Question 1

Suppose variable expenses were to decrease by $3.00 per unit.What effect would this have on the cost volume profit analysis?

Accepted Answer

A)  The unit contribution margin would rise by $3.00. 
B)  The break-even point in units would increase. 
C)  The break-even point in units would decrease. 
D)  The unit contribution margin would rise by $3.00 AND the break-even point in units would decrease. 
A)  The unit contribution margin would rise by $3.00. 
B)  The break-even point in units would increase. 
C)  The break-even point in units would decrease. 
D)  The unit contribution margin would rise by $3.00 AND the break-even point in units would decrease.

Question 2

Cost volume profit applied to the service industry
A nursing home has the following annual budget:
Calculate the budgeted break-even point in inpatient days.

Accepted Answer

A)  7333 days 
B)  22 000 days 
C)  25 000 days 
D)  None of the given answers 
A)  7333 days 
B)  22 000 days 
C)  25 000 days 
D)  None of the given answers

Question 3

Which of the following assumptions is made when doing a cost volume profit analysis based on activity-based costing?

Accepted Answer

A)  Sales volume equals production volume. 
B)  As production volume changes,the number of set-ups,inspections,material moves etc.does not change. 
C)  The purchase price of raw materials per unit remains constant. 
D)  Sales volume equals production volume AND the purchase price of raw materials per unit remains constant. 
A)  Sales volume equals production volume. 
B)  As production volume changes,the number of set-ups,inspections,material moves etc.does not change. 
C)  The purchase price of raw materials per unit remains constant. 
D)  Sales volume equals production volume AND the purchase price of raw materials per unit remains constant.

Question 4

The break-even point in sales dollars can be calculated by dividing:

Accepted Answer

A)  fixed expenses by the unit contribution margin 
B)  variable expenses by the unit contribution margin 
C)  fixed expenses by the contribution margin ratio 
D)  variable expenses by the contribution margin ratio 
A)  fixed expenses by the unit contribution margin 
B)  variable expenses by the unit contribution margin 
C)  fixed expenses by the contribution margin ratio 
D)  variable expenses by the contribution margin ratio

Question 5

Your local pizza parlour has annual fixed costs of $20 000,the pizza price is $8 and the unit variable cost $4.What is the contribution margin ratio?

Accepted Answer

A)  40% 
B)  45% 
C)  50% 
D)  60% 
A)  40% 
B)  45% 
C)  50% 
D)  60%

Question 6

When doing cost volume profit analysis,the starting point is always to analyse the cost behaviours in relation to activity levels.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is the most precise definition of the operating leverage factor? The operating leverage factor measures:

Accepted Answer

A)  the proportion of fixed costs in a firm's cost structure 
B)  the proportion of variable costs in a firm's cost structure 
C)  the effect that an increase (decrease)in sales volume will have on profit 
D)  the proportion of fixed costs in a firm's cost structure AND the proportion of variable costs in a firm's cost structure 
A)  the proportion of fixed costs in a firm's cost structure 
B)  the proportion of variable costs in a firm's cost structure 
C)  the effect that an increase (decrease)in sales volume will have on profit 
D)  the proportion of fixed costs in a firm's cost structure AND the proportion of variable costs in a firm's cost structure

Question 8

Cost volume profit analysis is a popular tool in practice.Why is it so popular?

Accepted Answer

A)  It is a simple tool that can be used for long-run decision making. 
B)  It is a simple tool to apply and is suitable for short-run decision making. 
C)  It can be employed in all types of firms. 
D)  It is a simple tool to apply and is suitable for short-run decision making AND it can be employed in all types of firms. 
A)  It is a simple tool that can be used for long-run decision making. 
B)  It is a simple tool to apply and is suitable for short-run decision making. 
C)  It can be employed in all types of firms. 
D)  It is a simple tool to apply and is suitable for short-run decision making AND it can be employed in all types of firms.

Question 9

A firm makes and sells three standard products in a specific product mix.All three products are made using the same production facilities.The following budgeted data for the coming year is available.Total annual fixed costs $348 000
Tax rate 40%
Calculate the margin of safety for the firm.

Accepted Answer

A)  $1 776 000 
B)  $1 664 000 
C)  $1 332 000 
D)  None of the given answers 
A)  $1 776 000 
B)  $1 664 000 
C)  $1 332 000 
D)  None of the given answers

Question 10

Suppose fixed expenses were to increase by 5.9 per cent.How would this affect the break-even point?

Accepted Answer

A)  The break-even point in units would rise 5.9 per cent. 
B)  The break-even point in dollars would rise 11.8 per cent. 
C)  The break-even point in dollars would rise by more than 5.9 per cent. 
D)  The break-even point in dollars would fall by more than 5.9 per cent. 
A)  The break-even point in units would rise 5.9 per cent. 
B)  The break-even point in dollars would rise 11.8 per cent. 
C)  The break-even point in dollars would rise by more than 5.9 per cent. 
D)  The break-even point in dollars would fall by more than 5.9 per cent.

Question 11

The margin of safety is the difference between:

Accepted Answer

A)  contribution margin and net profit before tax 
B)  budgeted contribution margin and actual contribution margin 
C)  budgeted sales revenue and actual sales revenue 
D)  budgeted sales revenue and break-even sales revenue 
A)  contribution margin and net profit before tax 
B)  budgeted contribution margin and actual contribution margin 
C)  budgeted sales revenue and actual sales revenue 
D)  budgeted sales revenue and break-even sales revenue

Question 12

If a firm has a net profit of $50 000,a revenue of $520 000 and variable costs of $300 000,the operating leverage factor would be 5.5.

Accepted Answer

A) True 
 B)False

Question 13

Maxie Pty Ltd makes and sells two types of shoes,Plain and Fancy.Product data is as follows:
Sixty per cent of the sales in units are Plain and annual fixed expenses are $45 000.Determine the weighted average unit contribution margin.

Accepted Answer

A)  $17.00 
B)  $9.25 
C)  $9.00 
D)  $4.80 
A)  $17.00 
B)  $9.25 
C)  $9.00 
D)  $4.80

Question 14

The break-even point is that level of activity where:

Accepted Answer

A)  total revenue equals total cost 
B)  total revenue equals fixed cost 
C)  total revenue equals variable cost 
D)  total revenue equals product cost 
A)  total revenue equals total cost 
B)  total revenue equals fixed cost 
C)  total revenue equals variable cost 
D)  total revenue equals product cost

Question 15

If total costs remain the same,the smaller the proportion of fixed costs in a firm's cost structure:

Accepted Answer

A)  the greater the impact on profit from a percentage change in sales volume 
B)  the smaller the impact a percentage change in sales volume will have on profit 
C)  the lower the contribution margin 
D)  the smaller the impact a percentage change in sales volume will have on profit AND the lower the contribution margin 
A)  the greater the impact on profit from a percentage change in sales volume 
B)  the smaller the impact a percentage change in sales volume will have on profit 
C)  the lower the contribution margin 
D)  the smaller the impact a percentage change in sales volume will have on profit AND the lower the contribution margin

Question 16

Econ Pty Ltd produced and sold 45 000 units of a single product last year.Data concerning the year's profit and loss statement are as follows:
What was Econ's total contribution margin for the year?

Accepted Answer

A)  $495 000 
B)  $540 000 
C)  $724 500 
D)  $810 000 
A)  $495 000 
B)  $540 000 
C)  $724 500 
D)  $810 000

Question 17

Chelonia Ltd manufactures small robot toys.It plans to introduce two products,Speedie and Spunkie.It is anticipated that the product mix will be 40% Speedie and 60% Spunkie.One unit of Speedie will be sold for $100,with variable cost equals $40.For a unit of Spunkie,the selling price will be $120 and the variable cost is $70.The fixed cost for producing the two products is $108 000.The company plans to include a safety margin of $20 000 before tax.Assuming a tax rate of 30%,what should be the budgeted sales?

Accepted Answer

A)  Speedie: 1012 units;Spunkie: 1517 units 
B)  Speedie: 1517 units,Spunkie: 1012 units 
C)  Speedie: 948 units;Spunkie: 1422 units 
D)  Speedie: 1422 units,Spunkie: 948 units 
A)  Speedie: 1012 units;Spunkie: 1517 units 
B)  Speedie: 1517 units,Spunkie: 1012 units 
C)  Speedie: 948 units;Spunkie: 1422 units 
D)  Speedie: 1422 units,Spunkie: 948 units

Question 18

Alclear Pool & Spa presently provides a weekly maintenance service to 150 homes.Variable costs amount to approximately $12 per week for labour,mileage,chemicals and other supplies.Fixed costs are approximately $13 000 per quarter (13 weeks).Customers pay $270 per quarter for the weekly service.All contracts are written for one quarter (13 weeks).Determine the number of customers (rounded)to break even.

Accepted Answer

A)  95 
B)  103 
C)  114 
D)  197 
A)  95 
B)  103 
C)  114 
D)  197

Question 19

The extent to which an organisation uses fixed costs in its cost structure is called:

Accepted Answer

A)  financial leverage 
B)  operating leverage 
C)  fixed cost leverage 
D)  operating leverage AND fixed cost leverage 
A)  financial leverage 
B)  operating leverage 
C)  fixed cost leverage 
D)  operating leverage AND fixed cost leverage

Question 20

In general,an increase in fixed cost while the contribution margin remains unchanged will:

Accepted Answer

A)  Increase the break even point 
B)  Decrease the break even point,but only if the safety margin is positive 
C)  Either increase or decrease the break even point,depending on operation leverage. 
D)  have no impact on break even point. 
A)  Increase the break even point 
B)  Decrease the break even point,but only if the safety margin is positive 
C)  Either increase or decrease the break even point,depending on operation leverage. 
D)  have no impact on break even point.

Suppose variable expenses were to decrease by $3.00 per unit.What effect would this have on the cost volume profit analysis?

Cost volume profit applied to the service industry A nursing home has the following annual budget: Calculate the budgeted break-even point in inpatient days.

Which of the following assumptions is made when doing a cost volume profit analysis based on activity-based costing?

The break-even point in sales dollars can be calculated by dividing:

Your local pizza parlour has annual fixed costs of $20 000,the pizza price is $8 and the unit variable cost $4.What is the contribution margin ratio?

When doing cost volume profit analysis,the starting point is always to analyse the cost behaviours in relation to activity levels.

Which of the following is the most precise definition of the operating leverage factor? The operating leverage factor measures:

Cost volume profit analysis is a popular tool in practice.Why is it so popular?

A firm makes and sells three standard products in a specific product mix.All three products are made using the same production facilities.The following budgeted data for the coming year is available.Total annual fixed costs $348 000 Tax rate 40% Calculate the margin of safety for the firm.

Suppose fixed expenses were to increase by 5.9 per cent.How would this affect the break-even point?

The margin of safety is the difference between:

If a firm has a net profit of $50 000,a revenue of $520 000 and variable costs of $300 000,the operating leverage factor would be 5.5.

Maxie Pty Ltd makes and sells two types of shoes,Plain and Fancy.Product data is as follows: Sixty per cent of the sales in units are Plain and annual fixed expenses are $45 000.Determine the weighted average unit contribution margin.

The break-even point is that level of activity where:

If total costs remain the same,the smaller the proportion of fixed costs in a firm's cost structure:

Econ Pty Ltd produced and sold 45 000 units of a single product last year.Data concerning the year's profit and loss statement are as follows: What was Econ's total contribution margin for the year?

The extent to which an organisation uses fixed costs in its cost structure is called:

In general,an increase in fixed cost while the contribution margin remains unchanged will:

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

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Exam 18: Cost Volume Profit Analysis

Suppose variable expenses were to decrease by $3.00 per unit.What effect would this have on the cost volume profit analysis?

Cost volume profit applied to the service industry A nursing home has the following annual budget: Calculate the budgeted break-even point in inpatient days.

Which of the following assumptions is made when doing a cost volume profit analysis based on activity-based costing?

The break-even point in sales dollars can be calculated by dividing:

Your local pizza parlour has annual fixed costs of $20 000,the pizza price is $8 and the unit variable cost $4.What is the contribution margin ratio?

When doing cost volume profit analysis,the starting point is always to analyse the cost behaviours in relation to activity levels.

Which of the following is the most precise definition of the operating leverage factor? The operating leverage factor measures:

Cost volume profit analysis is a popular tool in practice.Why is it so popular?

A firm makes and sells three standard products in a specific product mix.All three products are made using the same production facilities.The following budgeted data for the coming year is available.Total annual fixed costs $348 000 Tax rate 40% Calculate the margin of safety for the firm.

Suppose fixed expenses were to increase by 5.9 per cent.How would this affect the break-even point?

The margin of safety is the difference between:

If a firm has a net profit of $50 000,a revenue of $520 000 and variable costs of $300 000,the operating leverage factor would be 5.5.

Maxie Pty Ltd makes and sells two types of shoes,Plain and Fancy.Product data is as follows: Sixty per cent of the sales in units are Plain and annual fixed expenses are $45 000.Determine the weighted average unit contribution margin.

The break-even point is that level of activity where:

If total costs remain the same,the smaller the proportion of fixed costs in a firm's cost structure:

Econ Pty Ltd produced and sold 45 000 units of a single product last year.Data concerning the year's profit and loss statement are as follows: What was Econ's total contribution margin for the year?

The extent to which an organisation uses fixed costs in its cost structure is called:

In general,an increase in fixed cost while the contribution margin remains unchanged will:

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