Question 1

As volume increases,total fixed costs remain the same.

Accepted Answer

A) True 
 B)False  True

Question 2

Operating income can be calculated by:

Accepted Answer

A) Dividing fixed costs by the contribution margin ratio. 
B) Multiplying fixed costs by the contribution margin ratio. 
C) Multiplying the margin of safety by the contribution margin ratio. 
D) Dividing the margin of safety by the contribution margin ratio. 
A) Dividing fixed costs by the contribution margin ratio. 
B) Multiplying fixed costs by the contribution margin ratio. 
C) Multiplying the margin of safety by the contribution margin ratio. 
D) Dividing the margin of safety by the contribution margin ratio. C

Question 3

Cost-volume-profit graph
Describe the important relationships shown on a cost-volume-profit graph.

Accepted Answer

The important relationships shown on a cost-volume-profit graph are changes in revenue,costs,and operating income in relation to changes in the level of business activity.The point at which a business moves from a loss to a profit position (the break-even point)is also shown,but this is relatively less important because the objective of a business endeavor is to earn a high rate of return on investment,not to break even.

Question 4

If monthly fixed costs are $21,000 and the contribution margin ratio is 42%,the monthly sales volume required to break even is:

Accepted Answer

A) $8,820. 
B) $50,000. 
C) $78,000. 
D) $39,207. 
A) $8,820. 
B) $50,000. 
C) $78,000. 
D) $39,207.

Question 5

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 6

Any business which operates at less than capacity will have smaller fixed costs than variable costs.

Accepted Answer

A) True 
 B)False

Question 7

In cost-volume-profit analysis,income tax expense:

Accepted Answer

A) Is included among the monthly operating expenses as a variable cost. 
B) Is considered a fixed cost of doing business. 
C) Is treated as a semi-variable cost that is partially dependent upon sales volume. 
D) Is generally ignored. 
A) Is included among the monthly operating expenses as a variable cost. 
B) Is considered a fixed cost of doing business. 
C) Is treated as a semi-variable cost that is partially dependent upon sales volume. 
D) Is generally ignored.

Question 8

A company's relevant range of production is:

Accepted Answer

A) The production range from zero to 100% of plant capacity. 
B) The production range over which CVP assumptions are valid. 
C) The production range beyond the break-even point. 
D) The production range that covers fixed but not variable costs. 
A) The production range from zero to 100% of plant capacity. 
B) The production range over which CVP assumptions are valid. 
C) The production range beyond the break-even point. 
D) The production range that covers fixed but not variable costs.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

High-low method
The following information is available regarding the total repair costs of Alexander Design Company for six months of 2015:   (a)Using the high-low method,compute the following:
(1)The variable element of repair cost per unit of production:
$_________________ per unit
(2)The fixed element of the monthly repair cost: $__________________
(b)Use the cost relationship determined in part a to estimate the total repair cost for July 2015,given that production is scheduled for 2,300 units.$___________________

Accepted Answer

(a)(1)$7.20 per unit

Question 11

Montclair Company earns an average contribution margin ratio of 40% on its sales.The local store manager estimates that he can increase monthly sales volume by $45,000 by spending an additional $7,000 per month for direct mail advertising.Compute the monthly increase in operating income if the manager's estimate about the increased sales volume is accurate.

Accepted Answer

A) $11,000. 
B) $23,000. 
C) $16,000. 
D) $18,000. 
A) $11,000. 
B) $23,000. 
C) $16,000. 
D) $18,000.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

A company's most profitable products are often those which:

Accepted Answer

A) Have the highest contribution margin ratios and the highest sales volumes. 
B) Have the highest contribution margin ratios and the lowest sales volumes. 
C) Have the lowest contribution margin ratios and the highest sales volumes. 
D) Have the lowest contribution margin ratios and the lowest sales volumes. 
A) Have the highest contribution margin ratios and the highest sales volumes. 
B) Have the highest contribution margin ratios and the lowest sales volumes. 
C) Have the lowest contribution margin ratios and the highest sales volumes. 
D) Have the lowest contribution margin ratios and the lowest sales volumes.

Question 14

If unit sales prices are $7 and variable costs are $5 per unit,how many units would have to be sold to break-even if fixed costs equal $8,000?

Accepted Answer

A) 2,000 units. 
B) 3,000 units. 
C) 4,000 units. 
D) 3,800 units. 
A) 2,000 units. 
B) 3,000 units. 
C) 4,000 units. 
D) 3,800 units.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

The margin of safety sales volume times the contribution margin ratio equals operating income.

Accepted Answer

A) True 
 B)False

Question 17

A manufacturing company produced the following report:   Required:
(1)How many units would have to be sold to break-even?
(2)If fixed overhead were to increase by $1,800 what would the break-even point in units be?
(3)What is operating income if sales increase by 25%?

Accepted Answer

(1)113 uni

Question 18

Contribution margin is total revenue less variable costs.

Accepted Answer

A) True 
 B)False

Question 19

As volume increases,per unit variable costs will decrease on a per-unit basis and stay the same in total.

Accepted Answer

A) True 
 B)False

Question 20

When cost-volume-profit analysis is used,the need for a cost accounting system is eliminated.

Accepted Answer

A) True 
 B)False

Exam 20: Cost-Volume-Profit Analysis

As volume increases,total fixed costs remain the same.

Operating income can be calculated by:

Cost-volume-profit graph Describe the important relationships shown on a cost-volume-profit graph.

If monthly fixed costs are $21,000 and the contribution margin ratio is 42%,the monthly sales volume required to break even is:

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

Any business which operates at less than capacity will have smaller fixed costs than variable costs.

In cost-volume-profit analysis,income tax expense:

A company's relevant range of production is:

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

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

A company's most profitable products are often those which:

If unit sales prices are $7 and variable costs are $5 per unit,how many units would have to be sold to break-even if fixed costs equal $8,000?

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

The margin of safety sales volume times the contribution margin ratio equals operating income.

A manufacturing company produced the following report: Required: (1)How many units would have to be sold to break-even? (2)If fixed overhead were to increase by $1,800 what would the break-even point in units be? (3)What is operating income if sales increase by 25%?

Contribution margin is total revenue less variable costs.

As volume increases,per unit variable costs will decrease on a per-unit basis and stay the same in total.

When cost-volume-profit analysis is used,the need for a cost accounting system is eliminated.

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

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