Question 1

If the contribution margin is $10, the selling price per unit is $25 and the fixed costs are $45 000, what is the number of units that must be sold to break even?

Accepted Answer

A)  4500 
B)  4000 
C)  3000 
D)  1800 
A)  4500 
B)  4000 
C)  3000 
D)  1800

Question 2

On a CVP graph the vertical distance between the total revenue and total costs lines represents the

Accepted Answer

A)  sales volume. 
B)  fixed costs. 
C)  variable costs. 
D)  profit or loss. 
A)  sales volume. 
B)  fixed costs. 
C)  variable costs. 
D)  profit or loss.

Question 3

Epex Pty Ltd makes a single product. Annual fixed expenses are $48 000 and the contribution margin ratio is 30 per cent. What volume in sales dollars is necessary for Epex to achieve a target profit of $15 000?

Accepted Answer

A)  $63 000 
B)  $90 000 
C)  $160 000 
D)  $210 000 
A)  $63 000 
B)  $90 000 
C)  $160 000 
D)  $210 000

Question 4

Management would prefer a smaller safety margin to a larger one, as the smaller margin puts the company in a better financial position.

Accepted Answer

A) True 
 B)False

Question 5

The firm uses activity-based costing and has the following cost structure: selling price $50, batch cost $20 000, unit level costs $30 per unit, facility costs $120 000 and product costs $60 000. What is the break-even point in units?

Accepted Answer

A)  6000 
B)  7000 
C)  9000 
D)  10 000 
A)  6000 
B)  7000 
C)  9000 
D)  10 000

Question 6

Would you expect the following to be high or low in a labour-intensive industry: (1) operating leverage, (2) break-even point and (3) safety margin?

Accepted Answer

A)  High, high, low 
B)  Low, low, high 
C)  Low, low, low 
D)  High, high, high 
A)  High, high, low 
B)  Low, low, high 
C)  Low, low, low 
D)  High, high, high

Question 7

i. Define operating leverage.
ii. The firm is planning to increase the selling price. If sales volume in units does not change, what will happen to the operating leverage factor? (Assume the firm pays no income taxes.) Explain.
iii. The firm is planning to increase fixed manufacturing costs and decrease variable manufacturing costs per unit. At the present volume of production, the total manufacturing costs will be unchanged. What will this change do to the operating leverage factor? (Assume no income taxes.) Explain.

Accepted Answer

i. Operating leverage is contribution ma

Question 8

If a firm has $482 500 in fixed costs, a unit contribution margin of $45 and targeted sales volume of 12 500 units, the target net profit would be

Accepted Answer

A)  1737. 
B)  13 402. 
C)  80 000. 
D)  10 722. 
A)  1737. 
B)  13 402. 
C)  80 000. 
D)  10 722.

Question 9

The firm's fixed costs are $60 000, variable cost per unit is $15 and selling price per unit is $20. The break-even point in sales dollars is

Accepted Answer

A)  $80 000. 
B)  $120 000. 
C)  $240 000. 
D)  $300 000. 
A)  $80 000. 
B)  $120 000. 
C)  $240 000. 
D)  $300 000.

Question 10

Although the cost structure of a firm considers the proportions of fixed and variable costs, these structures will differ depending on the firm itself and the particular industry.

Accepted Answer

A) True 
 B)False

Question 11

Cost volume profit (CVP) analysis is based on a number of limiting assumptions. Which of the following is not one of the assumptions of the CVP model?

Accepted Answer

A)  Production units equal sales units over the period. 
B)  If the firm has a product mix, the mix remains constant. 
C)  Cost behaviour is linear over the relevant range. 
D)  CVP analysis only applies to a single-product firm. 
A)  Production units equal sales units over the period. 
B)  If the firm has a product mix, the mix remains constant. 
C)  Cost behaviour is linear over the relevant range. 
D)  CVP analysis only applies to a single-product firm.

If the contribution margin is $10, the selling price per unit is $25 and the fixed costs are $45 000, what is the number of units that must be sold to break even?

On a CVP graph the vertical distance between the total revenue and total costs lines represents the

Epex Pty Ltd makes a single product. Annual fixed expenses are $48 000 and the contribution margin ratio is 30 per cent. What volume in sales dollars is necessary for Epex to achieve a target profit of $15 000?

Management would prefer a smaller safety margin to a larger one, as the smaller margin puts the company in a better financial position.

The firm uses activity-based costing and has the following cost structure: selling price $50, batch cost $20 000, unit level costs $30 per unit, facility costs $120 000 and product costs $60 000. What is the break-even point in units?

Would you expect the following to be high or low in a labour-intensive industry: (1) operating leverage, (2) break-even point and (3) safety margin?

If a firm has $482 500 in fixed costs, a unit contribution margin of $45 and targeted sales volume of 12 500 units, the target net profit would be

The firm's fixed costs are $60 000, variable cost per unit is $15 and selling price per unit is $20. The break-even point in sales dollars is

Although the cost structure of a firm considers the proportions of fixed and variable costs, these structures will differ depending on the firm itself and the particular industry.

Cost volume profit (CVP) analysis is based on a number of limiting assumptions. Which of the following is not one of the assumptions of the CVP model?

Management Accounting: Information for Creating Value and Managing Resources

Management Accounting: Cost Terms and Concepts

Cost Behaviour, Cost Drivers and Cost Estimation

Product Costing Systems

Process Costing and Operation Costing

Service Costing

A Closer Look at Overhead Costs

Activity-Based Costing

Budgeting Systems

Standard Costs for Control: Direct Material and Direct Labour

Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

Managing and Reporting Performance

Financial Performance Measures and Incentive Schemes

Strategic Performance Measurement Systems

Managing Suppliers and Customers

Managing Costs and Quality

Sustainability and Management Accounting

Information for Decisions: Relevant Costs and Benefits

Pricing and Product Mix Decisions

Information for Capital Expenditure Decisions

Filters

Exam 18: Cost Volume Profit Analysis

If the contribution margin is $10, the selling price per unit is $25 and the fixed costs are $45 000, what is the number of units that must be sold to break even?

On a CVP graph the vertical distance between the total revenue and total costs lines represents the

Epex Pty Ltd makes a single product. Annual fixed expenses are $48 000 and the contribution margin ratio is 30 per cent. What volume in sales dollars is necessary for Epex to achieve a target profit of $15 000?

Management would prefer a smaller safety margin to a larger one, as the smaller margin puts the company in a better financial position.

The firm uses activity-based costing and has the following cost structure: selling price $50, batch cost $20 000, unit level costs $30 per unit, facility costs $120 000 and product costs $60 000. What is the break-even point in units?

Would you expect the following to be high or low in a labour-intensive industry: (1) operating leverage, (2) break-even point and (3) safety margin?

If a firm has $482 500 in fixed costs, a unit contribution margin of $45 and targeted sales volume of 12 500 units, the target net profit would be

The firm's fixed costs are $60 000, variable cost per unit is $15 and selling price per unit is $20. The break-even point in sales dollars is

Although the cost structure of a firm considers the proportions of fixed and variable costs, these structures will differ depending on the firm itself and the particular industry.

Cost volume profit (CVP) analysis is based on a number of limiting assumptions. Which of the following is not one of the assumptions of the CVP model?

Management Accounting: Information for Creating Value and Managing Resources

Management Accounting: Cost Terms and Concepts

Cost Behaviour, Cost Drivers and Cost Estimation

Product Costing Systems

Process Costing and Operation Costing

Service Costing

A Closer Look at Overhead Costs

Activity-Based Costing

Budgeting Systems

Standard Costs for Control: Direct Material and Direct Labour

Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

Managing and Reporting Performance

Financial Performance Measures and Incentive Schemes

Strategic Performance Measurement Systems

Managing Suppliers and Customers

Managing Costs and Quality

Sustainability and Management Accounting

Information for Decisions: Relevant Costs and Benefits

Pricing and Product Mix Decisions

Information for Capital Expenditure Decisions

Filters