Question 1

Fixed costs of $15,750 divided by the contribution margin ratio of 50% would yield the dollar amount of breakeven sales as $31,500.

Accepted Answer

A) True 
 B)False

Question 2

Beasley Company currently sells its products for $35 per unit. Management is contemplating a 20% increase in the selling price for the next year. Variable costs are currently 50% of sales revenue and are not expected to change in dollar amount on a per unit basis next year (the company will pay the same amount for variable costs next year). Fixed expenses are $79,625 per year. What is the breakeven point in units at the anticipated selling price per unit next year?

Accepted Answer

A) 1,338 units 
B) 3,250 units 
C) 3,520 units 
D) 7,583 units

Question 3

Wallace Incorporated sells its products for $520 per unit. Variable costs are currently 45% of sales revenue. Fixed expenses are $125,840 per year. What is the breakeven point in units at the current selling price?

Accepted Answer

A) 167 units 
B) 286 units 
C) 440 units 
D) 538 units

Question 4

If the selling price per unit is $70, variable expenses per unit are $45, target operating income is $38,000, and total fixed expenses are $22,000, how many units must be sold to reach the target operating income?

Accepted Answer

A) 880 
B) 2,400 
C) 1,520 
D) 543

Question 5

A hotel would be an example of a company with high operating leverage.

Accepted Answer

A) True 
 B)False

Question 6

CVP stands for Company-Volume-Profit.

Accepted Answer

A) True 
 B)False

Question 7

To find a firm's operating leverage factor at a given level of sales, you

Accepted Answer

A) divide the contribution margin by fixed expenses. 
B) divide the contribution margin by operating income. 
C) divide variable expenses by fixed expenses. 
D) divide relatively operating income by contribution margin.

Question 8

If the selling price per unit is $25.00, the variable expense per unit is $6.25, and the breakeven sales in dollars is $465,200, what are total fixed expenses?

Accepted Answer

A) $18,608 
B) $ 992 
C) $348,900 
D) $1,395,600

Question 9

Mom and Pop's Ice Cream Shoppe sells ice cream cones for $5.00 per customer. Variable costs are $2.25 per cone. Fixed costs are $3,000 per month. What is the company's contribution margin ratio?

Accepted Answer

A) 182% 
B) 45% 
C) 3% 
D) 55%

Question 10

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 as a percentage of target sales in dollars?

Accepted Answer

A) 180.00% 
B) 25.00% 
C) 20.00% 
D) 60.00%

Question 11

Grosheim Incorporated has fixed expenses of $212,500 per year. Right now, Grosheim Incorporated is selling its products for $125 per unit. Management is contemplating a 25% increase in the selling price for the next year. Variable costs are currently 40% of sales revenue and are not expected to change in dollar amount on a per unit basis next year (the company will pay the same amount for variable costs next year). If fixed costs increase 10% next year, and the new selling price per unit goes into effect, how many units will need to be sold to breakeven?

Accepted Answer

A) 1,133 units 
B) 2,877 units 
C) 233,750 units 
D) 2,200 units

Question 12

On a CVP graph, total fixed costs are shown as a horizontal line.

Accepted Answer

A) True 
 B)False

Question 13

Washington Bottling Company provides the following information about its single product.  What is the contribution margin per unit?

Accepted Answer

A) $2.00 
B) $13.10 
C) $0.26 
D) $5.55

Question 14

When calculating the breakeven point in terms of sales revenue, variable costs should be divided by the contribution margin ratio.

Accepted Answer

A) True 
 B)False

Question 15

To find the number of units that need to be sold in order to breakeven or generate a target profit, the formula used is

Accepted Answer

A) (fixed expenses + operating income)÷ contribution margin per unit. 
B) (fixed expenses + operating income)÷ contribution margin ratio. 
C) (fixed expenses - operating income)÷ contribution margin ratio. 
D) (fixed expenses - operating income)÷ contribution margin per unit.

Question 16

Cedar Mills Incorporated has a predicted operating income of $72,000. Its total variable expenses are $20,000 and its total fixed expenses are $32,000. It has a unit contribution margin of $10. Cedar Mills' breakeven sales in units is

Accepted Answer

A) 8,400. 
B) 10,400. 
C) 4,000. 
D) 12,400.

Question 17

To the left of the breakeven point on a CVP graph, the area between the total expense line and the sales revenue line representing which of the following?

Accepted Answer

A) Operating loss 
B) Operating income 
C) Slope of variable costs per unit 
D) Slope of fixed costs per unit

Question 18

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:  The weighted average contribution margin for the three products of Jackie's Snacks is

Accepted Answer

A) $11.20. 
B) $ 0.65. 
C) $ 2.00. 
D) $50.00.

Question 19

To find the sales revenue (sales in dollars)needed in order to breakeven or generate a target profit, the formula used is

Accepted Answer

A) (fixed expenses + operating income)÷ contribution margin per unit. 
B) (fixed expenses + operating income)÷ contribution margin ratio. 
C) (fixed expenses - operating income)÷ contribution margin ratio. 
D) (fixed expenses - operating income)÷ contribution margin per unit.

Question 20

Which of the following represents the excess of the selling price per unit of a product over the variable cost of obtaining and selling each unit?

Accepted Answer

A) Gross margin 
B) Operating income 
C) Net income 
D) Unit contribution margin

Exam 7: Cost-Volume-Profit Analysis

Fixed costs of $15,750 divided by the contribution margin ratio of 50% would yield the dollar amount of breakeven sales as $31,500.

Wallace Incorporated sells its products for $520 per unit. Variable costs are currently 45% of sales revenue. Fixed expenses are $125,840 per year. What is the breakeven point in units at the current selling price?

If the selling price per unit is $70, variable expenses per unit are $45, target operating income is $38,000, and total fixed expenses are $22,000, how many units must be sold to reach the target operating income?

A hotel would be an example of a company with high operating leverage.

CVP stands for Company-Volume-Profit.

To find a firm's operating leverage factor at a given level of sales, you

If the selling price per unit is $25.00, the variable expense per unit is $6.25, and the breakeven sales in dollars is $465,200, what are total fixed expenses?

Mom and Pop's Ice Cream Shoppe sells ice cream cones for $5.00 per customer. Variable costs are $2.25 per cone. Fixed costs are $3,000 per month. What is the company's contribution margin ratio?

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 as a percentage of target sales in dollars?

On a CVP graph, total fixed costs are shown as a horizontal line.

Washington Bottling Company provides the following information about its single product. What is the contribution margin per unit?

When calculating the breakeven point in terms of sales revenue, variable costs should be divided by the contribution margin ratio.

To find the number of units that need to be sold in order to breakeven or generate a target profit, the formula used is

Cedar Mills Incorporated has a predicted operating income of $72,000. Its total variable expenses are $20,000 and its total fixed expenses are $32,000. It has a unit contribution margin of $10. Cedar Mills' breakeven sales in units is

To the left of the breakeven point on a CVP graph, the area between the total expense line and the sales revenue line representing which of the following?

To find the sales revenue (sales in dollars) needed in order to breakeven or generate a target profit, the formula used is

Which of the following represents the excess of the selling price per unit of a product over the variable cost of obtaining and selling each unit?