Question 1

Gerber Company is planning to sell 200,000 units for $2.00 a unit and will just brea? even at this level of sales. The contribution margin ratio is 25%. What are the company's fixed expenses?

Accepted Answer

A) $200,000. 
B) $300,000. 
C) $100,000. 
D) $160,000.

Question 2

Ostler Company's net income last year was $10,000 and its contribution margin wa? $50,000. Using the operating leverage concept, if the company's sales increase next year by 8%, net income can be expected to increase by:

Accepted Answer

A) 20%. 
B) 40%. 
C) 16%. 
D) 160%.

Question 3

Reference: 08-11
Hurst Co. manufactures and sells a single product. Price and cost data regarding this product are as follows: $$\begin{array} { | l | l | } 
\hline \text { Selling price } & \$ 40 \text { per unit } \
\hline \text { Variable manufacturing costs } & \$ 20 \text { per unit } \
\hline \text { Variable selling \& admin. expenses } & \$ 6 \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 208,000 \text { per year } \
\hline \text { Fixed selling \& admin. expenses } & \$ 324,000 \text { per year } \
\hline
\end{array}$$
-The break-even point in units per year is?

Accepted Answer

A) 38,000. 
B) 26,600. 
C) 15,200. 
D) 40,000.

Question 4

Reference: 08-09
Fletcher Company has three products with the following characteristics: $$\begin{array} { | l | l | l | l | } 
\hline & \text { Product A } & \text { Product B } & \text { Product C } \
\hline \text { Monthly sales in dollars } & \$ 60,000 & \$ 80,000 & \$ 100,000 \
\hline \text { Contribution margin ratio } & 20 \% & 40 \% & 16 \% \
\hline
\end{array}$$
-The overall contribution margin ratio for the company as a whole is (round your final answer to the nearest tenth of a percent):

Accepted Answer

A) 75.0%. 
B) 25.3%. 
C) 28.5%. 
D) 25.0%.

Question 5

Young Company has a margin of safety percentage of 20%. The break-even in sales dollars point is $400,000 and the variable costs are 40% of sales. Given this information, the net income is:

Accepted Answer

A) $80,000. 
B) $48,000. 
C) $0. 
D) $60,000.

Question 6

The break-even point in units sold will decrease if there is an increase in which of the following?

Accepted Answer

A) Total fixed expenses. 
B) Unit sales volume. 
C) Selling price. 
D) Unit variable expenses.

Question 7

In the income statement of a manufacturing business with both variable and fixed overhead costs of production, if there are no beginning or ending inventories, comparing Absorption Costing to Variable Costing, which of the following statements is true?

Accepted Answer

A) Under Absorption Costing, cost of goods sold will be higher than under Variable Costing. 
B) There will be no differences in cost of goods sold and net income between the two methods. 
C) Under Absorption Costing, cost of goods sold will be higher and net income will be higher than under Variable Costing. 
D) Under Variable Costing, cost of goods sold will be lower and net income will be higher than under Absorption Costing.

Question 8

Reference: 08-01
The following is Addison Corporation's contribution format income statement for last month: $$\begin{array} { | l | c | } 
\hline \text { Sales } & \$ 1,000,000 \
\hline \text { Less variable expenses } & 700,000 \
\hline \text { Contribution margin } & 300,000 \
\hline \text { Less fixed expenses } & 180,000 \
\hline \text { Net income } & \$ 120,000 \
\hline
\end{array}$$ The company has no beginning or ending inventories. A total of 20,000 units were produced and sold last month.
-How many units would the company have to sell to attain target profits of $150,000

Accepted Answer

A) 37,500 units. 
B) 22,000 units. 
C) 25,000 units. 
D) 26,667 units.

Question 9

Reference: 08-04
The following data relate to a company that produces and sells a travel guide that is updated monthly: $$\begin{array} { | l | l | } 
\hline \text { Fixed costs: } & \
\hline \text { Copy editing } & \$ 6,000 \
\hline \text { Art work } & 2,000 \
\hline \text { Typesetting } & 72,000 \
\hline & \
\hline \text { Variable costs: } & \
\hline \text { Printing and binding } & \$ 3.20 \text { per copy } \
\hline \text { Bookstore discounts } & 4.00 \text { per copy } \
\hline \text { Salespersons' commissions } & 0.50 \text { per copy } \
\hline \text { Author's royalties } & 2.00 \text { per copy } \
\hline
\end{array}$$ Each book sells for $20.00. The company sold 8,000 books in June and 10,000 books in July.
-The degree of operating leverage for July is:

Accepted Answer

A) the same as that for June. 
B) lower than that for June. 
C) not determinable. 
D) higher than that for June.

Question 10

Reference: 08-03
McGordon Corporation has provided the following data: $$\begin{array} { | l | l | } 
\hline \text { Sales } & \$ 800,000 \
\hline \text { Variable expenses } & 560,000 \
\hline \text { Fixed expenses } & 168,000 \
\hline
\end{array}$$
-The break-even point in sales dollars is?

Accepted Answer

A) $240,000. 
B) $560,000. 
C) $408,000. 
D) $728,000.

Question 11

The following data pertain to Wistron Company's two products: $$\begin{array} { | l | l | l | } 
\hline & \text { Product } X & \text { Product } Y \
\hline \text { Sales in dollars } & \$ 100,000 & \$ 80,000 \
\hline \text { Contribution margin ratio } & 48 \% & 30 \% \
\hline
\end{array}$$ If fixed expenses for the company as a whole are $60,000 and the product mix is constant, the overall break-even point for the company would be:

Accepted Answer

A) $132,000. 
B) $153,846. 
C) $150,000. 
D) $100,000.

Question 12

The margin of safety percentage is equal to the margin of safety in dollars divided by total sales in dollars.

Accepted Answer

A) True 
 B)False

Question 13

How many photo-prints did the division have to sell to break even

Accepted Answer

A) 90,000 photo-prints. 
B) 60,000 photo-prints. 
C) 180,000 photo-prints. 
D) 120,000 photo-prints.

Question 14

The following is last month's contribution format income statement: $$\begin{array} { | l | c | } 
\hline \text { Sales } ( 20,000 \text { units } ) & \$ 1,800,000 \
\hline \text { Less variable expenses } & 1,200,000 \
\hline \text { Contribution margin } & 600,000 \
\hline \text { Less fixed expenses } & 400,000 \
\hline \text { Net income } & \$ 200,000 \
\hline
\end{array}$$ What is the company's break-even in sales dollars?

Accepted Answer

A) $1,800,000. 
B) $1,200,000. 
C) $1,600,000. 
D) $0.

Question 15

Wallace, Inc. prepared the following budgeted data based on a sales forecast of $6,000,000: $$\begin{array} { | l | l | l | } 
\hline & \text { Variable } & \text { Fixed } \
\hline \text { Direct materials } & \$ 1,600,000 & \
\hline \text { Direct labour } & 1,400,000 & \
\hline \text { Factory overhead } & 600,000 & \$ 900,000 \
\hline \text { Selling expenses } & 240,000 & 360,000 \
\hline \text { Administrative expenses } & 60,000 & 140,000 \
\hline \text { Total } & \$ 3,900,000 & \$ 1,400,000 \
\hline
\end{array}$$ What would be the amount of sales dollars at the break-even point?

Accepted Answer

A) $4,000,000. 
B) $5,300,000. 
C) $3,500,000. 
D) $2,250,000.

Question 16

Kern Company prepared the following tentative budget for next year: $$\begin{array} { | l | l | } 
\hline \text { Sales } & \$ 500,000 \
\hline \text { Selling price } & \$ 5 \text { per unit } \
\hline \text { Variable expenses } & \$ 300,000 \
\hline \text { Fixed expenses } & \$ 150,000 \
\hline
\end{array}$$ The sales manager argues that the unit selling price could be increased by 20%, with an expected volume decrease of only 10%. If Kern incorporates these changes in its budget, what should be the budgeted net income?

Accepted Answer

A) $66,000. 
B) $120,000. 
C) $90,000. 
D) $145,000.

Question 17

The following is last month's contribution format income statement: $$\begin{array} { | l | c | } 
\hline \text { Sales (12,000 units) } & \$ 1,200,000 \
\hline \text { Less variable expenses } & 700,000 \
\hline \text { Contribution margin } & 500,000 \
\hline \text { Less fixed expenses } & 300,000 \
\hline \text { Net income } & \$ 200,000 \
\hline
\end{array}$$ What is the company's margin of safety percentage?

Accepted Answer

A) 42%. 
B) 40%. 
C) 17%. 
D) 20%.

Question 18

A total of 30,000 units were sold last year. The contribution margin per unit was $2, and fixed expenses totalled $20,000 for the year. This year fixed expenses are expected to increase to $26,000, but the contribution margin per unit will remain unchanged at $2. How many units must be sold this year to earn the same net income as was earned last year?

Accepted Answer

A) 13,000 units. 
B) 23,000 units. 
C) 33,000 units. 
D) 30,000 units.

Question 19

While using Variable Costing format of income statement, which of the following is not included in product costs?

Accepted Answer

A) Variable manufacturing overhead. 
B) Direct labour. 
C) Fixed manufacturing overhead. 
D) Direct materials.

Question 20

The break-even point in units can be obtained by dividing total fixed expenses by the contribution margin ratio.

Accepted Answer