Question 1

Identify items a, b, and c in the cost-volume-profit graph shown below.

Accepted Answer

(a) Profit

Question 2

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 3

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. Dunkin company management targets an annual after-tax income of $843,750. The company is subject to a 25% income tax rate. Compute the unit sales to earn the target after-tax net income.

Accepted Answer

A)  12,000. 
B)  10,188. 
C)  6,672. 
D)  11,750. 
E)  14,688. 
A)  12,000. 
B)  10,188. 
C)  6,672. 
D)  11,750. 
E)  14,688.

Question 4

Thomas Company has total fixed costs of $360,000 and variable costs of $14 per unit. If the unit sales price is reduced from $24 to $20 and advertising is increased by $10,000, sales will increase from 40,000 to 65,000 units. Should Thomas reduce its per unit sales price and pay for the additional advertising? (Support your answer with calculations.)

Accepted Answer

Since there is a $20,000 decre

Question 5

In cost-volume-profit analysis, the unit contribution margin is:

Accepted Answer

A)  Sales price per unit less cost of goods sold per unit. 
B)  Sales price per unit less unit fixed cost per unit. 
C)  Sales price per unit less total variable cost per unit. 
D)  Sales price per unit less unit total cost per unit. 
E)  The same as the contribution margin ratio. 
A)  Sales price per unit less cost of goods sold per unit. 
B)  Sales price per unit less unit fixed cost per unit. 
C)  Sales price per unit less total variable cost per unit. 
D)  Sales price per unit less unit total cost per unit. 
E)  The same as the contribution margin ratio.

Question 6

Use the following information to determine the margin of safety in dollars:

Accepted Answer

A)  $88,500. 
B)  $108,500. 
C)  $173,600. 
D)  $326,400. 
E)  $500,000. 
A)  $88,500. 
B)  $108,500. 
C)  $173,600. 
D)  $326,400. 
E)  $500,000.

Question 7

The method most likely to produce the most precise line of cost behavior is the scatter diagram.

Accepted Answer

A) True 
 B)False

Question 8

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 contribution margin per unit is:

Accepted Answer

A)  $5.00. 
B)  $7.00. 
C)  $8.17. 
D)  $12.00. 
E)  $17.00. 
A)  $5.00. 
B)  $7.00. 
C)  $8.17. 
D)  $12.00. 
E)  $17.00.

Question 9

Contribution margin is the amount of sales that exceeds total variable costs.

Accepted Answer

A) True 
 B)False

Question 10

A _______________ cost is one that remains unchanged in amount when volume of activity varies from period to period within a relevant range. A ______________ cost is one that changes in proportion to changes in volume of activity.

Accepted Answer

The answer of A _______________ cost is one that remains...

Question 11

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 12

A firm sells two different products, A andA. Total fixed costs for this firm are $1,260,000. Additional selling prices and cost information for both products follow:
Required: (a) Calculate the contribution margin per composite unit.
(b) Calculate the break-even point in units of each individual product.
(c) If pretax income before taxes of $294,000 is desired, how many units of A and B must be sold?
   B. For each unit of B, the firm sells two units of

Accepted Answer

The answer of A firm sells two different products, A...

Question 13

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 break-even point in composite units.

Accepted Answer

A)  1,748. 
B)  1,468. 
C)  1,550. 
D)  1,395. 
E)  1,270. 
A)  1,748. 
B)  1,468. 
C)  1,550. 
D)  1,395. 
E)  1,270.

Question 14

What are the basic assumptions of CVP analysis with regard to variable cost, fixed cost, and selling price per unit? (Assume a single product).

Accepted Answer

Variable costs per unit are co

Question 15

___________________________ is a statistical method of identifying an estimated line of cost behavior.

Accepted Answer

Least-Squa

Question 16

Brown Company's contribution margin ratio is 24%. Total fixed costs are $84,000. What is Brown's break-even point in sales dollars?

Accepted Answer

A)  $20,160. 
B)  $110,526. 
C)  $350,000. 
D)  $240,000. 
E)  $84,000. 
A)  $20,160. 
B)  $110,526. 
C)  $350,000. 
D)  $240,000. 
E)  $84,000.

Question 17

Hiller Co. anticipates total fixed costs of $120,000 and variable costs equal to 40% of sales. What is the pretax income if sales are $650,000?

Accepted Answer

Pretax Income = $650

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

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 20

Which of the following is the correct interpretation of a degree of operating leverage of 5?

Accepted Answer

A)  Operating leverage of 5 means that sales can decrease by 5% before the firm's current level of sales will hit the break-even point. 
B)  Operating leverage of 5 means that if sales increase by 5% the firm will hit its break-even point. 
C)  Operating leverage of 5 means that if sales increase by 5%, there will be a 25% increase in the firm's pretax profit. 
D)  Operating leverage of 5 measures the degree of debt employed by the firm's debt structure. 
E)  Operating leverage of 5 means that the company would need to increase sales by 5 times in order to hit its break-even point. 
A)  Operating leverage of 5 means that sales can decrease by 5% before the firm's current level of sales will hit the break-even point. 
B)  Operating leverage of 5 means that if sales increase by 5% the firm will hit its break-even point. 
C)  Operating leverage of 5 means that if sales increase by 5%, there will be a 25% increase in the firm's pretax profit. 
D)  Operating leverage of 5 measures the degree of debt employed by the firm's debt structure. 
E)  Operating leverage of 5 means that the company would need to increase sales by 5 times in order to hit its break-even point.

Exam 22: Cost-Volume-Profit Analysis

Identify items a, b, and c in the cost-volume-profit graph shown below.

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:

In cost-volume-profit analysis, the unit contribution margin is:

Use the following information to determine the margin of safety in dollars:

The method most likely to produce the most precise line of cost behavior is the scatter diagram.

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 contribution margin per unit is:

Contribution margin is the amount of sales that exceeds total variable costs.

A _______________ cost is one that remains unchanged in amount when volume of activity varies from period to period within a relevant range. A ______________ cost is one that changes in proportion to changes in volume of activity.

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?

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 break-even point in composite units.

What are the basic assumptions of CVP analysis with regard to variable cost, fixed cost, and selling price per unit? (Assume a single product).

___________________________ is a statistical method of identifying an estimated line of cost behavior.

Brown Company's contribution margin ratio is 24%. Total fixed costs are $84,000. What is Brown's break-even point in sales dollars?

Hiller Co. anticipates total fixed costs of $120,000 and variable costs equal to 40% of sales. What is the pretax income if sales are $650,000?

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

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:

Which of the following is the correct interpretation of a degree of operating leverage of 5?

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

Long-Term Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

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

Filters

A _ cost is one that remains unchanged in amount when volume of activity varies from period to period within a relevant range. A cost is one that changes in proportion to changes in volume of activity.