Question 1

Which of the following best describes the typical relationship between variable costs and volume?

Accepted Answer

A) Total variable costs increase in an erratic,unpredictable fashion with changes in volume. 
B) Total variable costs stay constant with changes in volume. 
C) Unit variable costs increase with changes in volume up to a certain point and then remain constant. 
D) Total variable costs increase in direct proportion to increases in volume. 
A) Total variable costs increase in an erratic,unpredictable fashion with changes in volume. 
B) Total variable costs stay constant with changes in volume. 
C) Unit variable costs increase with changes in volume up to a certain point and then remain constant. 
D) Total variable costs increase in direct proportion to increases in volume.

Question 2

Excerpts from a cost-volume-profit analysis indicate fixed costs of $30,000,a variable cost per unit of $36,a selling price of $60,and a sales level of $125,000.The targeted level of profit must be

Accepted Answer

A) $20,000. 
B) $50,000. 
C) $95,000. 
D) $75,000. 
A) $20,000. 
B) $50,000. 
C) $95,000. 
D) $75,000.

Question 3

A mixed costs line,plotted on a graph,will start at the Y axis at the amount of fixed cost.

Accepted Answer

A) True 
 B)False

Question 4

Is breakeven analysis a tool that can be used for a service-oriented business? Explain your answer.

Accepted Answer

Yes.A service organization does not have

Question 5

Ben & Harry Co.sold 100,000 units last year with the following results:
 
a.Management thinks that a 5 percent reduction in the unit sales price and a $31,000 increase in fixed advertising costs will create a 30 percent increase in unit sales.Assess this proposal and make a recommendation on what action should be taken.
b.Assume that the marketing manager thinks that the unit sales price and advertisement costs should not be changed.Instead,he recommends a $0.40 per unit increase in sales commissions to generate the 30 percent increase in unit sales and a 20 percent increase in operating income.This results in reduction of fixed costs to a certain extent.
Assess this proposal.

Accepted Answer

a.If the changes are made,the following

Question 6

Operating income is determined by deducting all fixed costs related to production,selling,and administration from contribution margin.

Accepted Answer

A) True 
 B)False

Question 7

When fixed costs are $18,000 and the contribution margin per unit is $4,the breakeven point is

Accepted Answer

A) 4,500 units. 
B) 2,230 units. 
C) $22,300. 
D) $72,000. 
A) 4,500 units. 
B) 2,230 units. 
C) $22,300. 
D) $72,000.

Question 8

Lilly LLC wants to make a profit of $30,000.It has variable costs of $99 per unit and fixed costs of $20,000.How much must it charge per unit if 5,000 units are sold?

Accepted Answer

A) $84 
B) $69 
C) $99 
D) $109 
A) $84 
B) $69 
C) $99 
D) $109

Question 9

The Raquet Business is planning to manufacture a new type of tennis ball.Each tennis ball would sell for $3.75 and would require $1.75 in variable costs.In addition,annual fixed costs associated with the project would total $64,000.
a.Use the contribution margin approach to calculate:
(1)the breakeven point in units
(2)the breakeven point in dollars
b.Determine the operating income or loss at a sales volume of 30,000 tennis balls.
c.Determine the number of tennis balls that must be sold to earn a profit of $80,000.

Accepted Answer

a.(1)$64,000 @#LAT-DLM& ($3.75 - $1.75)=

Question 10

The weighted-average contribution margin is computed by multiplying each product's unit contribution margin by the sales mix percentage of each product.

Accepted Answer

A) True 
 B)False

Question 11

The new Corina watch has an expected selling price per watch of $42,the projected variable cost per unit is $24,and estimated fixed costs per month are $24,120. The expected breakeven point in units per month is

Accepted Answer

A) 1,115 watches. 
B) 1,590 watches. 
C) 1,340 watches. 
D) 1,780 watches. 
A) 1,115 watches. 
B) 1,590 watches. 
C) 1,340 watches. 
D) 1,780 watches.

Question 12

Native American Pottery expects to earn a profit of $95,000 in 2014.The company manufactures ornamental ceramic tiles.Each lot of 100 blocks requires variable costs of $5.00 for direct materials,$3.50 for direct labor,and $4.50 for overhead.Total variable costs are thus $13 per lot.Fixed costs for 2014 are expected to be $130,000.Each hundred-block lot will sell for $33.
a.Determine how many lots of ceramic tiles the company must sell to earn its targeted profit,and convert this amount to sales dollars.
b.Compute breakeven sales in dollars.
c.Explain the dollar difference between breakeven sales dollars and the sales dollars necessary to earn the targeted profit.Use the contribution margin as part of your explanation.

Accepted Answer

a.
@#IMG-DLM& 
b. @#IMG-DLM& 
c.
@#IMG-DLM&
The company must produce a

Question 13

In terms of cost behavior,telephone expenses are often classified as

Accepted Answer

A) sunk costs. 
B) variable costs. 
C) fixed costs. 
D) mixed costs. 
A) sunk costs. 
B) variable costs. 
C) fixed costs. 
D) mixed costs.

Question 14

If fixed costs are $180,000,variable costs are $38 per unit,and the product sells for $70,the breakeven point in sales dollars is $5,625.

Accepted Answer

A) True 
 B)False

Question 15

Understanding cost behavior helps managers in planning the optimal mix of services or products to offer.

Accepted Answer

A) True 
 B)False

Question 16

In a breakeven scatter diagram,the loss area continues till the total costs line is below total revenues line.

Accepted Answer

A) True 
 B)False

Question 17

Using the contribution margin approach,find the contribution margin ratio for Consumer Products if the selling price per unit is $15,the variable cost per unit is $7.50,and the fixed costs are $8,000.

Accepted Answer

A) 25% 
B) 75% 
C) 50% 
D) 100% 
A) 25% 
B) 75% 
C) 50% 
D) 100%

Question 18

Luther Inc.has two products: Normal (unit sales price,$30;unit variable cost,$15)and Hybrid (unit sales price,$35;unit variable cost,$20).The company's sales mix of the Normal to the Hybrid is 3:2 and fixed costs are $42,000.
a.Determine the weighted-average contribution margin.
b.Calculate the weighted-average breakeven point.
c.Compute the breakeven point for each product.

Accepted Answer

a.
@#IMG-DLM&
b.Weighted-average breakev

Question 19

At production levels below the breakeven point,

Accepted Answer

A) fixed costs are recovered. 
B) profit is negative. 
C) variable costs are zero. 
D) fixed costs are zero. 
A) fixed costs are recovered. 
B) profit is negative. 
C) variable costs are zero. 
D) fixed costs are zero.

Question 20

Product X sells for $20 per unit and has variable costs of $10 per unit.If the fixed costs amount to $45,000,the breakeven point will be:

Accepted Answer

A) 4,500 units. 
B) 1,500 units. 
C) 2,250 units. 
D) 6,225 units. 
A) 4,500 units. 
B) 1,500 units. 
C) 2,250 units. 
D) 6,225 units.

Exam 19: Cost-Volume-Profit Analysis

Which of the following best describes the typical relationship between variable costs and volume?

Excerpts from a cost-volume-profit analysis indicate fixed costs of $30,000,a variable cost per unit of $36,a selling price of $60,and a sales level of $125,000.The targeted level of profit must be

A mixed costs line,plotted on a graph,will start at the Y axis at the amount of fixed cost.

Is breakeven analysis a tool that can be used for a service-oriented business? Explain your answer.

Operating income is determined by deducting all fixed costs related to production,selling,and administration from contribution margin.

When fixed costs are $18,000 and the contribution margin per unit is $4,the breakeven point is

Lilly LLC wants to make a profit of $30,000.It has variable costs of $99 per unit and fixed costs of $20,000.How much must it charge per unit if 5,000 units are sold?

The weighted-average contribution margin is computed by multiplying each product's unit contribution margin by the sales mix percentage of each product.

The new Corina watch has an expected selling price per watch of $42,the projected variable cost per unit is $24,and estimated fixed costs per month are $24,120. The expected breakeven point in units per month is

In terms of cost behavior,telephone expenses are often classified as

If fixed costs are $180,000,variable costs are $38 per unit,and the product sells for $70,the breakeven point in sales dollars is $5,625.

Understanding cost behavior helps managers in planning the optimal mix of services or products to offer.

In a breakeven scatter diagram,the loss area continues till the total costs line is below total revenues line.

Using the contribution margin approach,find the contribution margin ratio for Consumer Products if the selling price per unit is $15,the variable cost per unit is $7.50,and the fixed costs are $8,000.

At production levels below the breakeven point,

Product X sells for $20 per unit and has variable costs of $10 per unit.If the fixed costs amount to $45,000,the breakeven point will be:

Uses of Accounting Information and the Financial Statements

Measurement Concepts: Recording Business Transactions

Measuring Business Income: Adjusting the Accounts

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long-Term Assets

Current Liabilities and Fair Value Accounting

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting and Cost Concepts

Costing Systems: Job Order Costing

Costing Systems: Process Costing

Value-Based Systems: Activity-Based Costing and Lean Accounting

The Budgeting Process

Flexible Budgets and Performance Analysis

Standard Costing and Variance Analysis

Short-Run Decision Analysis

Capital Investment Analysis

Pricing Decisions, including Target Costing and Transfer Pricing

Quality Management and Measurement

Accounting for Unincorporated Businesses

Accounting for Investments

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