Question 1

In comparison to selling a product with a low contribution margin ratio,selling a product with a high contribution margin ratio always:

Accepted Answer

A) Requires less dollar sales volume to cover a given level of fixed costs. 
B) Results in a greater margin of safety. 
C) Results in higher operating income. 
D) Results in a higher contribution margin per unit sold. 
A) Requires less dollar sales volume to cover a given level of fixed costs. 
B) Results in a greater margin of safety. 
C) Results in higher operating income. 
D) Results in a higher contribution margin per unit sold.

Question 2

High-low method
The following information is available regarding the total repair costs of Alexander Design Company for six months of 2018:
   (a)Using the high-low method,compute the following:
(1)The variable element of repair cost per unit of production:
$________ per unit
(2)The fixed element of the monthly repair cost: $________
(b)Use the cost relationship determined in part a to estimate the total repair cost for July 2018,given that production is scheduled for 2,300 units.$________

Accepted Answer

(a)(1)$7.20 per unit

Question 3

[The following information applies to the questions displayed below.]
Mitchell Corporation manufactures a single product.The selling price is $85 per unit,and variable costs amount to $68 per unit.The fixed costs are $16,500 per month.
-What is the monthly sales volume in dollars necessary to break-even?

Accepted Answer

A) $82,500 
B) $66,500 
C) $97,059 
D) $77,500 
A) $82,500 
B) $66,500 
C) $97,059 
D) $77,500

Question 4

A manufacturing company produced the following report:   Required:
(1)How many units would have to be sold to break-even?
(2)If fixed overhead were to increase by $1,800 what would the break-even point in units be?
(3)What is operating income if sales increase by 25%?

Accepted Answer

(1)113 uni

Question 5

Economies of scale can be achieved by using facilities more intensively.

Accepted Answer

A) True 
 B)False

Question 6

What will be the monthly margin of safety (in dollars)if 3,000 units are sold each month? (Round the answer to the nearest dollar. )

Accepted Answer

A) $16,667 
B) $100,000 
C) $43,333 
D) $150,000 
A) $16,667 
B) $100,000 
C) $43,333 
D) $150,000

Question 7

[The following information applies to the questions displayed below.]
Grand Gimmicks Company produces a single product with a current selling price of $170.Variable costs are $130 per unit,and fixed costs per month average $6,240.Management is considering increasing the selling price to $190 per unit.Assume that the variable cost per unit of the product and monthly fixed expenses will not change as a result of the proposed increase in selling price.
-At the proposed increased selling price of $190 per unit,the contribution margin ratio is closest to:

Accepted Answer

A) 60.2%. 
B) 31.6%. 
C) 68.4%. 
D) 50.8%. 
A) 60.2%. 
B) 31.6%. 
C) 68.4%. 
D) 50.8%.

Question 8

If the unit sales price is $14,variable costs are $7 per unit and fixed costs are $42,000,how many units must be sold to earn an income of $250,000? (Round the answer up to the next whole number. )

Accepted Answer

A) 52,142 units 
B) 41,715 units 
C) 34,762 units 
D) 29,796 units 
A) 52,142 units 
B) 41,715 units 
C) 34,762 units 
D) 29,796 units

Question 9

[The following information applies to the questions displayed below.]
The levels of production and of manufacturing overhead for the first five months of 2018 for Duke & Duchess Products are shown below:
  
-In June,Duke & Duchess expects to manufacture 18,000 units.Using the high-low method,compute the total estimated manufacturing overhead for June.(Round your intermediate computations to two decimal places. )

Accepted Answer

A) $65,278 
B) $61,668 
C) $63,948 
D) $18,360 
A) $65,278 
B) $61,668 
C) $63,948 
D) $18,360

Question 10

The Gillett Company's breakeven point in units is 25,000.Assuming that variable costs are 50% and fixed costs are $500,000,what is the company's projected operating income if sales are $1,250,000?

Accepted Answer

A) $750,000 
B) $100,000 
C) $125,000 
D) $400,000 
A) $750,000 
B) $100,000 
C) $125,000 
D) $400,000

Question 11

The higher the unit contribution margin,the higher the volume of unit sales required to cover a given amount of fixed costs.

Accepted Answer

A) True 
 B)False

Question 12

Millar Company produces a single product that it sells for $89 a unit.If the fixed costs of manufacturing and selling the product are $68,400 a month and the variable costs are $57 a unit,which of the below is correct?

Accepted Answer

A) The fixed costs amount to $32 per unit at any level of output within a relevant volume range. 
B) The company will break even with a sales volume of $68,400 a month. 
C) An increase in sales volume above $68,400 a month will cause an increase in fixed costs. 
D) The contribution margin per unit of product is $32. 
A) The fixed costs amount to $32 per unit at any level of output within a relevant volume range. 
B) The company will break even with a sales volume of $68,400 a month. 
C) An increase in sales volume above $68,400 a month will cause an increase in fixed costs. 
D) The contribution margin per unit of product is $32.

Question 13

How will a company's contribution margin be affected by an investment in equipment that increases fixed costs in order to achieve a reduction in direct labor cost?

Accepted Answer

A) Contribution margin will increase. 
B) Contribution margin will fall. 
C) Contribution margin will either increase or decrease depending on the relative magnitudes of the changes in fixed and variable costs. 
D) Contribution margin will remain the same. 
A) Contribution margin will increase. 
B) Contribution margin will fall. 
C) Contribution margin will either increase or decrease depending on the relative magnitudes of the changes in fixed and variable costs. 
D) Contribution margin will remain the same.

Question 14

Which of the following is an example of a fixed cost for an airline?

Accepted Answer

A) Depreciation on the corporate headquarters 
B) Fuel costs 
C) Income taxes expense 
D) Passengers' meals 
A) Depreciation on the corporate headquarters 
B) Fuel costs 
C) Income taxes expense 
D) Passengers' meals

Question 15

Cost-volume-profit analysis
Diana Company,a sole proprietorship,sells only one product.The regular price is $160.Variable costs are 55% of this selling price,and fixed costs are $8,400 a month.
Management decides to decrease the selling price from $160 to $145 per unit.Assume that the cost of the product and the fixed operating expenses are not changed by this pricing decision.
(a)At the original selling price of $160 a unit,what is the contribution margin ratio? ________%
(b)At the original selling price of $160 a unit,what dollar volume of sales per month is required for Diana Company to break-even? (Round your answer to the nearest whole dollar. )$________
(c)At the original selling price of $160 a unit,what dollar volume of sales per month is required for Diana Company to earn a monthly operating income of $6,500? (Round your answer to the nearest whole dollar. )$________
(d)At the reduced selling price of $145 a unit,what is the contribution margin ratio? ________%
(e)At the reduced selling price of $145 a unit,what dollar volume of sales per month is required to break-even? (Round your intermediate percentage to one decimal place and final answer to the nearest whole dollar. )$________

Accepted Answer

(a)45%
(b)

Question 16

In the area of cost-volume-profit analysis,the contribution margin ratio shows how much each dollar of sales contributes to:

Accepted Answer

A) Cover the fixed costs of the business and providing operating income. 
B) Fixed expenses and variable expenses. 
C) Variable expenses and interest charges. 
D) Variable expenses when production is at normal capacity. 
A) Cover the fixed costs of the business and providing operating income. 
B) Fixed expenses and variable expenses. 
C) Variable expenses and interest charges. 
D) Variable expenses when production is at normal capacity.

Question 17

[The following information applies to the questions displayed below.]
The levels of production and of manufacturing overhead for the first five months of 2018 for Duke & Duchess Products are shown below:
  
-Using the high-low method,Duke & Duchess's monthly overhead cost is closest to which of the following? (Round your intermediate computations to two decimal places. )

Accepted Answer

A) $59,413 
B) $12,495 
C) $12,250 
D) $46,918 
A) $59,413 
B) $12,495 
C) $12,250 
D) $46,918

Question 18

[The following information applies to the questions displayed below.]
Grayson Enterprises manufactures springs and shock absorbers.Springs account for 40% of the company's total sales revenue,whereas shocks account for about 60%.The contribution margin ratios for springs and shocks are 45% and 35%,respectively.Grayson's fixed costs average $450,000 per month.
-In order to earn an operating income of $252,000,Grayson's monthly sales must be:

Accepted Answer

A) $1,700,000. 
B) $1,750,000. 
C) $1,800,000. 
D) $1,850,000. 
A) $1,700,000. 
B) $1,750,000. 
C) $1,800,000. 
D) $1,850,000.

Question 19

Operating income can be calculated by:

Accepted Answer

A) Dividing fixed costs by the contribution margin ratio. 
B) Multiplying fixed costs by the contribution margin ratio. 
C) Multiplying the margin of safety by the contribution margin ratio. 
D) Dividing the margin of safety by the contribution margin ratio. 
A) Dividing fixed costs by the contribution margin ratio. 
B) Multiplying fixed costs by the contribution margin ratio. 
C) Multiplying the margin of safety by the contribution margin ratio. 
D) Dividing the margin of safety by the contribution margin ratio.

Question 20

The Parry Company's breakeven point in units is 20,000.Assuming that variable costs are 30% and fixed costs are $100,000,what is the company's projected operating income if sales are $750,000?

Accepted Answer

A) $425,000 
B) $125,000 
C) $250,000 
D) $400,000 
A) $425,000 
B) $125,000 
C) $250,000 
D) $400,000

Exam 20: Cost-Volume-Profit Analysis

In comparison to selling a product with a low contribution margin ratio,selling a product with a high contribution margin ratio always:

A manufacturing company produced the following report: Required: (1)How many units would have to be sold to break-even? (2)If fixed overhead were to increase by $1,800 what would the break-even point in units be? (3)What is operating income if sales increase by 25%?

Economies of scale can be achieved by using facilities more intensively.

What will be the monthly margin of safety (in dollars)if 3,000 units are sold each month? (Round the answer to the nearest dollar. )

If the unit sales price is $14,variable costs are $7 per unit and fixed costs are $42,000,how many units must be sold to earn an income of $250,000? (Round the answer up to the next whole number. )

The Gillett Company's breakeven point in units is 25,000.Assuming that variable costs are 50% and fixed costs are $500,000,what is the company's projected operating income if sales are $1,250,000?

The higher the unit contribution margin,the higher the volume of unit sales required to cover a given amount of fixed costs.

Millar Company produces a single product that it sells for $89 a unit.If the fixed costs of manufacturing and selling the product are $68,400 a month and the variable costs are $57 a unit,which of the below is correct?

How will a company's contribution margin be affected by an investment in equipment that increases fixed costs in order to achieve a reduction in direct labor cost?

Which of the following is an example of a fixed cost for an airline?

In the area of cost-volume-profit analysis,the contribution margin ratio shows how much each dollar of sales contributes to:

Operating income can be calculated by:

The Parry Company's breakeven point in units is 20,000.Assuming that variable costs are 30% and fixed costs are $100,000,what is the company's projected operating income if sales are $750,000?

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

the Time Value of Money: Future Amounts and Present Values

Forms of Business Organization

Filters