Question 1

Sandy Incorporated sells two products,larges and smalls.Larges sell for $90 per unit with variable costs of $60 per unit.Smalls sell for $30 per unit with variable costs of $10 per unit.Total fixed costs for the company are $41,600.Sandy Incorporated typically sells three larges for every two smalls.What is the breakeven point in total units?

Accepted Answer

A) 392 units 
B) 4,160 units 
C) 1,600 units 
D) 320 units

Question 2

Yellow Company's variable expenses are 40% of sales and have monthly fixed expenses of $15,000.The monthly target operating income is $3,750.What is the monthly margin of safety as a percentage of target sales in dollars?

Accepted Answer

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

Question 3

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 4

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 5

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 6

All else being equal,a company with a high operating leverage will have

Accepted Answer

A) relatively low fixed costs. 
B) relatively high variable costs. 
C) relatively high contribution margin ratio. 
D) relatively low risk.

Question 7

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 8

Hyde's Headphones sells deluxe headphones for $75 each.Unit variable expenses total $45.The breakeven sales in units is 2,400 and budgeted sales in units is 4,200.What is the margin of safety in dollars?

Accepted Answer

A) $24 
B) $135,000 
C) $495,000 
D) $1,800

Question 9

The selling price of a particular product is $38.00 per unit,fixed costs total $175,000,and the breakeven sales in dollars is $875,000,what will the variable expense per unit be?

Accepted Answer

A) $152.00 
B) $7.60 
C) $45.60 
D) $30.40

Question 10

Jackie's Creamery sells fudge,cookies,and popcorn to patrons in the local community.The manager at the creamery sold 12,000 total boxes of merchandise last year.The popcorn outsold fudge by a margin of 2 to 1.The sales of caramels equaled the sales of popcorn.Total fixed costs for Jackie's Creamery total $14,000.The managerial accountant at Jackie's Creamery reported the following information:

Which formula should the managerial accountant use to determine the number of boxes of each different snack sold?

Accepted Answer

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

Question 11

Stanley's Candies is considering building a new plant in Europe.It predicts sales at the new plant to be 40,000 units at $4.00/unit.Below is a listing of estimated expenses:

A European firm was contracted to sell the product and will receive a commission of 10% of the sales price.No U.S.home office expenses will be allocated to the new facility.
The unit variable cost for Stanley's Candies is

Accepted Answer

A) $1.25. 
B) $3.15. 
C) $2.30. 
D) $1.90.

Question 12

If the selling price per unit is $100,total fixed expenses are $600,000,and the breakeven sales in dollars is $800,000,what is the variable expense per unit?

Accepted Answer

A) $33.33 
B) $175.00 
C) $75.00 
D) $25.00

Question 13

Star Corporation management has budgeted the following amounts for its next fiscal year:

If Star Corporation spends an additional $20,000 on advertising,sales volume should increase by 3,000 units.What effect will this have on operating income?

Accepted Answer

A) Increase of $75,000 
B) Increase of $55,000 
C) Decrease of $55,000 
D) Decrease of $75,000

Question 14

Gabe Industries sells two products,Basic models and Deluxe models.Basic models sell for $42 per unit with variable costs of $30 per unit.Deluxe models sell for $50 per unit with variable costs of $40 per unit.Total fixed costs for the company are $75,400.Gabe Industries typically sells four Basic models for every Deluxe model.What is the breakeven point in total units?

Accepted Answer

A) 6,500 units 
B) 3,900 units 
C) 9,921 units 
D) 5,953 units

Question 15

Total contribution margin less total fixed expenses equals

Accepted Answer

A) contribution margin ratio. 
B) operating income. 
C) gross profit. 
D) sales revenue.

Question 16

A company's margin of safety is computed as

Accepted Answer

A) actual sales - expected sales. 
B) expected sales - actual sales. 
C) expected sales - sales at breakeven. 
D) sales at breakeven - expected sales.

Question 17

Cedar Mills Incorporated desires an operating income of $72,000.Its variable expenses are $20,000 and its total fixed expenses have increased from $32,000 to $60,000.Its unit contribution margin is $10.Its sales in units to achieve the target profit is

Accepted Answer

A) 15,200. 
B) 1,200. 
C) 13,200. 
D) 11,200.

Question 18

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 19

Variable costs are $17 per unit and the sales price is $20 per unit.If volume would triple as a result of decreasing the sales price to $16 per unit,the business should strongly consider decreasing the sales price to $16 per unit.

Accepted Answer

A) True 
 B)False

Question 20

Palmer's Gourmet Chocolates produces and sells assorted boxed chocolates.The unit selling price is $50,unit variable costs are $25,and total fixed costs are $2,000.What are breakeven sales in dollars?

Accepted Answer

A) $4,000 
B) $1,333 
C) $80 
D) $2,000

Exam 7: Cost-Volume-Profit Analysis