Question 1

Contribution margin ratio is computed by

Accepted Answer

A) dividing contribution margin by operating income. 
B) dividing contribution margin by sales revenue. 
C) dividing sales revenue by contribution margin. 
D) dividing operating income by contribution margin.

Question 2

Cartman Enterprises management has budgeted the following amounts for its next fiscal year:

If Cartman Enterprises can reduce fixed expenses by $16,000,how will breakeven sales in units be affected?

Accepted Answer

A) Increase by 400 units 
B) Increase by 1,600 units 
C) Decrease by 400 units 
D) Decrease by 1,600 units

Question 3

Fixed expenses total $31,000,the breakeven sales in dollars is $93,000 and the selling price per unit is $99.The variable expense per unit is

Accepted Answer

A) approximately $33. 
B) approximately $66. 
C) approximately $132. 
D) approximately $198.

Question 4

In the last reporting period,Helena's Heavenly Fixture Company recorded 100,000 units sold for the first time in the history of the company.The price per unit was $89.99 and variable costs per unit at $36.39.Showing all work in the space provided,compute the contribution margin.Next,compute the fixed costs if the operating income is $4,020,000.

Accepted Answer

A) $5,360,000;$1,340,000 
B) $5,500,000;$1,360,000 
C) $5,575,000;$1,375,000 
D) $5,600,000;$1,425,000

Question 5

Electric Jet Skis operates a jet ski rental business.Assume the jet skis rent for $55 per 6 hours.The variable costs are $33 per 6 hours rental,and its fixed costs are $80,000 each month.What is the contribution margin ratio?

Accepted Answer

A) 40% 
B) 60% 
C) 250% 
D) 22%

Question 6

The horizontal line intersecting the vertical y-axis at the level of total cost on a CVP graph represents

Accepted Answer

A) total costs. 
B) total variable costs. 
C) total fixed costs. 
D) breakeven point.

Question 7

Spice Company has a product which sells for $150 and has a unit contribution margin of $75.It has fixed costs of $35/unit at the current production volume.Spice Company's contribution margin ratio is

Accepted Answer

A) 23%. 
B) 50%. 
C) 37%. 
D) 73%.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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 10

Barkley Company sells two products,red cups and black mugs.Barkley predicts that it will sell 2,500 red cups and 1,000 black mugs in the next period.The unit contribution margins for red cups and black mugs are $2.80 and $3.50,respectively.What is the weighted average unit contribution margin?

Accepted Answer

A) $2.33 
B) $7.00 
C) $3.00 
D) $1.00

Question 11

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 in dollars if the business achieves its operating income goal?

Accepted Answer

A) $50,000 
B) $31,250 
C) $68,750 
D) $12,500

Question 12

Sensitivity analysis is a "what if" technique that asks what a result will be if an underlying assumption changes.

Accepted Answer

A) True 
 B)False

Question 13

A company's margin of safety can be stated

Accepted Answer

A) in units. 
B) in dollars. 
C) as a percentage of sales. 
D) any of the above.

Question 14

Hickory Point Amusement Park sells admission tickets for $50 per person for one visit.Variable costs are $15 per visitor and fixed costs are $60,000,000 per month.The company's relevant range extends to 2,000,000 visitors per month.What is Hickory Point's projected operating income if 1,750,000 visitors come to the park during the month?

Accepted Answer

A) $1,250,000 
B) $61,250,000 
C) $87,500,000 
D) $27,500,000

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Martin Enterprises provides the following information about its single product.

What is the breakeven point in units?

Accepted Answer

A) 22,100 
B) 8,710 
C) 40,900 
D) 4,706

Question 17

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 18

Fave Motion Pictures sells movie tickets for $10 per movie patron.Variable costs are $7.50 per movie patron and fixed costs are $50,000 per month.The company's relevant range extends to 35,000 movie patrons per month.What is Fave Motion Pictures' projected operating income if 25,000 movie patrons see movies during a month?

Accepted Answer

A) $62,500 
B) $12,500 
C) $250,000 
D) $200,000

Question 19

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 20

Which of the following is an underlying assumption of the cost-volume-profit graph?

Accepted Answer

A) Total fixed expenses will change during the accounting period. 
B) The sales mix of products is constantly changing. 
C) Volume is the only cost driver. 
D) Inventory levels are constantly changing.

Exam 7: Cost-Volume-Profit Analysis

Contribution margin ratio is computed by

Cartman Enterprises management has budgeted the following amounts for its next fiscal year: If Cartman Enterprises can reduce fixed expenses by $16,000,how will breakeven sales in units be affected?

Fixed expenses total $31,000,the breakeven sales in dollars is $93,000 and the selling price per unit is $99.The variable expense per unit is

Electric Jet Skis operates a jet ski rental business.Assume the jet skis rent for $55 per 6 hours.The variable costs are $33 per 6 hours rental,and its fixed costs are $80,000 each month.What is the contribution margin ratio?

The horizontal line intersecting the vertical y-axis at the level of total cost on a CVP graph represents

Spice Company has a product which sells for $150 and has a unit contribution margin of $75.It has fixed costs of $35/unit at the current production volume.Spice Company's contribution margin ratio is

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

Barkley Company sells two products,red cups and black mugs.Barkley predicts that it will sell 2,500 red cups and 1,000 black mugs in the next period.The unit contribution margins for red cups and black mugs are $2.80 and $3.50,respectively.What is the weighted average unit contribution margin?

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 in dollars if the business achieves its operating income goal?

Sensitivity analysis is a "what if" technique that asks what a result will be if an underlying assumption changes.

A company's margin of safety can be stated

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

Martin Enterprises provides the following information about its single product. What is the breakeven point in units?

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?

Fixed costs divided by weighted average contribution margin per unit equals

Which of the following is an underlying assumption of the cost-volume-profit graph?