caty Couture sells designer shirts for $43 per shirt.It incurs monthly fixed costs of $7,000.The contribution margin ratio is calculated to be 20%.What is the breakeven point in units?

Drenning Timber Products has estimated the following amounts for its next fiscal year: What will happen to the breakeven point (in units)if Drenning can reduce fixed expenses by $22,500?

Fixed costs per unit decrease as production levels decrease.

When the variable cost per unit increases,the total number of units required to breakeven also increases.

Contribution margin is calculated by deducting ________ from sales revenue.

Ito Company has provided the following information: Calculate the contribution margin per unit.

If fixed costs go up,and all other factors remain the same,the margin of safety will become larger.

Which of the following costing methods charges all the manufacturing costs to the products?

Allentown Aqua,Inc.has provided the following information for the year. What is the unit product cost using variable costing?

Which of the following will appear as a line item in the traditional format of an income statement?

Sequoah Company sells its product for $60 and has variable costs of $31 per unit.The total fixed costs are $35,000.What will be the effect on the breakeven point in units if variable costs increase by $6 due to an increase in the cost of direct materials?

When there are no units in the beginning Finished Goods Inventory and the units produced are more than the units sold,the operating income will be higher under absorption costing than variable costing.

When all of the units produced are sold,the operating income is the same under both the absorption and variable costing methods.Assume no beginning and ending inventories.Which of the following gives the correct reason for the above statement?

Fontana Pizza Company sells pizzas in two different sizes-medium and large.The two products sell in equal numbers.The contribution margin of a medium pizza is $14 and the contribution margin of a large pizza is $18.The weighted average contribution margin is $16.

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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