Question 1

As volume increases,per unit fixed costs stay the same.

Accepted Answer

A) True 
 B)False

Question 2

[The following information applies to the questions displayed below.]
The monthly high and low levels of direct labor hours and of total manufacturing overhead for Onyx Company are as shown:
  
-In a month in which 6,500 direct labor hours are worked,Onyx's manufacturing overhead should be approximately:

Accepted Answer

A) $18,000. 
B) $28,000. 
C) $31,000. 
D) $35,000. 
A) $18,000. 
B) $28,000. 
C) $31,000. 
D) $35,000.

Question 3

Management expects total sales of $40 million,a margin of safety of $10 million,and a contribution margin ratio of 45%.Which of the following estimated amounts is not consistent with this information?

Accepted Answer

A) Variable costs,$22 million 
B) Fixed costs,$13.5 million 
C) Operating income,$6 million 
D) Break-even sales volume,$30 million 
A) Variable costs,$22 million 
B) Fixed costs,$13.5 million 
C) Operating income,$6 million 
D) Break-even sales volume,$30 million

Question 4

Mitchum,Inc.produced different amounts of product X each month as follows:
   Using the high-low method,determine:
(1)The variable expense per unit
(2)The fixed expense
(3)If Mitchum produced 410 units what would total expenses be?

Accepted Answer

(1)$15
(2)

Question 5

Cost-volume-profit relationships
Spotless,Inc. ,sells only one product.The sales price per unit is $50,with variable cost per unit of $40.Fixed costs are $60,000 per month.Maximum capacity is 34,000 units per month.Answer the following questions:
(a)To break-even,how many units must Spotless sell per month? ________ units
(b)If Spotless,Inc. ,sold 25,000 units,what would be its operating income for the month? $________
(c)At present capacity,what is the maximum operating income Spotless can expect to earn per month? $________
(d)Assuming that direct labor cost can be reduced by $2 per unit,what would the maximum operating income be per month? $________

Accepted Answer

(a)6,000 units
(b)$1

Question 6

With variable costs,the cost per unit varies with changes in volume.

Accepted Answer

A) True 
 B)False

Question 7

A company's most profitable products are often those which:

Accepted Answer

A) Have the highest contribution margin ratios and the highest sales volumes. 
B) Have the highest contribution margin ratios and the lowest sales volumes. 
C) Have the lowest contribution margin ratios and the highest sales volumes. 
D) Have the lowest contribution margin ratios and the lowest sales volumes. 
A) Have the highest contribution margin ratios and the highest sales volumes. 
B) Have the highest contribution margin ratios and the lowest sales volumes. 
C) Have the lowest contribution margin ratios and the highest sales volumes. 
D) Have the lowest contribution margin ratios and the lowest sales volumes.

Question 8

[The following information applies to the questions displayed below.]
The following data are available for product no.CK74,manufactured and sold by Ruby Corporation:
  
-The contribution margin per unit for product no.CK74 is:

Accepted Answer

A) $26. 
B) $80.19 
C) $117. 
D) $63. 
A) $26. 
B) $80.19 
C) $117. 
D) $63.

Question 9

If unit sales prices are $7 and variable costs are $5 per unit,how many units would have to be sold to break-even if fixed costs equal $8,000?

Accepted Answer

A) 2,000 units 
B) 3,000 units 
C) 4,000 units 
D) 3,800 units 
A) 2,000 units 
B) 3,000 units 
C) 4,000 units 
D) 3,800 units

Question 10

What will be Sultan 's monthly operating income if 3,700 units are sold each month?

Accepted Answer

A) $15,000 
B) $31,000 
C) $75,000 
D) $105,000 
A) $15,000 
B) $31,000 
C) $75,000 
D) $105,000

Question 11

What will be the monthly margin of safety (in dollars)if 1,800 units are sold each month?

Accepted Answer

A) $82,500 
B) $70,500 
C) $12,000 
D) $16,500 
A) $82,500 
B) $70,500 
C) $12,000 
D) $16,500

Question 12

[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.
-Stupper Corporation manufactures two products;data are shown below:   If Stupper's monthly fixed costs average $200,000,what is its break-even point expressed in sales dollars? (Round the answer to the nearest dollar. )

Accepted Answer

A) $320,000 
B) $250,000 
C) $370,370 
D) $152,632 
A) $320,000 
B) $250,000 
C) $370,370 
D) $152,632

Question 13

The dollar amount by which sales can decline before an operating loss is incurred is called the:

Accepted Answer

A) Contribution margin. 
B) Contribution margin ratio. 
C) Margin of safety. 
D) Relevant range. 
A) Contribution margin. 
B) Contribution margin ratio. 
C) Margin of safety. 
D) Relevant range.

Question 14

When cost-volume-profit analysis is used,the need for a cost accounting system is eliminated.

Accepted Answer

A) True 
 B)False

Question 15

Contribution margin is total revenue less variable costs.

Accepted Answer

A) True 
 B)False

Question 16

Raymond & Sons generates an average contribution margin ratio of 45% on its sales.Management estimates that by spending $3,500 more per month to rent additional facilities,the business will be able to increase operating income by $10,000 per month.Management must feel that the additional facilities will increase monthly sales volume (in dollars)by:

Accepted Answer

A) $4,725. 
B) $8,775. 
C) $13,500. 
D) $30,000. 
A) $4,725. 
B) $8,775. 
C) $13,500. 
D) $30,000.

Question 17

The volume of output that causes fixed costs to be equal in amount to total revenue is called the break-even point.

Accepted Answer

A) True 
 B)False

Question 18

The margin of safety is calculated by:

Accepted Answer

A) Dividing fixed costs plus target income by the contribution margin. 
B) Subtracting break-even income from current income. 
C) Subtracting break-even sales from current sales. 
D) Subtracting fixed costs from current contribution margin. 
A) Dividing fixed costs plus target income by the contribution margin. 
B) Subtracting break-even income from current income. 
C) Subtracting break-even sales from current sales. 
D) Subtracting fixed costs from current contribution margin.

Question 19

[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 contribution margin ratio of Mitchell 's product?

Accepted Answer

A) 65% 
B) 80% 
C) 72% 
D) 20% 
A) 65% 
B) 80% 
C) 72% 
D) 20%

Question 20

If the monthly sales volume required to break even is $190,000 and monthly fixed costs are $55,900,the contribution margin ratio is closest to:

Accepted Answer

A) 29%. 
B) 71%. 
C) 23%. 
D) 340%. 
A) 29%. 
B) 71%. 
C) 23%. 
D) 340%.

Exam 20: Cost-Volume-Profit Analysis

As volume increases,per unit fixed costs stay the same.

Management expects total sales of $40 million,a margin of safety of $10 million,and a contribution margin ratio of 45%.Which of the following estimated amounts is not consistent with this information?

Mitchum,Inc.produced different amounts of product X each month as follows: Using the high-low method,determine: (1)The variable expense per unit (2)The fixed expense (3)If Mitchum produced 410 units what would total expenses be?

With variable costs,the cost per unit varies with changes in volume.

A company's most profitable products are often those which:

[The following information applies to the questions displayed below.] The following data are available for product no.CK74,manufactured and sold by Ruby Corporation: -The contribution margin per unit for product no.CK74 is:

If unit sales prices are $7 and variable costs are $5 per unit,how many units would have to be sold to break-even if fixed costs equal $8,000?

What will be Sultan 's monthly operating income if 3,700 units are sold each month?

What will be the monthly margin of safety (in dollars)if 1,800 units are sold each month?

The dollar amount by which sales can decline before an operating loss is incurred is called the:

When cost-volume-profit analysis is used,the need for a cost accounting system is eliminated.

Contribution margin is total revenue less variable costs.

The volume of output that causes fixed costs to be equal in amount to total revenue is called the break-even point.

The margin of safety is calculated by:

[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 contribution margin ratio of Mitchell 's product?

If the monthly sales volume required to break even is $190,000 and monthly fixed costs are $55,900,the contribution margin ratio is closest to:

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

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