Question 1

Service businesses do not have any overhead costs.

Accepted Answer

A) True 
 B)False

Question 2

Cost-volume-profit analysis cannot be used to estimate a targeted profit for service businesses.

Accepted Answer

A) True 
 B)False

Question 3

Loyal Enterprises has sales revenue of $125,000 for 2014.Its product sells for $10 and has a 25 percent contribution margin.Fixed costs are $26,000.What is Loyal Enterprises' operating income for 2014?

Accepted Answer

A) $2,600 
B) $26,000 
C) $31,250 
D) $5,250 
A) $2,600 
B) $26,000 
C) $31,250 
D) $5,250

Question 4

A new product,an easy to store guitar stand,is being planned,with the following cost estimates: variable cost per unit,$9,and total fixed costs,$58,000.The projected sales price is $13 each.
a.Using the contribution margin approach,compute the number of units that must be sold to break even.
b.Using the same approach and assuming that fixed costs can be reduced by $8,000,how many units must be sold to produce a profit of $65,000?
c.Given the original information and the projection that 50,000 units can be sold,compute the selling price that the producer must use to obtain a profit of $150,000.

Accepted Answer

The answer of A new product,an easy to store guitar...

Question 5

Contribution margin is calculated by deducting total fixed costs from total sales.

Accepted Answer

A) True 
 B)False

Question 6

The contribution margin equals zero at the breakeven point.

Accepted Answer

A) True 
 B)False

Question 7

Regression analysis takes into consideration only the highest and the lowest level of activities to predict cost behavior.

Accepted Answer

A) True 
 B)False

Question 8

Costs are not affected by the changes in the volume of production.

Accepted Answer

A) True 
 B)False

Question 9

Given below are the costs and activity observations for Ncwin Company's maintenance costs.   Using the high-low method,what is Ncwin's monthly fixed costs for maintenance?

Accepted Answer

A) $11,250 
B) $4,550 
C) $3,750 
D) $2,650 
A) $11,250 
B) $4,550 
C) $3,750 
D) $2,650

Question 10

Depreciation calculated using the straight-line method is an example of a fixed cost.

Accepted Answer

A) True 
 B)False

Question 11

In a graph of cost-volume-profit analysis,the

Accepted Answer

A) total revenue line typically begins at a required minimum level. 
B) slope of the total cost line is dependent on the variable cost per unit. 
C) total cost line normally begins at zero. 
D) sales level at which total cost and total revenue lines intersect is also equal to fixed costs. 
A) total revenue line typically begins at a required minimum level. 
B) slope of the total cost line is dependent on the variable cost per unit. 
C) total cost line normally begins at zero. 
D) sales level at which total cost and total revenue lines intersect is also equal to fixed costs.

Question 12

Share and Care International is trying to determine how many clients must be serviced in order to cover its monthly service overhead.Using the high-low method,it has determined that the variable cost per client is $800 and that the monthly fixed overhead is $28,000. Assuming an average fee of $1,200 per client,the breakeven point per month is

Accepted Answer

A) 35 clients. 
B) 80 clients. 
C) 70 clients. 
D) 55 clients. 
A) 35 clients. 
B) 80 clients. 
C) 70 clients. 
D) 55 clients.

Question 13

To find out the breakeven point in dollars,we divide fixed costs by gross margin ratio.

Accepted Answer

A) True 
 B)False

Question 14

A contribution margin income statement is formatted to emphasize cost behavior rather than organizational functions.

Accepted Answer

A) True 
 B)False

Question 15

An organization's theoretical operating capacity is the level at which its management expects to operate during a normal business environment.

Accepted Answer

A) True 
 B)False

Question 16

The high-low method allows managers to differentiate between fixed and variable costs when dealing with mixed costs.

Accepted Answer

A) True 
 B)False

Question 17

Clark International produces designer watches.Each watch requires materials worth $14.50 and three direct labor hours.The company pays its production supervisor a salary of $500 per week.Hourly wage rate at Clark is $5.If 25 watches are produced in a week,what is the fixed cost per watch?

Accepted Answer

A) $14.50 
B) $5.00 
C) $20.00 
D) $34.50 
A) $14.50 
B) $5.00 
C) $20.00 
D) $34.50

Question 18

Riverside has gathered the following data in order to calculate the weighted-average contribution margin: Round intermediate and final answers to two decimal places.   The weighted-average contribution margin is

Accepted Answer

A) $175. 
B) $100. 
C) $95.50 
D) $75.50 
A) $175. 
B) $100. 
C) $95.50 
D) $75.50

Question 19

The following are monthly totals taken from the log of laser printer used by the Hardcopy Printing International.Cost was based on a flat fee plus a declining cost per copy made after a minimum number of copies had been made each month.
 
To differentiate the variable and fixed costs in the use of this machine for future planning, use the high-low method to (a) determine the variable cost per copy (round your answers to two decimal places) and (b) compute the fixed and variable costs for the months of August and December (round your answers to nearest whole number).

Accepted Answer

a.
@#IMG-DLM&
The variable cos

Question 20

Threshold Inc.has provided the following data:   The sales mix for Products A,B,and C is

Accepted Answer

A) 62.5 percent,12.5 percent,and 25 percent,respectively. 
B) 40 percent,20 percent,and 40 percent,respectively. 
C) 100 percent,25 percent,and 50 percent,respectively. 
D) 44 percent,33 percent,and 23 percent,respectively. 
A) 62.5 percent,12.5 percent,and 25 percent,respectively. 
B) 40 percent,20 percent,and 40 percent,respectively. 
C) 100 percent,25 percent,and 50 percent,respectively. 
D) 44 percent,33 percent,and 23 percent,respectively.

Exam 19: Cost-Volume-Profit Analysis

Service businesses do not have any overhead costs.

Cost-volume-profit analysis cannot be used to estimate a targeted profit for service businesses.

Loyal Enterprises has sales revenue of $125,000 for 2014.Its product sells for $10 and has a 25 percent contribution margin.Fixed costs are $26,000.What is Loyal Enterprises' operating income for 2014?

Contribution margin is calculated by deducting total fixed costs from total sales.

The contribution margin equals zero at the breakeven point.

Regression analysis takes into consideration only the highest and the lowest level of activities to predict cost behavior.

Costs are not affected by the changes in the volume of production.

Given below are the costs and activity observations for Ncwin Company's maintenance costs. Using the high-low method,what is Ncwin's monthly fixed costs for maintenance?

Depreciation calculated using the straight-line method is an example of a fixed cost.

In a graph of cost-volume-profit analysis,the

To find out the breakeven point in dollars,we divide fixed costs by gross margin ratio.

A contribution margin income statement is formatted to emphasize cost behavior rather than organizational functions.

An organization's theoretical operating capacity is the level at which its management expects to operate during a normal business environment.

The high-low method allows managers to differentiate between fixed and variable costs when dealing with mixed costs.

Clark International produces designer watches.Each watch requires materials worth $14.50 and three direct labor hours.The company pays its production supervisor a salary of $500 per week.Hourly wage rate at Clark is $5.If 25 watches are produced in a week,what is the fixed cost per watch?

Riverside has gathered the following data in order to calculate the weighted-average contribution margin: Round intermediate and final answers to two decimal places. The weighted-average contribution margin is

Threshold Inc.has provided the following data: The sales mix for Products A,B,and C is

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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