Question 1

Cost-volume-profit analysis is often complex when applied to a company with different products.

Accepted Answer

A) True 
 B)False

Question 2

With fixed costs, the cost per unit varies with changes in volume.

Accepted Answer

A) True 
 B)False

Question 3

What is the monthly sales volume in dollars necessary to break-even? (Rounded)

Accepted Answer

A)  $320,000. 
B)  $106,667. 
C)  $200,000. 
D)  $133,333. 
A)  $320,000. 
B)  $106,667. 
C)  $200,000. 
D)  $133,333.

Question 4

The contribution margin is the difference between total revenue and fixed costs.

Accepted Answer

A) True 
 B)False

Question 5

Olsen Auto Supply earns a contribution margin ratio of 40 percent. The store manager estimates that by spending an additional $5,000 per month for radio advertising, the store will be able to increase its operating income by $3,000 per month. The manager is expecting the radio advertising to increase monthly sales volume by:

Accepted Answer

A)  $12,500. 
B)  $8,000. 
C)  $7,500. 
D)  $20,000. 
A)  $12,500. 
B)  $8,000. 
C)  $7,500. 
D)  $20,000.

Question 6

In a month in which 30,000 equivalent full units are produced, Ratnere's manufacturing overhead should be approximately:

Accepted Answer

A)  $52,500. 
B)  $79,500. 
C)  $132,000. 
D)  $90,500. 
A)  $52,500. 
B)  $79,500. 
C)  $132,000. 
D)  $90,500.

Question 7

In June, Duke & Duchess expects to manufacture 18,000 units. Using the high-low method, compute the total estimated manufacturing overhead for June.

Accepted Answer

A)  $65,278. 
B)  $61,668. 
C)  $63,948. 
D)  $18,360. 
A)  $65,278. 
B)  $61,668. 
C)  $63,948. 
D)  $18,360.

Question 8

At the increased selling price of $55 per unit, what is the contribution margin ratio?

Accepted Answer

The answer of At the increased selling price of $55...

Question 9

As volume increases, per unit fixed costs stay the same.

Accepted Answer

A) True 
 B)False

Question 10

The high-low method is the only method to be used when determining semivariable costs.

Accepted Answer

A) True 
 B)False

Question 11

What is the contribution margin ratio of Mitchell 's product?

Accepted Answer

A)  65%. 
B)  80%. 
C)  72%. 
D)  20%. 
A)  65%. 
B)  80%. 
C)  72%. 
D)  20%.

Question 12

A company with monthly fixed costs of $170,000 expects to earn monthly operating income of $25,000 by selling 6,500 units per month. What is the company's expected unit contribution margin?

Accepted Answer

A)  $30. 
B)  $28. 
C)  $2. 
D)  The information given is insufficient to determine unit contribution margin. 
A)  $30. 
B)  $28. 
C)  $2. 
D)  The information given is insufficient to determine unit contribution margin.

Question 13

At the current selling price of $170 per unit, what dollar volume of sales per month is necessary for Grand Gimmicks to generate monthly operating income of $12,000?

Accepted Answer

A)  $24,162. 
B)  $51,063. 
C)  $58,838. 
D)  $77,617. 
A)  $24,162. 
B)  $51,063. 
C)  $58,838. 
D)  $77,617.

Question 14

Assume Rhinefold's margin of safety was $300,000 in May. What was the company's operating income in May? $__________.

Accepted Answer

The answer of Assume Rhinefold's margin of safety was $300,000...

Question 15

The range over which output may be expected to vary is called the relevant range.

Accepted Answer

A) True 
 B)False

Question 16

In cost-volume-profit analysis, the volume index is always stated in units.

Accepted Answer

A) True 
 B)False

Question 17

In a cost-volume-profit graph, the dollar amount by which actual sales exceed break-even sales volume is called the margin of safety. The margin of safety sales volume times the contribution margin ratio equals operating income.

Accepted Answer

A) True 
 B)False

Question 18

A fixed cost may include all of the following except:

Accepted Answer

A)  Rent for the warehouse. 
B)  Annual salary of the CEO. 
C)  Depreciation. 
D)  Sales commission expense. 
A)  Rent for the warehouse. 
B)  Annual salary of the CEO. 
C)  Depreciation. 
D)  Sales commission expense.

Question 19

The break-even point in a cost-volume-profit graph is always found:

Accepted Answer

A)  At 50% of full capacity. 
B)  At the sales volume resulting in the lowest average unit cost. 
C)  At the volume at which total revenue equals total variable costs. 
D)  At the volume at which total revenue equals total fixed costs plus total variable costs. 
A)  At 50% of full capacity. 
B)  At the sales volume resulting in the lowest average unit cost. 
C)  At the volume at which total revenue equals total variable costs. 
D)  At the volume at which total revenue equals total fixed costs plus total variable costs.

Question 20

Refer to the information above. In order to earn an operating income of $252,000, Grayson's monthly sales must be:

Accepted Answer

A)  $1,700,000. 
B)  $1,750,000. 
C)  $1,800,000. 
D)  $1,850,000. 
A)  $1,700,000. 
B)  $1,750,000. 
C)  $1,800,000. 
D)  $1,850,000.

Exam 20: Cost-Volume-Profit Analysis

Cost-volume-profit analysis is often complex when applied to a company with different products.

With fixed costs, the cost per unit varies with changes in volume.

What is the monthly sales volume in dollars necessary to break-even? (Rounded)

The contribution margin is the difference between total revenue and fixed costs.

In a month in which 30,000 equivalent full units are produced, Ratnere's manufacturing overhead should be approximately:

In June, Duke & Duchess expects to manufacture 18,000 units. Using the high-low method, compute the total estimated manufacturing overhead for June.

At the increased selling price of $55 per unit, what is the contribution margin ratio?

As volume increases, per unit fixed costs stay the same.

The high-low method is the only method to be used when determining semivariable costs.

What is the contribution margin ratio of Mitchell 's product?

A company with monthly fixed costs of $170,000 expects to earn monthly operating income of $25,000 by selling 6,500 units per month. What is the company's expected unit contribution margin?

At the current selling price of $170 per unit, what dollar volume of sales per month is necessary for Grand Gimmicks to generate monthly operating income of $12,000?

Assume Rhinefold's margin of safety was $300,000 in May. What was the company's operating income in May? $__________.

The range over which output may be expected to vary is called the relevant range.

In cost-volume-profit analysis, the volume index is always stated in units.

In a cost-volume-profit graph, the dollar amount by which actual sales exceed break-even sales volume is called the margin of safety. The margin of safety sales volume times the contribution margin ratio equals operating income.

A fixed cost may include all of the following except:

The break-even point in a cost-volume-profit graph is always found:

Refer to the information above. In order to earn an operating income of $252,000, Grayson's monthly sales must be:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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