Question 1

If fixed costs are $500,000 and variable costs are 60% of break-even sales,profit is zero when sales revenue is $930,000.

Accepted Answer

A) True 
 B)False

Question 2

The reliability of cost-volume-profit analysis does not depend on the assumption that costs can be accurately divided into fixed and variable components.

Accepted Answer

A) True 
 B)False

Question 3

Variable costs are costs that vary in total in direct proportion to changes in the activity level.

Accepted Answer

A) True 
 B)False

Question 4

A business had a margin of safety ratio of 20%,variable costs of 75% of sales,fixed costs of $240,000,a break-even point of $960,000,and operating income of $60,000 for the current year.Calculate the current year's sales.

Accepted Answer

The answer of A business had a margin of safety...

Question 5

Which of the graphs in Figure 21-1 illustrates the nature of a mixed cost?

Accepted Answer

A)  Graph 2 
B)  Graph 3 
C)  Graph 4 
D)  Graph 1

Question 6

Thompson Company manufactures and sells cookware.Because of current trends,it expects to increase sales by 15% next year.If this expected level of production and sales occurs and plant expansion is not needed,how should this increase affect next year's total amounts for the following costs. ​
Variable Costs Fixed Costs Mixed Costs

Accepted Answer

A)  ​ increase increase increase 
B)  ​increase no change increase 
C)  ​ no change no change increase 
D)  decrease increase increase

Question 7

Given the following cost and activity observations for Smithson Company's utilities,use the high-low method to calculate Smithson's fixed costs per month.Do not round your intermediate calculations.

Accepted Answer

A)  $1,533 
B)  $2,530 
C)  $22,800 
D)  $50,600

Question 8

Zipee Inc.'s unit selling price is $90,the unit variable costs are $40.50,fixed costs are $170,000,and current sales are 12,000 units.How much will operating income change if sales increase by 5,000 units?

Accepted Answer

A)  $125,000 decrease 
B)  $175,000 increase 
C)  $75,000 increase 
D)  $247,500 increase

Question 9

Perfect Stampers makes and sells aftermarket hub caps.The variable cost for each hub cap is $4.75 and the hub cap sells for $9.95.Perfect Stampers has fixed costs per month of $3,120.Compute the contribution margin per unit and break-even sales in units and in dollars for the month.

Accepted Answer

The answer of Perfect Stampers makes and sells aftermarket hub...

Question 10

If a business had a capacity of $10,000,000 of sales,actual sales of $6,000,000,break-even sales of $4,200,000,fixed costs of $1,800,000,and variable costs of 60% of sales,what is the margin of safety expressed as a percentage of sales?

Accepted Answer

The answer of If a business had a capacity of...

Question 11

Flying Cloud Co.has the following operating data for its manufacturing operations: ​
 The company has decided to increase the wages of hourly workers which will increase the unit variable cost by 10%.Increases in the salaries of factory supervisors and property taxes for the factory will increase fixed costs by 4%.If sales prices are held constant,the next break-even point for Flying Cloud Co.will be

Accepted Answer

A)  increased by 640 units 
B)  increased by 400 units 
C)  decreased by 640 units 
D)  increased by 800 units

Question 12

In order to choose the proper activity base for a cost,managerial accountants must be familiar with the operations of the entity.

Accepted Answer

A) True 
 B)False

Question 13

Variable costs are costs that remain constant on a per-unit basis as the level of activity changes.

Accepted Answer

A) True 
 B)False

Question 14

Most operating decisions of management focus on a narrow range of activity called the

Accepted Answer

A)  relevant range of production 
B)  strategic level of production 
C)  optimal level of production 
D)  tactical operating level of production

Question 15

The adoption of variable costing for managerial decision making is based on the premise that fixed factory overhead costs are related to productive capacity of the manufacturing plant and are normally not affected by the number of units produced.

Accepted Answer

A) True 
 B)False

Question 16

The following data are available from the accounting records of Willow Creek Co.for the month ended May 31.During the accounting period,17,000 units were manufactured and sold at a price of $60 per unit.There were no beginning inventories,and all units were completed (no work in process).
​

Accepted Answer

The answer of The following data are available from the...

Question 17

If the unit selling price is $40,the volume of sales is $3,000,000,sales at the break-even point amount to $2,500,000,and the maximum possible sales are $3,300,000,the margin of safety is 14,500 units.

Accepted Answer

A) True 
 B)False

Question 18

The cost graphs in the illustration below shows various types of cost behaviors.
For each of the following costs,identify the cost graph that best describes its cost behavior as the number of units produced and sold increases:

Accepted Answer

The answer of The cost graphs in the illustration below...

Question 19

With the aid of computer software,managers can vary assumptions regarding selling prices,costs,and volume,and can immediately see the effects of each change on the break-even point and profit.This is called

Accepted Answer

A)  "what if" or sensitivity analysis 
B)  vary the data analysis 
C)  computer aided analysis 
D)  data gathering

Question 20

Forde Co.has an operating leverage of 4.Sales are expected to increase by 12% next year.Operating income is

Accepted Answer

A)  unaffected 
B)  expected to increase by 3% 
C)  expected to increase by 48% 
D)  expected to increase by 4 %

Exam 19: Cost-Volume-Profit Analysis

If fixed costs are $500,000 and variable costs are 60% of break-even sales,profit is zero when sales revenue is $930,000.

The reliability of cost-volume-profit analysis does not depend on the assumption that costs can be accurately divided into fixed and variable components.

Variable costs are costs that vary in total in direct proportion to changes in the activity level.

A business had a margin of safety ratio of 20%,variable costs of 75% of sales,fixed costs of $240,000,a break-even point of $960,000,and operating income of $60,000 for the current year.Calculate the current year's sales.

Which of the graphs in Figure 21-1 illustrates the nature of a mixed cost?

Given the following cost and activity observations for Smithson Company's utilities,use the high-low method to calculate Smithson's fixed costs per month.Do not round your intermediate calculations.

Zipee Inc.'s unit selling price is $90,the unit variable costs are $40.50,fixed costs are $170,000,and current sales are 12,000 units.How much will operating income change if sales increase by 5,000 units?

Perfect Stampers makes and sells aftermarket hub caps.The variable cost for each hub cap is $4.75 and the hub cap sells for $9.95.Perfect Stampers has fixed costs per month of $3,120.Compute the contribution margin per unit and break-even sales in units and in dollars for the month.

If a business had a capacity of $10,000,000 of sales,actual sales of $6,000,000,break-even sales of $4,200,000,fixed costs of $1,800,000,and variable costs of 60% of sales,what is the margin of safety expressed as a percentage of sales?

In order to choose the proper activity base for a cost,managerial accountants must be familiar with the operations of the entity.

Variable costs are costs that remain constant on a per-unit basis as the level of activity changes.

Most operating decisions of management focus on a narrow range of activity called the

The adoption of variable costing for managerial decision making is based on the premise that fixed factory overhead costs are related to productive capacity of the manufacturing plant and are normally not affected by the number of units produced.

The following data are available from the accounting records of Willow Creek Co.for the month ended May 31.During the accounting period,17,000 units were manufactured and sold at a price of $60 per unit.There were no beginning inventories,and all units were completed (no work in process). ​

If the unit selling price is $40,the volume of sales is $3,000,000,sales at the break-even point amount to $2,500,000,and the maximum possible sales are $3,300,000,the margin of safety is 14,500 units.

The cost graphs in the illustration below shows various types of cost behaviors. For each of the following costs,identify the cost graph that best describes its cost behavior as the number of units produced and sold increases:

With the aid of computer software,managers can vary assumptions regarding selling prices,costs,and volume,and can immediately see the effects of each change on the break-even point and profit.This is called

Forde Co.has an operating leverage of 4.Sales are expected to increase by 12% next year.Operating income is

The following data are available from the accounting records of Willow Creek Co.for the month ended May 31.During the accounting period,17,000 units were manufactured and sold at a price of $60 per unit.There were no beginning inventories,and all units were completed (no work in process).