Question 1

To determine the slope of the variable cost from a scatter diagram, divide the change in volume by the change in cost.

Accepted Answer

A) True 
 B)False

Question 2

On a typical cost-volume-profit graph, unit sales are shown on the horizontal axis and both dollars of sales and dollars of costs are represented on the vertical axis.

Accepted Answer

A) True 
 B)False

Question 3

A company manufactures and sells spotlights. Each spotlight sells for $145. The variable cost per unit is $98, and the company's total fixed costs are $235,000. Predicted sales are 15,000 units. What is the contribution margin per unit?

Accepted Answer

The answer of A company manufactures and sells spotlights. Each...

Question 4

Conan Company has total fixed costs of $112,000. Its product sells for $35 per unit and variable costs amount to $25 per unit. Next year Conan Company wishes to earn a pretax income that equals 10% of fixed costs. How many units must be sold to achieve this target income level?

Accepted Answer

A)  1,120. 
B)  8,214. 
C)  11,200. 
D)  12,320. 
E)  14,080. 
A)  1,120. 
B)  8,214. 
C)  11,200. 
D)  12,320. 
E)  14,080.

Question 5

In Davis Corporation's most recent fiscal year, the company reported pretax earnings of $215,000. Fixed costs totaled $325,800, the unit selling price of the firm's only product was $60, and the variable costs per unit were 40% of the selling price. Based on this information, the firm's break-even point in units was:

Accepted Answer

A)  13,575 units. 
B)  15,023 units. 
C)  13,750 units. 
D)  9,050 units. 
E)  8,750 units. 
A)  13,575 units. 
B)  15,023 units. 
C)  13,750 units. 
D)  9,050 units. 
E)  8,750 units.

Question 6

The relevant range of operations includes extremely high and low levels of production that are unlikely to occur.

Accepted Answer

A) True 
 B)False

Question 7

To calculate the break-even point in units, one must know unit fixed cost, unit variable cost, and sales price.

Accepted Answer

A) True 
 B)False

Question 8

Dunkin Company manufactures and sells a single product that sells for $480 per unit; variable costs are $300. Annual fixed costs are $990,000. Current sales volume is $4,200,000. Compute the break-even point in units.

Accepted Answer

A)  3,750. 
B)  10,000. 
C)  5,500. 
D)  3,300. 
E)  6,000. 
A)  3,750. 
B)  10,000. 
C)  5,500. 
D)  3,300. 
E)  6,000.

Question 9

Hanover Hats produces specialty logo baseball caps for a variety of customers. Selected cost data for Hanover follows: direct materials cost $8,000; sales commissions, $9,000; depreciation on factory equipment, $21,000; factory labor, $16,000; factory lease, $24,000. If Hanover Hats sells 6,100 caps at an average price of $12 for each cap, what is the company's contribution margin?

Accepted Answer

The answer of Hanover Hats produces specialty logo baseball caps...

Question 10

Describe how a cost-volume-profit analysis would be performed for a company that sells more than one product. (Assume that the sales mix is known.)

Accepted Answer

Since the sales mix is known, the contri

Question 11

A company has total fixed costs of $200,000. Its product sells for $25 per unit and variable costs amount to $15 per unit. The company wishes to earn an after-tax income of $35,000. Assume that the company has a 30% tax rate. How many units must be sold to achieve this after-tax income level?

Accepted Answer

The answer of A company has total fixed costs of...

Question 12

Winthrop Manufacturing produces a product that sells for $50.00. Fixed costs are $260,000 and variable costs are $24.00 per unit. Winthrop can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. Compute break-even point in units if the new machine is purchased.

Accepted Answer

A)  10,438 units. 
B)  8,814 units. 
C)  10,000 units. 
D)  9,200 units. 
E)  9,869 units. 
A)  10,438 units. 
B)  8,814 units. 
C)  10,000 units. 
D)  9,200 units. 
E)  9,869 units.

Question 13

Joseph Co. has three products A, B, and C, and its fixed costs are $69,000. The sales mix for its products are 3 units of A, 4 units of B, and 1 unit of
C. Information about the three products follows:
   (a) Calculate the company's break-even point in composite units and sales dollars.
(b) Calculate the number of units of each individual product to be sold at the break-even point.

Accepted Answer

The answer of Joseph Co. has three products A, B,...

Question 14

Winthrop Manufacturing produces a product that sells for $50.00. Fixed costs are $260,000 and variable costs are $24.00 per unit. Winthrop can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. Compute break-even point in dollars with the purchase of the new machine.

Accepted Answer

A)  $500,000. 
B)  $440,678. 
C)  $521,923. 
D)  $480,000. 
E)  $460,000. 
A)  $500,000. 
B)  $440,678. 
C)  $521,923. 
D)  $480,000. 
E)  $460,000.

Question 15

Davison Company has fixed costs of $315,000 and a contribution margin ratio of 24%. If sales are expected to be $1,500,000, what is the percentage of the margin of safety?

Accepted Answer

The answer of Davison Company has fixed costs of $315,000...

Question 16

A break-even point can be calculated either in units or in dollars.

Accepted Answer

A) True 
 B)False

Question 17

Dunkin Company manufactures and sells a single product that sells for $480 per unit; variable costs are $300. Annual fixed costs are $990,000. Current sales volume is $4,200,000. Compute the break-even point in dollars.

Accepted Answer

A)  $2,790,000. 
B)  $2,640,000. 
C)  $2,880,000. 
D)  $2,475,000. 
E)  $2,500,000. 
A)  $2,790,000. 
B)  $2,640,000. 
C)  $2,880,000. 
D)  $2,475,000. 
E)  $2,500,000.

Question 18

A product sells for $200 per unit, and its variable costs per unit are $130. The fixed costs are $420,000. What is the break-even point in dollar sales?

Accepted Answer

A)  $2,100. 
B)  $6,000. 
C)  $420,000. 
D)  $646,154. 
E)  $1,200,000. 
A)  $2,100. 
B)  $6,000. 
C)  $420,000. 
D)  $646,154. 
E)  $1,200,000.

Question 19

The sales level at which a company neither earns a profit nor incurs a loss is the:

Accepted Answer

A)  Relevant range. 
B)  Margin of safety. 
C)  Step-wise variable level. 
D)  Break-even point. 
E)  Contribution margin. 
A)  Relevant range. 
B)  Margin of safety. 
C)  Step-wise variable level. 
D)  Break-even point. 
E)  Contribution margin.

Question 20

A company's normal operating range, which excludes extremely high and low volumes that are not likely to occur, is called the:

Accepted Answer

A)  Margin of safety. 
B)  Contribution range. 
C)  Break-even point. 
D)  Relevant range. 
E)  High-low point. 
A)  Margin of safety. 
B)  Contribution range. 
C)  Break-even point. 
D)  Relevant range. 
E)  High-low point.

Exam 22: Cost-Volume-Profit Analysis

To determine the slope of the variable cost from a scatter diagram, divide the change in volume by the change in cost.

On a typical cost-volume-profit graph, unit sales are shown on the horizontal axis and both dollars of sales and dollars of costs are represented on the vertical axis.

A company manufactures and sells spotlights. Each spotlight sells for $145. The variable cost per unit is $98, and the company's total fixed costs are $235,000. Predicted sales are 15,000 units. What is the contribution margin per unit?

Conan Company has total fixed costs of $112,000. Its product sells for $35 per unit and variable costs amount to $25 per unit. Next year Conan Company wishes to earn a pretax income that equals 10% of fixed costs. How many units must be sold to achieve this target income level?

The relevant range of operations includes extremely high and low levels of production that are unlikely to occur.

To calculate the break-even point in units, one must know unit fixed cost, unit variable cost, and sales price.

Dunkin Company manufactures and sells a single product that sells for $480 per unit; variable costs are $300. Annual fixed costs are $990,000. Current sales volume is $4,200,000. Compute the break-even point in units.

Describe how a cost-volume-profit analysis would be performed for a company that sells more than one product. (Assume that the sales mix is known.)

A company has total fixed costs of $200,000. Its product sells for $25 per unit and variable costs amount to $15 per unit. The company wishes to earn an after-tax income of $35,000. Assume that the company has a 30% tax rate. How many units must be sold to achieve this after-tax income level?

Davison Company has fixed costs of $315,000 and a contribution margin ratio of 24%. If sales are expected to be $1,500,000, what is the percentage of the margin of safety?

A break-even point can be calculated either in units or in dollars.

Dunkin Company manufactures and sells a single product that sells for $480 per unit; variable costs are $300. Annual fixed costs are $990,000. Current sales volume is $4,200,000. Compute the break-even point in dollars.

A product sells for $200 per unit, and its variable costs per unit are $130. The fixed costs are $420,000. What is the break-even point in dollar sales?

The sales level at which a company neither earns a profit nor incurs a loss is the:

A company's normal operating range, which excludes extremely high and low volumes that are not likely to occur, is called the:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money

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