Question 1

Which of the following statements is false regarding the contribution margin income statement?

Accepted Answer

A)  It will group costs into categories based on their behavior (fixed or variable). 
B)  It will include a subtotal called gross profit. 
C)  It is not allowed for external reporting purposes. 
D)  It is used by management to perform cost-volume-profit analysis. 
A)  It will group costs into categories based on their behavior (fixed or variable). 
B)  It will include a subtotal called gross profit. 
C)  It is not allowed for external reporting purposes. 
D)  It is used by management to perform cost-volume-profit analysis.

Question 2

Your boss read a recent magazine article about income statements, but he was unclear about the differences between a traditional income statement and a contribution margin income statement. Explain the difference by: a) presenting a sample format for each statement, b) describing the focus of each statement, and c) discussing how and by whom each statement is used.

Accepted Answer

The answer of Your boss read a recent magazine article...

Question 3

Chapman Products produces a unique item with the following information:
   Required: Calculate the following based on the above information:

Accepted Answer

The answer of Chapman Products produces a unique item with...

Question 4

Harrison Manufacturing has the following product information available:   If Harrison is in the 35% tax bracket, how many units need to be sold in order to earn an after-tax target profit of $260,000?

Accepted Answer

A)  16,667 units 
B)  14,483 units 
C)  22,282 units 
D)  20,317 units 
A)  16,667 units 
B)  14,483 units 
C)  22,282 units 
D)  20,317 units

Question 5

Cameron Corp. Cameron Corp. has the following product information:
  Refer to the Cameron Corp. information above. What is the break-even point in units?

Accepted Answer

A)  8,500 units 
B)  2,975 units 
C)  1,041 units 
D)  170,000 units 
A)  8,500 units 
B)  2,975 units 
C)  1,041 units 
D)  170,000 units

Question 6

Cameron Corp. Cameron Corp. has the following product information:
  Refer to the Cameron Corp. information above. What is the break-even point in sales dollars?

Accepted Answer

A)  $20,825 
B)  $59,500 
C)  $170,000 
D)  $416,500 
A)  $20,825 
B)  $59,500 
C)  $170,000 
D)  $416,500

Question 7

Greenwood Manufacturing has the following product information:
   Required: Calculate the following based on the above information:

Accepted Answer

The answer of Greenwood Manufacturing has the following product information:
...

Question 8

The difference between sales and cost of goods sold is called:

Accepted Answer

A)  net income. 
B)  gross profit. 
C)  contribution margin. 
D)  finished goods inventory. 
A)  net income. 
B)  gross profit. 
C)  contribution margin. 
D)  finished goods inventory.

Question 9

When and why should income taxes be considered in profit planning? What is the impact on target profit when income taxes are taken into account?

Accepted Answer

Income taxes should be considered in pro

Question 10

What is meant by the term "break-even point" and how is it computed in a single versus a multi-product environment?

Accepted Answer

The "break-even point" is the level of s

Question 11

All else being equal, which of the following would not cause the contribution margin to decrease?

Accepted Answer

A)  An increase in total variable costs. 
B)  A decrease in sales volume. 
C)  A decrease in variable costs per unit. 
D)  A decrease in the sales price per unit. 
A)  An increase in total variable costs. 
B)  A decrease in sales volume. 
C)  A decrease in variable costs per unit. 
D)  A decrease in the sales price per unit.

Question 12

How is contribution margin ratio computed?

Accepted Answer

The contribution margin ratio

Question 13

Which of the following is an assumption of CVP analysis?

Accepted Answer

A)  Inventory levels increase at a constant rate. 
B)  Costs are linear throughout the relevant range. 
C)  The number of units sold is constant. 
D)  Fixed costs increase as production increases. 
A)  Inventory levels increase at a constant rate. 
B)  Costs are linear throughout the relevant range. 
C)  The number of units sold is constant. 
D)  Fixed costs increase as production increases.

Question 14

One of the major assumptions used in CVP analysis is:

Accepted Answer

A)  that number of units sold each year remains the same. 
B)  that in a multi-product environment, all products are assumed to be sold in identical proportion to total sales. 
C)  that the tax rate is not known. 
D)  that the sales price of a product will not change as volume changes. 
A)  that number of units sold each year remains the same. 
B)  that in a multi-product environment, all products are assumed to be sold in identical proportion to total sales. 
C)  that the tax rate is not known. 
D)  that the sales price of a product will not change as volume changes.

Question 15

The difference between sales and variable costs is called:

Accepted Answer

A)  net income. 
B)  gross profit 
C)  contribution margin. 
D)  cost of goods sold. 
A)  net income. 
B)  gross profit 
C)  contribution margin. 
D)  cost of goods sold.

Question 16

Poole Products Inc. Poole Products Inc. has the following product information available:
  Refer to the Poole Products Inc. information above. What is the break-even point in sales dollars?

Accepted Answer

A)  $21,600 
B)  $36,000 
C)  $60,000 
D)  $90,000 
A)  $21,600 
B)  $36,000 
C)  $60,000 
D)  $90,000

Question 17

Stealth Software Inc. Stealth Software Inc. has the following information available from last year for one of its software products:
  Refer to the Stealth Software Inc. information above. If the software had a sales price of $20 per unit, what is the contribution margin per unit?

Accepted Answer

A)  $10 
B)  $6 
C)  $14 
D)  $20 
A)  $10 
B)  $6 
C)  $14 
D)  $20

Question 18

What does operating leverage reveal about a company?

Accepted Answer

Operating leverage provides an indicatio

Question 19

For each of the following statements, fill in the blank with either the word increase, decrease, or stay the same.

Accepted Answer

The answer of For each of the following statements, fill...

Question 20

Poole Products Inc. Poole Products Inc. has the following product information available:
  Refer to the Poole Products Inc. information above. How many units need to be sold in order to earn a target profit of $249,000?

Accepted Answer

A)  8,143 units 
B)  14,200 units 
C)  16,600 units 
D)  19,000 units 
A)  8,143 units 
B)  14,200 units 
C)  16,600 units 
D)  19,000 units

Which of the following statements is false regarding the contribution margin income statement?

Chapman Products produces a unique item with the following information: Required: Calculate the following based on the above information:

Harrison Manufacturing has the following product information available: If Harrison is in the 35% tax bracket, how many units need to be sold in order to earn an after-tax target profit of $260,000?

Cameron Corp. Cameron Corp. has the following product information: Refer to the Cameron Corp. information above. What is the break-even point in units?

Cameron Corp. Cameron Corp. has the following product information: Refer to the Cameron Corp. information above. What is the break-even point in sales dollars?

Greenwood Manufacturing has the following product information: Required: Calculate the following based on the above information:

The difference between sales and cost of goods sold is called:

When and why should income taxes be considered in profit planning? What is the impact on target profit when income taxes are taken into account?

What is meant by the term "break-even point" and how is it computed in a single versus a multi-product environment?

All else being equal, which of the following would not cause the contribution margin to decrease?

How is contribution margin ratio computed?

Which of the following is an assumption of CVP analysis?

One of the major assumptions used in CVP analysis is:

The difference between sales and variable costs is called:

Poole Products Inc. Poole Products Inc. has the following product information available: Refer to the Poole Products Inc. information above. What is the break-even point in sales dollars?

Stealth Software Inc. Stealth Software Inc. has the following information available from last year for one of its software products: Refer to the Stealth Software Inc. information above. If the software had a sales price of $20 per unit, what is the contribution margin per unit?

What does operating leverage reveal about a company?

For each of the following statements, fill in the blank with either the word increase, decrease, or stay the same.

Poole Products Inc. Poole Products Inc. has the following product information available: Refer to the Poole Products Inc. information above. How many units need to be sold in order to earn a target profit of $249,000?

Introduction to Managerial Accounting

Product Costing: Manufacturing Processes, Cost Terminology, and Cost Flows

Job Costing, Process Costing, and Operations Costing

Activity-Based Costing

Cost Behavior

Relevant Costs and Product Planning Decisions

Long-Term Capital Investment Decisions

The Use of Budgets in Planning and Decision Making

Variance Analysis A Tool for Cost Control and Performance Evaluation

Decentralization, Performance Evaluation, and the Balanced Scorecard

Financial Statement Analysis

The Statement of Cash Flows

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Exam 6: Cost-Volume-Profit Analysis

Which of the following statements is false regarding the contribution margin income statement?

Chapman Products produces a unique item with the following information: Required: Calculate the following based on the above information:

Harrison Manufacturing has the following product information available: If Harrison is in the 35% tax bracket, how many units need to be sold in order to earn an after-tax target profit of $260,000?

Cameron Corp. Cameron Corp. has the following product information: Refer to the Cameron Corp. information above. What is the break-even point in units?

Cameron Corp. Cameron Corp. has the following product information: Refer to the Cameron Corp. information above. What is the break-even point in sales dollars?

Greenwood Manufacturing has the following product information: Required: Calculate the following based on the above information:

The difference between sales and cost of goods sold is called:

When and why should income taxes be considered in profit planning? What is the impact on target profit when income taxes are taken into account?

What is meant by the term "break-even point" and how is it computed in a single versus a multi-product environment?

All else being equal, which of the following would not cause the contribution margin to decrease?

How is contribution margin ratio computed?

Which of the following is an assumption of CVP analysis?

One of the major assumptions used in CVP analysis is:

The difference between sales and variable costs is called:

Poole Products Inc. Poole Products Inc. has the following product information available: Refer to the Poole Products Inc. information above. What is the break-even point in sales dollars?

Stealth Software Inc. Stealth Software Inc. has the following information available from last year for one of its software products: Refer to the Stealth Software Inc. information above. If the software had a sales price of $20 per unit, what is the contribution margin per unit?

What does operating leverage reveal about a company?

For each of the following statements, fill in the blank with either the word increase, decrease, or stay the same.

Poole Products Inc. Poole Products Inc. has the following product information available: Refer to the Poole Products Inc. information above. How many units need to be sold in order to earn a target profit of $249,000?

Introduction to Managerial Accounting

Product Costing: Manufacturing Processes, Cost Terminology, and Cost Flows

Job Costing, Process Costing, and Operations Costing

Activity-Based Costing

Cost Behavior

Relevant Costs and Product Planning Decisions

Long-Term Capital Investment Decisions

The Use of Budgets in Planning and Decision Making

Variance Analysis A Tool for Cost Control and Performance Evaluation

Decentralization, Performance Evaluation, and the Balanced Scorecard

Financial Statement Analysis

The Statement of Cash Flows

Filters