Question 1

Which of the following equations is TRUE?

Accepted Answer

A)  Contribution margin = Sales revenue ´ Variable cost ratio 
B)  Contribution margin ratio = Contribution margin/Variable costs 
C)  Contribution margin = Fixed costs 
D)  Contribution margin ratio = 1 - Variable cost ratio 
A)  Contribution margin = Sales revenue ´ Variable cost ratio 
B)  Contribution margin ratio = Contribution margin/Variable costs 
C)  Contribution margin = Fixed costs 
D)  Contribution margin ratio = 1 - Variable cost ratio

Question 2

In the cost-volume-profit analysis, income taxes

Accepted Answer

A)  are treated as a fixed cost. 
B)  increase the sales volume required to break even. 
C)  increase the sales volume required to earn a desired profit. 
D)  Are treated as a fixed cost. 
A)  are treated as a fixed cost. 
B)  increase the sales volume required to break even. 
C)  increase the sales volume required to earn a desired profit. 
D)  Are treated as a fixed cost.

Question 3

The variable cost ratio

Accepted Answer

A)  expresses variable costs as a percentage of total costs. 
B)  expresses the proportion between fixed costs and variable costs. 
C)  expresses variable cost in terms of sales dollars. 
D)  expresses the proportion of sales dollars available to cover fixed costs and provide for a profit. 
A)  expresses variable costs as a percentage of total costs. 
B)  expresses the proportion between fixed costs and variable costs. 
C)  expresses variable cost in terms of sales dollars. 
D)  expresses the proportion of sales dollars available to cover fixed costs and provide for a profit.

Question 4

Which of the following assumptions does NOT pertain to cost-volume-profit analysis?

Accepted Answer

A)  The units produced will equal the units sold. 
B)  Inventories are constant. 
C)  All costs are classified as fixed or variable. 
D)  Sales mix may vary during the related period. 
A)  The units produced will equal the units sold. 
B)  Inventories are constant. 
C)  All costs are classified as fixed or variable. 
D)  Sales mix may vary during the related period.

Question 5

Total contribution margin is calculated by subtracting

Accepted Answer

A)  cost of goods sold from total revenues. 
B)  fixed costs from total revenues. 
C)  total manufacturing costs from total revenues. 
D)  total variable costs from total revenues. 
A)  cost of goods sold from total revenues. 
B)  fixed costs from total revenues. 
C)  total manufacturing costs from total revenues. 
D)  total variable costs from total revenues.

Question 6

Using cost-volume-profit analysis, we can conclude that a 20 percent reduction in variable costs will

Accepted Answer

A)  reduce the break-even sales volume by 20 percent. 
B)  reduce total costs by 20 percent. 
C)  reduce the slope of the total cost line by 20 percent. 
D)  not affect the break-even sales volume if there is an offsetting 20 percent increase in fixed costs. 
A)  reduce the break-even sales volume by 20 percent. 
B)  reduce total costs by 20 percent. 
C)  reduce the slope of the total cost line by 20 percent. 
D)  not affect the break-even sales volume if there is an offsetting 20 percent increase in fixed costs.

Question 7

Thomas Company had the following information:  
- What is the break-even point in units using ABC?

Accepted Answer

A)  30,000 units 
B)  45,000 units 
C)  15,000 units 
D)  75,000 units 
A)  30,000 units 
B)  45,000 units 
C)  15,000 units 
D)  75,000 units

Question 8

Assuming all other things are the same, selling price per unit must have _______________ if there was a decrease in the break-even point.

Accepted Answer

A)  remained the same 
B)  increased first, then decreased 
C)  increased 
D)  decreased 
A)  remained the same 
B)  increased first, then decreased 
C)  increased 
D)  decreased

Question 9

The contribution margin at the break-even point

Accepted Answer

A)  equals total fixed costs. 
B)  is zero. 
C)  plus total fixed costs equals total revenues. 
D)  is greater than variable costs. 
A)  equals total fixed costs. 
B)  is zero. 
C)  plus total fixed costs equals total revenues. 
D)  is greater than variable costs.

Question 10

A very high degree of operating leverage indicates a firm

Accepted Answer

A)  has high fixed costs. 
B)  has a high net income. 
C)  has high variable costs. 
D)  is operating close to its break-even point. 
A)  has high fixed costs. 
B)  has a high net income. 
C)  has high variable costs. 
D)  is operating close to its break-even point.

Question 11

Dirth Company sells only one product at a regular price of $7.50 per unit.Variable expenses are 60 percent of sales and fixed expenses are $30,000.Management has decided to decrease the selling price to $6.00 in hopes of increasing its volume of sales
- What is the sales dollars level required to break even at the old price of $7.50?

Accepted Answer

A)  $75,000 
B)  $12,000 
C)  $18,000 
D)  $50,000 
A)  $75,000 
B)  $12,000 
C)  $18,000 
D)  $50,000

Question 12

Camp Gordon has annual fixed operating costs of $150,000 and variable costs of $550 per camper.Total fees charged to campers amount to $500 each.The camp expects 350 campers next summer.Projected government grants are $95,000.How much must Camp Gordon raise from other sources to break even?

Accepted Answer

A)  $45,000 
B)  $37,500 
C)  $97,500 
D)  $72,500 
A)  $45,000 
B)  $37,500 
C)  $97,500 
D)  $72,500

Question 13

The Smith Corporation has the following data for 2011:  
- If sales decrease to 7,500 units in 2012, Smith's operating leverage will be

Accepted Answer

A)  0.25. 
B)  2.00. 
C)  4.00. 
D)  undefined. 
A)  0.25. 
B)  2.00. 
C)  4.00. 
D)  undefined.

Question 14

Assume the following cost behavior data for Portrait Company:  
- What volume of sales dollars is required to earn a before-tax income of $27,000?

Accepted Answer

A)  $198,000 
B)  $180,000 
C)  $90,000 
D)  $270,000 
A)  $198,000 
B)  $180,000 
C)  $90,000 
D)  $270,000

Question 15

A profit-volume graph

Accepted Answer

A)  measures profit or loss on the horizontal axis. 
B)  illustrates total revenues, total cost, and profits at various sales volumes. 
C)  is not subject to the same limiting assumptions as cost-volume-profit graphs. 
D)  illustrates the relationship between volume and profits. 
A)  measures profit or loss on the horizontal axis. 
B)  illustrates total revenues, total cost, and profits at various sales volumes. 
C)  is not subject to the same limiting assumptions as cost-volume-profit graphs. 
D)  illustrates the relationship between volume and profits.

Question 16

Urban Incorporated had the following information:   
-Suppose Urban could reduce setup costs by $300 per setup and could reduce the number of engineering hours needed to 1,400 hours.How many units must be sold to break even in this case?

Accepted Answer

A)  10,670 units 
B)  21,340 units 
C)  6,350 units 
D)  7,500 units 
A)  10,670 units 
B)  21,340 units 
C)  6,350 units 
D)  7,500 units

Question 17

The following diagram is a cost-volume-profit graph for a manufacturing company:   
-The difference between line AB and line AC (area BAC) is the

Accepted Answer

A)  contribution ratio. 
B)  total variable cost. 
C)  contribution margin per unit. 
D)  total fixed cost. 
A)  contribution ratio. 
B)  total variable cost. 
C)  contribution margin per unit. 
D)  total fixed cost.

Question 18

Lewis Production Company had the following projected information for 2006:   
-What is the break-even point in units?

Accepted Answer

A)  2,000 units 
B)  5,000 units 
C)  3,333 units 
D)  60,000 units 
A)  2,000 units 
B)  5,000 units 
C)  3,333 units 
D)  60,000 units

Question 19

Halbert Company projected the following information for next year:   How many units must be sold to obtain an after-tax profit of $40,000?

Accepted Answer

A)  3,750 units 
B)  5,000 units 
C)  5,625 units 
D)  5,167 units 
A)  3,750 units 
B)  5,000 units 
C)  5,625 units 
D)  5,167 units

Question 20

Malone Printing Company projected the following information for next year:   What is the break-even point in dollars?

Accepted Answer

A)  $200,000 
B)  $300,000 
C)  $120,000 
D)  $500,000 
A)  $200,000 
B)  $300,000 
C)  $120,000 
D)  $500,000

Which of the following equations is TRUE?

In the cost-volume-profit analysis, income taxes

The variable cost ratio

Which of the following assumptions does NOT pertain to cost-volume-profit analysis?

Total contribution margin is calculated by subtracting

Using cost-volume-profit analysis, we can conclude that a 20 percent reduction in variable costs will

Thomas Company had the following information: - What is the break-even point in units using ABC?

Assuming all other things are the same, selling price per unit must have _______________ if there was a decrease in the break-even point.

The contribution margin at the break-even point

A very high degree of operating leverage indicates a firm

Camp Gordon has annual fixed operating costs of $150,000 and variable costs of $550 per camper.Total fees charged to campers amount to $500 each.The camp expects 350 campers next summer.Projected government grants are $95,000.How much must Camp Gordon raise from other sources to break even?

The Smith Corporation has the following data for 2011: - If sales decrease to 7,500 units in 2012, Smith's operating leverage will be

Assume the following cost behavior data for Portrait Company: - What volume of sales dollars is required to earn a before-tax income of $27,000?

A profit-volume graph

Urban Incorporated had the following information: -Suppose Urban could reduce setup costs by $300 per setup and could reduce the number of engineering hours needed to 1,400 hours.How many units must be sold to break even in this case?

The following diagram is a cost-volume-profit graph for a manufacturing company: -The difference between line AB and line AC (area BAC) is the

Lewis Production Company had the following projected information for 2006: -What is the break-even point in units?

Halbert Company projected the following information for next year: How many units must be sold to obtain an after-tax profit of $40,000?

Malone Printing Company projected the following information for next year: What is the break-even point in dollars?

Introduction to Cost Management

Basic Cost Management Concepts

Cost Behavior

Activity-Based Costing

Product and Service Costing: Job-Order System

Process Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Decentralization: Responsibility Accounting, Performance Evaluation, and Transfer Pricing

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Activity Resource Usage Model and Tactical Decision Making

Pricing and Profitability Analysis

Capital Investment

Inventory Management: Economic Order Quantity, Jit, and the Theory of Constraints

Filters

Exam 16: Cost-Volume-Profit Analysis

Which of the following equations is TRUE?

In the cost-volume-profit analysis, income taxes

The variable cost ratio

Which of the following assumptions does NOT pertain to cost-volume-profit analysis?

Total contribution margin is calculated by subtracting

Using cost-volume-profit analysis, we can conclude that a 20 percent reduction in variable costs will

Thomas Company had the following information: - What is the break-even point in units using ABC?

Assuming all other things are the same, selling price per unit must have _______________ if there was a decrease in the break-even point.

The contribution margin at the break-even point

A very high degree of operating leverage indicates a firm

Camp Gordon has annual fixed operating costs of $150,000 and variable costs of $550 per camper.Total fees charged to campers amount to $500 each.The camp expects 350 campers next summer.Projected government grants are $95,000.How much must Camp Gordon raise from other sources to break even?

The Smith Corporation has the following data for 2011: - If sales decrease to 7,500 units in 2012, Smith's operating leverage will be

Assume the following cost behavior data for Portrait Company: - What volume of sales dollars is required to earn a before-tax income of $27,000?

A profit-volume graph

Urban Incorporated had the following information: -Suppose Urban could reduce setup costs by $300 per setup and could reduce the number of engineering hours needed to 1,400 hours.How many units must be sold to break even in this case?

The following diagram is a cost-volume-profit graph for a manufacturing company: -The difference between line AB and line AC (area BAC) is the

Lewis Production Company had the following projected information for 2006: -What is the break-even point in units?

Halbert Company projected the following information for next year: How many units must be sold to obtain an after-tax profit of $40,000?

Malone Printing Company projected the following information for next year: What is the break-even point in dollars?

Introduction to Cost Management

Basic Cost Management Concepts

Cost Behavior

Activity-Based Costing

Product and Service Costing: Job-Order System

Process Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Decentralization: Responsibility Accounting, Performance Evaluation, and Transfer Pricing

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Activity Resource Usage Model and Tactical Decision Making

Pricing and Profitability Analysis

Capital Investment

Inventory Management: Economic Order Quantity, Jit, and the Theory of Constraints

Filters