Question 1

Gross margin is another term for net income.

Accepted Answer

A) True 
 B)False

Question 2

Contribution margin on an income statement is equal to sales revenue minus fixed expenses.

Accepted Answer

A) True 
 B)False

Question 3

CVP assumes that inventory levels will not change.

Accepted Answer

A) True 
 B)False

Question 4

Matthew's Fish Fry has a monthly target operating income of $7,200. Variable expenses are 60% of sales and monthly fixed expenses are $1,800. What is Matthew's operating leverage factor at the target level of operating income?

Accepted Answer

A) 0.75 
B) 1.25 
C) 5.00 
D) 0.80

Question 5

The following information for the past year for the Blaine Corporation has been provided:  During the year, the company produced and sold 30,000 units of product at a selling price of $15.00 per unit. There was no beginning inventory of product at the beginning of the year.
What is the contribution margin for the year?

Accepted Answer

A) $ 93,000 
B) $450,000 
C) $262,000 
D) $281,000

Question 6

Rogers Incorporated has a targeted operating income of $518,000 for the upcoming year. The selling price of its single product is $40.50 each, while the variable cost per unit is $12.50. Fixed costs total $182,000.
Calculate the following:
a. Contribution margin per unit
b. Breakeven point in units
c. Units to be sold to earn the targeted operating income

Accepted Answer

The answer of Rogers Incorporated has a targeted operating income...

Question 7

Martin Enterprises provides the following information about its single product.  How many units must be sold to earn the targeted operating income?

Accepted Answer

A) 13,417 
B) 63,000 
C) 40,900 
D) 22,100

Question 8

Slamburger's sells three cheeseburgers for every two regular hamburgers. A cheeseburger sells for $3.50 with a variable cost of $1.00. A regular hamburger sells for $3 with a variable cost of $0.75. What is the weighted-average contribution margin?

Accepted Answer

A) $0.60 
B) $2.40 
C) $0.42 
D) $4.20

Question 9

Lewis Enterprises management has budgeted the following amounts for its next fiscal year:
  Requirements:
a. If Lewis Enterprises can reduce fixed expenses by $25,000, how will breakeven sales in units be affected?
b. If Lewis Enterprises spends an additional $1,000 on advertising, sales volume should increase by 2,000 units. What effect will this have on operating income?
c. If Lewis Enterprises can reduce fixed expenses by $40,000, by how much can variable expenses per unit increase and still allow the company to maintain the original breakeven sales in units?
d. If fixed expenses increase by 25%, to maintain the original breakeven sales in units, what would be the selling price per unit have to be?

Accepted Answer

The answer of Lewis Enterprises management has budgeted the following...

Question 10

The contribution margin ratio explains the percentage of each sales dollar that

Accepted Answer

A) contributes towards variable costs. 
B) contributes towards sales revenue. 
C) contributes towards period expenses. 
D) contributes towards fixed costs and generating a profit.

Question 11

________ should be subtracted from the sales price per unit to compute the unit contribution margin.

Accepted Answer

A) All variable costs 
B) Only variable inventoriable product costs 
C) Only variable period costs 
D) All fixed costs

Question 12

Barbara's Candles provides the following information about its single product.  What is the breakeven point in units?

Accepted Answer

A) 2,250 
B) 1,375 
C) 344 
D) 563

Question 13

When calculating the breakeven point in terms of units, fixed costs should be divided by the contribution per unit.

Accepted Answer

A) True 
 B)False

Question 14

If the selling price per unit is $75, total fixed expenses are $90,000, and the breakeven sales in dollars is $360,000, what will the variable expense per unit be?

Accepted Answer

A) $56.25 
B) $18.75 
C) $93.75 
D) $225.00

Question 15

Jackie's Snacks sells fudge, caramels, and popcorn. It sold 12,000 units 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. Additional information follows:  Breakeven sales in dollars for Jackie's Snacks is

Accepted Answer

A) $46,200. 
B) $39,600. 
C) $ 8,250. 
D) $16,800.

Question 16

A product is sold at $60.00 per unit, the variable expense per unit is $30, and total fixed expenses are $200,000, what are the breakeven sales in dollars?

Accepted Answer

A) $3,333 
B) $100,000 
C) $133,333 
D) $400,000

Question 17

If the selling price per unit is $42, the unit contribution margin is $15, and total fixed expenses are $570,000, what will the breakeven sales in units be?

Accepted Answer

A) 38,000 
B) 8,550,000 
C) 21,111 
D) 13,571

Question 18

The following selected data relates to Ivory Corporation:  If sales revenue per unit increases to $27 and 8,500 units are sold, what is the contribution margin?

Accepted Answer

A) $357,000 
B) $77,000 
C) $59,500 
D) $102,000

Question 19

Companies with low operating leverage have relatively higher variable costs and lower fixed costs.

Accepted Answer

A) True 
 B)False

Question 20

J.I.T Auto sells its cars for $20,000 per unit (car). Variable costs are currently 60% of sales revenue. Fixed expenses are $480,000,000 per year. What is the breakeven point in units at the current selling price?

Accepted Answer

A) 8,000 units 
B) 15,000 units 
C) 60,000 units 
D) 40,000 units

Exam 7: Cost-Volume-Profit Analysis

Gross margin is another term for net income.

Contribution margin on an income statement is equal to sales revenue minus fixed expenses.

CVP assumes that inventory levels will not change.

Matthew's Fish Fry has a monthly target operating income of $7,200. Variable expenses are 60% of sales and monthly fixed expenses are $1,800. What is Matthew's operating leverage factor at the target level of operating income?

Martin Enterprises provides the following information about its single product. How many units must be sold to earn the targeted operating income?

Slamburger's sells three cheeseburgers for every two regular hamburgers. A cheeseburger sells for $3.50 with a variable cost of $1.00. A regular hamburger sells for $3 with a variable cost of $0.75. What is the weighted-average contribution margin?

The contribution margin ratio explains the percentage of each sales dollar that

________ should be subtracted from the sales price per unit to compute the unit contribution margin.

Barbara's Candles provides the following information about its single product. What is the breakeven point in units?

When calculating the breakeven point in terms of units, fixed costs should be divided by the contribution per unit.

If the selling price per unit is $75, total fixed expenses are $90,000, and the breakeven sales in dollars is $360,000, what will the variable expense per unit be?

A product is sold at $60.00 per unit, the variable expense per unit is $30, and total fixed expenses are $200,000, what are the breakeven sales in dollars?

If the selling price per unit is $42, the unit contribution margin is $15, and total fixed expenses are $570,000, what will the breakeven sales in units be?

The following selected data relates to Ivory Corporation: If sales revenue per unit increases to $27 and 8,500 units are sold, what is the contribution margin?

Companies with low operating leverage have relatively higher variable costs and lower fixed costs.

J.I.T Auto sells its cars for $20,000 per unit (car) . Variable costs are currently 60% of sales revenue. Fixed expenses are $480,000,000 per year. What is the breakeven point in units at the current selling price?