Question 1

Duxbury Co. reports the following data for the current year:   Required:
(a) Calculate Duxbury's pretax income.
(b) Calculate Duxbury's degree of operating leverage.

Accepted Answer

The answer of Duxbury Co. reports the following data for...

Question 2

There are only two methods to derive an estimated line of cost behavior; the high-low method and the scatter diagram.

Accepted Answer

A) True 
 B)False

Question 3

Spruce Company is considering the production and sale of a new product with the following sales and cost data: unit sales price, $350; unit variable costs, $180; total fixed costs, $399,500; and projected sales, $910,000. Round your answers to the nearest whole unit or dollar.
(a) Calculate break-even in units.
(b) Calculate break-even in dollars (use four decimal places when calculating the contribution margin ratio).
(c) Calculate number of units that would need to be sold to generate an after-tax profit of $420,000 assuming a 30% tax rate.
(d) Calculate dollar sales that would be needed to generate the same profit as above.
(e) Calculate the margin of safety stated as a percentage using the $910,000 projected sales level.
Be sure to label each calculation and show all calculations.

Accepted Answer

The answer of Spruce Company is considering the production and...

Question 4

Scatter diagrams plot volume on the vertical axis and cost on the horizontal axis.

Accepted Answer

A) True 
 B)False

Question 5

Mueller Corp. manufactures compact discs that sell for $5.00. Fixed costs are $28,000 and variable costs are $3.60 per unit. Mueller can buy a newer production machine that will increase fixed costs by $8,000 per year, but will decrease variable costs by $0.40 per unit. What effect would the purchase of the new machine have on Mueller's break-even point in units?

Accepted Answer

A)  4,444 unit increase. 
B)  9,850 unit decrease. 
C)  5,714 unit increase. 
D)  4,444 unit decrease. 
E)  No effect on the break-even point in units. 
A)  4,444 unit increase. 
B)  9,850 unit decrease. 
C)  5,714 unit increase. 
D)  4,444 unit decrease. 
E)  No effect on the break-even point in units.

Question 6

The contribution margin ratio is the percent by which the margin of safety exceeds the break-even point.

Accepted Answer

A) True 
 B)False

Question 7

The contribution margin per unit is equal to the sales price per unit minus the variable costs per unit.

Accepted Answer

A) True 
 B)False

Question 8

During its most recent fiscal year, Simon Enterprises sold 200,000 electric screwdrivers at a price of $15 each. Fixed costs amounted to $400,000 and pretax income was $600,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?

Accepted Answer

A)  $2,400,000. 
B)  $1,600,000. 
C)  $3,000,000. 
D)  $2,000,000. 
E)  $1,000,000. 
A)  $2,400,000. 
B)  $1,600,000. 
C)  $3,000,000. 
D)  $2,000,000. 
E)  $1,000,000.

Question 9

Select cost information for Winfrey Enterprises is as follows:   Based on this information:

Accepted Answer

A)  Both direct materials and rent expense are variable costs. 
B)  Utilities expense is a mixed cost and rent expense is a variable cost. 
C)  Utilities expense is a mixed cost and rent expense is a fixed cost. 
D)  Direct materials is a fixed cost and utilities expense is a mixed cost. 
E)  Both direct materials and utilities expense are mixed costs. 
A)  Both direct materials and rent expense are variable costs. 
B)  Utilities expense is a mixed cost and rent expense is a variable cost. 
C)  Utilities expense is a mixed cost and rent expense is a fixed cost. 
D)  Direct materials is a fixed cost and utilities expense is a mixed cost. 
E)  Both direct materials and utilities expense are mixed costs.

Question 10

The contribution margin ratio:

Accepted Answer

A)  Is the percent of each sales dollar that remains after deducting total unit variable cost. 
B)  Is the percent of each sales dollar that remains after deducting total unit fixed cost. 
C)  Is the percent of each sales dollar that remains to cover fixed costs and contribute to the managers' incomes. 
D)  Cannot be used in conjunction with other analytical tools. 
E)  Is the same as the unit contribution margin. 
A)  Is the percent of each sales dollar that remains after deducting total unit variable cost. 
B)  Is the percent of each sales dollar that remains after deducting total unit fixed cost. 
C)  Is the percent of each sales dollar that remains to cover fixed costs and contribute to the managers' incomes. 
D)  Cannot be used in conjunction with other analytical tools. 
E)  Is the same as the unit contribution margin.

Question 11

The Haskins Company manufactures and sells radios. Each radio sells for $23.75 and the variable cost per unit is $16.25. Haskin's total fixed costs are $25,000, and budgeted sales are 8,000 units. What is the contribution margin per unit?

Accepted Answer

A)  $7.50. 
B)  $16.25. 
C)  $23.75. 
D)  $60,000. 
E)  $1.25. 
A)  $7.50. 
B)  $16.25. 
C)  $23.75. 
D)  $60,000. 
E)  $1.25.

Question 12

Yamaguchi Company's break even point in units is 1,000. The sales price per unit is $10 and variable cost per unit is $7. If the company sells 2,500 units, what will net income be?

Accepted Answer

A)  $4,500 
B)  $7,500 
C)  $17,000 
D)  $35,000 
E)  Fixed costs must be known in order to predict net incomE.Net Income = Contribution Margin x Units sold in excess of break-even units 
A)  $4,500 
B)  $7,500 
C)  $17,000 
D)  $35,000 
E)  Fixed costs must be known in order to predict net incomE.Net Income = Contribution Margin x Units sold in excess of break-even units

Question 13

A firm expects to sell 25,000 units of its product at $11 per unit. Pretax income is predicted to be $60,000. If the variable costs per unit are $5, total fixed costs must be:

Accepted Answer

A)  $65,000. 
B)  $90,000. 
C)  $125,000. 
D)  $215,000. 
E)  $275,000. 
A)  $65,000. 
B)  $90,000. 
C)  $125,000. 
D)  $215,000. 
E)  $275,000.

Question 14

The budgeted income statement presented below is for Griffith Corporation for the coming fiscal year. If Griffith Corporation is able to achieve the budgeted level of sales, its margin of safety in dollars would be:

Accepted Answer

A)  $172,420. 
B)  $150,000. 
C)  $262,500. 
D)  $275,862. 
E)  $310,115. 
A)  $172,420. 
B)  $150,000. 
C)  $262,500. 
D)  $275,862. 
E)  $310,115.

Question 15

The dollar amount of sales needed to achieve a target after-tax income is computed by dividing the sum of fixed costs plus the desired after-tax income plus income taxes by the contribution margin ratio.

Accepted Answer

A) True 
 B)False

Question 16

Total contribution margin in dollars divided by pretax income is the:

Accepted Answer

A)  Degree of operating leverage. 
B)  Contribution margin ratio. 
C)  Margin of safety. 
D)  Sales mix. 
E)  Break-even point in units. 
A)  Degree of operating leverage. 
B)  Contribution margin ratio. 
C)  Margin of safety. 
D)  Sales mix. 
E)  Break-even point in units.

Question 17

The budgeted income statement presented below is for Griffith Corporation for the coming fiscal year. If Griffith Corporation's income tax rate is 40%, compute the number of units that must be sold in order to achieve a target pretax income of $130,000.

Accepted Answer

A)  53,165. 
B)  81,250. 
C)  36,207. 
D)  50,000. 
E)  58,621. 
A)  53,165. 
B)  81,250. 
C)  36,207. 
D)  50,000. 
E)  58,621.

Question 18

A graph used to analyze past cost behaviors by displaying costs and volume levels for each period as points on the diagram is called a:

Accepted Answer

A)  Least-squares diagram. 
B)  Step-wise diagram. 
C)  Scatter diagram. 
D)  Break-even diagram. 
E)  Composite diagram. 
A)  Least-squares diagram. 
B)  Step-wise diagram. 
C)  Scatter diagram. 
D)  Break-even diagram. 
E)  Composite diagram.

Question 19

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 the contribution margin per unit if the machine is purchased.

Accepted Answer

A)  $22.50. 
B)  $26.00. 
C)  $29.50. 
D)  $28.50. 
E)  $27.50. 
A)  $22.50. 
B)  $26.00. 
C)  $29.50. 
D)  $28.50. 
E)  $27.50.

Question 20

Solving problems to determine the relationship of cost, volume, and profit often commences with the measurement of the _____________ point. Further analysis emphasizing profitability may be accomplished by measuring the _______________ and ________________.

Accepted Answer

break-even

Exam 22: Cost-Volume-Profit Analysis

Duxbury Co. reports the following data for the current year: Required: (a) Calculate Duxbury's pretax income. (b) Calculate Duxbury's degree of operating leverage.

There are only two methods to derive an estimated line of cost behavior; the high-low method and the scatter diagram.

Scatter diagrams plot volume on the vertical axis and cost on the horizontal axis.

The contribution margin ratio is the percent by which the margin of safety exceeds the break-even point.

The contribution margin per unit is equal to the sales price per unit minus the variable costs per unit.

Select cost information for Winfrey Enterprises is as follows: Based on this information:

The contribution margin ratio:

The Haskins Company manufactures and sells radios. Each radio sells for $23.75 and the variable cost per unit is $16.25. Haskin's total fixed costs are $25,000, and budgeted sales are 8,000 units. What is the contribution margin per unit?

Yamaguchi Company's break even point in units is 1,000. The sales price per unit is $10 and variable cost per unit is $7. If the company sells 2,500 units, what will net income be?

A firm expects to sell 25,000 units of its product at $11 per unit. Pretax income is predicted to be $60,000. If the variable costs per unit are $5, total fixed costs must be:

The budgeted income statement presented below is for Griffith Corporation for the coming fiscal year. If Griffith Corporation is able to achieve the budgeted level of sales, its margin of safety in dollars would be:

The dollar amount of sales needed to achieve a target after-tax income is computed by dividing the sum of fixed costs plus the desired after-tax income plus income taxes by the contribution margin ratio.

Total contribution margin in dollars divided by pretax income is the:

The budgeted income statement presented below is for Griffith Corporation for the coming fiscal year. If Griffith Corporation's income tax rate is 40%, compute the number of units that must be sold in order to achieve a target pretax income of $130,000.

A graph used to analyze past cost behaviors by displaying costs and volume levels for each period as points on the diagram is called a:

Solving problems to determine the relationship of cost, volume, and profit often commences with the measurement of the _____________ point. Further analysis emphasizing profitability may be accomplished by measuring the _______________ and ________________.

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

Filters

Solving problems to determine the relationship of cost, volume, and profit often commences with the measurement of the _____ point. Further analysis emphasizing profitability may be accomplished by measuring the _ and __________.