Question 1

An important assumption in multiproduct analysis is that the sales mix is known and remains constant.

Accepted Answer

A) True 
 B)False

Question 2

Baines Brothers manufactures and sells two products, A and Z in the ratio of 4:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the number of units of Product A Baines must sell to break even.

Accepted Answer

A)  5,080. 
B)  6,200. 
C)  5,580. 
D)  3,100. 
E)  9,300. 
A)  5,080. 
B)  6,200. 
C)  5,580. 
D)  3,100. 
E)  9,300.

Question 3

Thomas Co. produces and sells Ultra, Super, and Mega, and has total fixed costs of $52,000. Sales and cost data follow:   Calculate the break-even point in composite units.

Accepted Answer

The answer of Thomas Co. produces and sells Ultra, Super,...

Question 4

During a recent fiscal year, Dawson Company reported pretax income of $125,000, a contribution margin ratio of 25% and total contribution margin of $400,000. Total variable costs must have been:

Accepted Answer

A)  $1,100,000. 
B)  $1,200,000. 
C)  $500,000. 
D)  $1,600,000. 
E)  $2,100,000. 
A)  $1,100,000. 
B)  $1,200,000. 
C)  $500,000. 
D)  $1,600,000. 
E)  $2,100,000.

Question 5

Cost-volume-profit analysis cannot be used when a firm produces and sells more than one product.

Accepted Answer

A) True 
 B)False

Question 6

A company has fixed costs of $90,000. Its contribution margin ratio is 30% and the product sells for $75 per unit. What is the company's break-even point in dollar sales?

Accepted Answer

A)  $60,000. 
B)  $128,571. 
C)  $180,000. 
D)  $210,000. 
E)  $300,000. 
A)  $60,000. 
B)  $128,571. 
C)  $180,000. 
D)  $210,000. 
E)  $300,000.

Question 7

At Flint Company's break-even point of 9,000 units, fixed costs are $180,000 and variable costs are $540,000 in total. The unit sales price is:

Accepted Answer

A)  $20. 
B)  $40. 
C)  $60. 
D)  $80. 
E)  $100. 
A)  $20. 
B)  $40. 
C)  $60. 
D)  $80. 
E)  $100.

Question 8

What is operating leverage? How can the degree of operating leverage be used in analyzing changes in sales?

Accepted Answer

Operating leverage is the extent or rela

Question 9

A company's product sells at $12 per unit and has a $5 per unit variable cost. The company's total fixed costs are $98,000. The break-even point in units is:

Accepted Answer

A)  5,158. 
B)  7,000. 
C)  8,167. 
D)  14,000. 
E)  19,600. 
A)  5,158. 
B)  7,000. 
C)  8,167. 
D)  14,000. 
E)  19,600.

Question 10

A firm provides the following sales data:   Required: (a) Calculate the break-even point in dollar sales.
(b) Calculate the margin of safety in dollar sales.

Accepted Answer

The answer of A firm provides the following sales data:...

Question 11

The following information describes a product expected to be produced and sold by Hadley Company:   Required:
(a) Calculate the contribution margin ratio.
(b) Calculate the break-even point in dollar sales.
(c) What dollar amount of sales would be necessary to achieve a pretax income of $120,000?

Accepted Answer

The answer of The following information describes a product expected...

Question 12

Kelley Company and Mason Company each have sales of $200,000 and costs of $140,000. Kelley Company's costs consist of $40,000 fixed and $100,000 variable, while Mason Company's costs consist of $100,000 fixed and $40,000 variable. Which company will suffer the greatest decline in profits if sales volume declines by 15%? Prepare income statements and compute degree of operating leverage to assess.

Accepted Answer

The answer of Kelley Company and Mason Company each have...

Question 13

A graphic depiction of the break-even point is known as a cost-volume-profit (CVP) chart.

Accepted Answer

A) True 
 B)False

Question 14

Management anticipates fixed costs of $72,500 and variable costs equal to 40% of sales. What will pretax income equal if sales are $325,000?

Accepted Answer

A)  $57,500. 
B)  $122,500. 
C)  $130,000. 
D)  $181,250. 
E)  $252,500. 
A)  $57,500. 
B)  $122,500. 
C)  $130,000. 
D)  $181,250. 
E)  $252,500.

Question 15

The margin of safety can be expressed in units of product, in dollars, or as a percent of sales.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

The answer of The ______________________ is the sales level at...

Question 17

A cost that changes in proportion to changes in volume of activity is a(n):

Accepted Answer

A)  Differential cost. 
B)  Fixed cost. 
C)  Incremental cost. 
D)  Variable cost. 
E)  Product cost. 
A)  Differential cost. 
B)  Fixed cost. 
C)  Incremental cost. 
D)  Variable cost. 
E)  Product cost.

Question 18

The margin of safety is the amount that sales can drop before the company incurs a loss.

Accepted Answer

A) True 
 B)False

Question 19

Outback Products reports the following information:   Required:
(a) Calculate Outback Products' degree of operating leverage (DOL).
(b) Outback Products forecasts a 6% increase in sales. What is the expected effect in percent on pretax income?

Accepted Answer

The answer of Outback Products reports the following information: ...

Question 20

Degree of operating leverage (DOL) is defined as total contribution margin in dollars divided by pretax income.

Accepted Answer

A) True 
 B)False

Exam 22: Cost-Volume-Profit Analysis

An important assumption in multiproduct analysis is that the sales mix is known and remains constant.

Baines Brothers manufactures and sells two products, A and Z in the ratio of 4:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the number of units of Product A Baines must sell to break even.

Thomas Co. produces and sells Ultra, Super, and Mega, and has total fixed costs of $52,000. Sales and cost data follow: Calculate the break-even point in composite units.

During a recent fiscal year, Dawson Company reported pretax income of $125,000, a contribution margin ratio of 25% and total contribution margin of $400,000. Total variable costs must have been:

Cost-volume-profit analysis cannot be used when a firm produces and sells more than one product.

A company has fixed costs of $90,000. Its contribution margin ratio is 30% and the product sells for $75 per unit. What is the company's break-even point in dollar sales?

At Flint Company's break-even point of 9,000 units, fixed costs are $180,000 and variable costs are $540,000 in total. The unit sales price is:

What is operating leverage? How can the degree of operating leverage be used in analyzing changes in sales?

A company's product sells at $12 per unit and has a $5 per unit variable cost. The company's total fixed costs are $98,000. The break-even point in units is:

A firm provides the following sales data: Required: (a) Calculate the break-even point in dollar sales. (b) Calculate the margin of safety in dollar sales.

The following information describes a product expected to be produced and sold by Hadley Company: Required: (a) Calculate the contribution margin ratio. (b) Calculate the break-even point in dollar sales. (c) What dollar amount of sales would be necessary to achieve a pretax income of $120,000?

A graphic depiction of the break-even point is known as a cost-volume-profit (CVP) chart.

Management anticipates fixed costs of $72,500 and variable costs equal to 40% of sales. What will pretax income equal if sales are $325,000?

The margin of safety can be expressed in units of product, in dollars, or as a percent of sales.

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

A cost that changes in proportion to changes in volume of activity is a(n):

The margin of safety is the amount that sales can drop before the company incurs a loss.

Outback Products reports the following information: Required: (a) Calculate Outback Products' degree of operating leverage (DOL). (b) Outback Products forecasts a 6% increase in sales. What is the expected effect in percent on pretax income?

Degree of operating leverage (DOL) is defined as total contribution margin in dollars divided by pretax income.

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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