Question 1

If a company sells 13 of Product A for every 3 of Product B that it sells, the sales mix can be stated as

Accepted Answer

A) 13:3. 
B) 13/16 A and 3/16 B. 
C) both "13:3" and " 13/16 A and 3/16 B" are correct. 
D) neither "13:3" nor " 13/16 A and 3/16 B" is correct.

Question 2

CVP analysis helps managers prepare for and respond to economic changes, such as increasing costs and pressure to drop sales price.

Accepted Answer

A) True 
 B)False

Question 3

Mae Company sells its product for $12 per unit and has variable costs of $8 per unit. Total fixed costs are $60,000. Suppose variable costs increase by 10% due to an increase in the cost of direct materials. What will be the effect on the breakeven point in units?

Accepted Answer

A) Increase from 15,000 units to 18,750 units 
B) Decrease from 3,000 units to 2,885 units 
C) Decrease from 15,000 units to 5,357 units 
D) Decrease from 7,500 units to 6,818 units

Question 4

Jackie's Snacks sells fudge, caramels, and popcorn. It sold 12,000 boxes last year. Popcorn outsold fudge by a margin of 2 to 1. Sales of caramels were the same as sales of popcorn. Fixed costs for Jackie's Snacks are $14,000 and additional information follows:  The formula to determine the number of boxes of each snack sold is

Accepted Answer

A) 3x + 2x + x = 12,000. 
B) x + y + z = 12,000. 
C) x + 4x = 12,000. 
D) none of the above.

Question 5

Companies with high operating leverages generally have lower fixed costs than variable costs.

Accepted Answer

A) True 
 B)False

Question 6

The selling price of a RoadKing bicycle is $700, unit variable costs are $350, and total fixed costs are $12,600. How many bicycles will RoadKing need to sell to breakeven?

Accepted Answer

A) 25,200 
B) 12 
C) 36 
D) 18

Question 7

Sally's Fries sells three large fries for every two small ones. A small fry sells for $2 with a variable cost of $1. A large fry sells for $3 with a variable cost of $1.25. What is the weighted-average contribution margin?

Accepted Answer

A) $0.69 
B) $0.65 
C) $3.75 
D) $1.45

Question 8

If the variable cost per unit increases while the sale price per unit and total fixed costs remain constant, which of the following statements is true?

Accepted Answer

A) Breakeven point in units remains the same. 
B) Breakeven point in units decreases. 
C) Breakeven point in units increases. 
D) Contribution margin ratio increases.

Question 9

On a CVP graph, the vertical distance between the total expense line and the total fixed cost line equals the variable expenses.

Accepted Answer

A) True 
 B)False

Question 10

The Muffin House produces and sells a variety of muffins. The selling price per dozen is $15, variable costs are $9 per dozen, and total fixed costs are $4,200. How many dozen muffins must The Muffin House sell to breakeven?

Accepted Answer

A) 10,500 
B) 700 
C) 280 
D) 175

Question 11

The breakeven point on a CVP graph is the point where the sales revenue line intersects the total expense line.

Accepted Answer

A) True 
 B)False

Question 12

If total fixed costs are $455,000, the contribution margin per unit is $25.00, and targeted operating income is $25,000, how many units must be sold to breakeven?

Accepted Answer

A) 11,375,000 
B) 19,200 
C) 18,200 
D) 625,000

Question 13

Elk Manufacturing has budgeted the following amounts for its next fiscal year:  To maintain the original breakeven sales in units if fixed expenses were to increase by 20%, the selling price per unit would have to be

Accepted Answer

A) increased by 65.00%. 
B) increased by 15.00%. 
C) decreased by 15.00%. 
D) decreased by 65.00%.

Question 14

Fixed costs divided by weighted-average contribution margin per unit equals

Accepted Answer

A) breakeven sales in units. 
B) margin of safety ratio. 
C) breakeven sales in dollars. 
D) contribution margin ratio.

Question 15

The breakeven point may be defined as the number of units a company must sell to do which of the following?

Accepted Answer

A) Generate a net loss 
B) Generate a zero profit 
C) Earn more net income than the previous accounting period 
D) Generate a net income

Question 16

By multiplying ________ and then subtracting fixed costs, managers can quickly forecast the operating income.

Accepted Answer

A) projected sales units by the contribution margin ratio 
B) projected sales revenue by the contribution margin ratio 
C) projected sales revenue by the unit contribution margin 
D) projected sales units by the variable cost ratio

Question 17

Fancy Furniture has variable expenses of 40% of sales and monthly fixed expenses of $240,000. The monthly target operating income is $60,000. What is the monthly margin of safety in dollars if Fancy Furniture achieves its operating income goal?

Accepted Answer

A) $100,000 
B) $900,000 
C) $500,000 
D) $(300,000)

Question 18

Corny and Sweet grows and sells sweet corn at its roadside produce stand. The selling price per dozen is $3.75, variable costs are $1.25 per dozen, and total fixed costs are $750.00. How many dozens of ears of corn must Corny and Sweet sell to breakeven?

Accepted Answer

A) 1,125 
B) 200 
C) 300 
D) 175

Question 19

Neeley Grocery has a monthly target operating income of $25,000. Variable expenses are 20% of sales and monthly fixed expenses are $15,000. What is the monthly margin of safety as a percentage of target sales in dollars?

Accepted Answer

A) 137.50% 
B) 62.50% 
C) 80.00% 
D) 166.67%

Question 20

Franklin Producers sells its core product for $8 per unit and has variable costs of $6 per unit. Total fixed costs are $28,000. Suppose variable costs increase by 20% due to an increase in the cost of direct materials. What will be the effect on the breakeven point in units?

Accepted Answer

A) Decrease from 2,000 units to 1,842 units 
B) Decrease from 14,000 units to 4,118 units 
C) Increase from 14,000 units to 35,000 units 
D) Decrease from 4,667 units to 3,889 units

Exam 7: Cost-Volume-Profit Analysis

If a company sells 13 of Product A for every 3 of Product B that it sells, the sales mix can be stated as

CVP analysis helps managers prepare for and respond to economic changes, such as increasing costs and pressure to drop sales price.

Mae Company sells its product for $12 per unit and has variable costs of $8 per unit. Total fixed costs are $60,000. Suppose variable costs increase by 10% due to an increase in the cost of direct materials. What will be the effect on the breakeven point in units?

Companies with high operating leverages generally have lower fixed costs than variable costs.

The selling price of a RoadKing bicycle is $700, unit variable costs are $350, and total fixed costs are $12,600. How many bicycles will RoadKing need to sell to breakeven?

Sally's Fries sells three large fries for every two small ones. A small fry sells for $2 with a variable cost of $1. A large fry sells for $3 with a variable cost of $1.25. What is the weighted-average contribution margin?

If the variable cost per unit increases while the sale price per unit and total fixed costs remain constant, which of the following statements is true?

On a CVP graph, the vertical distance between the total expense line and the total fixed cost line equals the variable expenses.

The Muffin House produces and sells a variety of muffins. The selling price per dozen is $15, variable costs are $9 per dozen, and total fixed costs are $4,200. How many dozen muffins must The Muffin House sell to breakeven?

The breakeven point on a CVP graph is the point where the sales revenue line intersects the total expense line.

If total fixed costs are $455,000, the contribution margin per unit is $25.00, and targeted operating income is $25,000, how many units must be sold to breakeven?

Elk Manufacturing has budgeted the following amounts for its next fiscal year: To maintain the original breakeven sales in units if fixed expenses were to increase by 20%, the selling price per unit would have to be

Fixed costs divided by weighted-average contribution margin per unit equals

The breakeven point may be defined as the number of units a company must sell to do which of the following?

By multiplying ________ and then subtracting fixed costs, managers can quickly forecast the operating income.

Fancy Furniture has variable expenses of 40% of sales and monthly fixed expenses of $240,000. The monthly target operating income is $60,000. What is the monthly margin of safety in dollars if Fancy Furniture achieves its operating income goal?

Corny and Sweet grows and sells sweet corn at its roadside produce stand. The selling price per dozen is $3.75, variable costs are $1.25 per dozen, and total fixed costs are $750.00. How many dozens of ears of corn must Corny and Sweet sell to breakeven?

Neeley Grocery has a monthly target operating income of $25,000. Variable expenses are 20% of sales and monthly fixed expenses are $15,000. What is the monthly margin of safety as a percentage of target sales in dollars?

Franklin Producers sells its core product for $8 per unit and has variable costs of $6 per unit. Total fixed costs are $28,000. Suppose variable costs increase by 20% due to an increase in the cost of direct materials. What will be the effect on the breakeven point in units?