Question 1

Oldman River Company expects to produce and sell 2,000 units next month.Data on costs follows:
 $\begin{array}{ll}
\text { Per unit costs: } & \
\text { Selling price } & \$ 40 \
\text { Variable manufacturing costs } & \$ 10 \
\text { Variable selling costs } & \$ 6\\\text { Total costs: }\\text { Fixed manufacturing costs } & \$ 16,000 \
\text { Fixed selling costs } & \$ 8,000
\end{array}$ A. What is the break-even point in units?
B. What is the break-even point in sales doll ars?
C. What is the expected operating income for next month?
D. What is the margin of safety in dollars?

Accepted Answer

The answer of Oldman River Company expects to produce and...

Question 2

Suppose the selling price per unit increases.What will be the effect on the break-even point in units?

Accepted Answer

A) The units will decrease. 
B) The units will increase. 
C) The units will remain the same. 
D) The units will remain the same; however, contribution per unit will decrease.

Question 3

The linear equation for total cost is (unit variable cost × units)+ fixed cost.

Accepted Answer

A) True 
 B)False

Question 4

The HoltTec Company manufactures two products.Information about the two product lines for the year is as follows:
The company expects fixed costs to be $192,000.The firm expects 60% of its sales (in units)to be Basic Model.
Required: Determine the break-even point in units for both Basic Model and Deluxe Model.
 $\begin{array}{lrr}&\text { Basic Model}&\text { Deluxe Model }\
\text { Selling price per unit } & \$ 70 & \$ 100 \
\text { Variable costs per unit } & 30 & 40 \
\text { Contribution margin per unit } & \$ 40 & \$ 60
\end{array}$

Accepted Answer

The answer of The HoltTec Company manufactures two products.Information about...

Question 5

In a multi-product firm,if the sales mix changes,the break-even points for each product will not change.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following measures the sensitivity of profit changes to changes in sales volume?

Accepted Answer

A) contribution margin ratio 
B) variable cost ratio 
C) operating leverage 
D) degree of operating leverage

Question 7

The absorption income statement provides a good check to determine if the sale of a certain number of units really results in operating income of the given amount.

Accepted Answer

A) True 
 B)False

Question 8

What are the assumptions underlying cost-volume-profit analysis?

Accepted Answer

The answer of What are the assumptions underlying cost-volume-profit analysis?...

Question 9

Ashley Furniture provided the following data for next month:
 $\begin{array}{lr}
\text { Selling price per unit } & \$ 500 \
\text { Variable manufacturing costs per unit } & \$ 150 \
\text { Fixed manufacturing costs per unit } & \$ 75 \
\text { Variable selling costs per unit } & \$ 50 \
\text { Fixed selling costs per unit } & \$ 50 \
\text { Expected production and sales } & 2,000 \text { units }
\end{array}$ A. What is contribution margin per unit?
B. What is the contribution margin ratio?
C. What is the break-even point in units?
D. What are the sales in dollars needed to obtain on operating income of $\$ 20,000$ ?

Accepted Answer

The answer of Ashley Furniture provided the following data for...

Question 10

What is the ratio of fixed expenses to the contribution margin ratio?

Accepted Answer

A) the break-even point in sales 
B) the break-even point in units 
C) the variable cost ratio 
D) the margin of safety

Question 11

Match each item with the correct statement below.
-Break-even point

Accepted Answer

A) horizontal-axis of CVP graph 
B) vertical-axis of CVP graph 
C) slope of revenue line 
D) slope of cost line 
E) point where the total revenue line and the total cost line intersect

Question 12

Match each item with the correct statement below.
-Sales revenue minus total variable cost or price minus unit variable cost

Accepted Answer

A) Break-even point 
B) Common fixed expenses 
C) Contribution margin 
D) Direct fixed expenses 
E) Margin of safety
F)Operating leverage
G)Degree of operating leverage
H)Sales mix

Question 13

It is impossible to calculate the break-even point for individual products in a multiple product firm because many of the fixed costs are common to a number of products.

Accepted Answer

A) True 
 B)False

Question 14

ePiano makes electronic keyboards. The practice model price is $220, and its variable expenses are $190. The deluxe model price is $340, and its variable expenses are $250. The professional model price is $1,200 and its variable expenses are $800. Total fixed expenses are $187,000. In general, ePiano sells six practice models and three deluxe models for every professional model sold.
-Refer to the Figure.What is the overall sales revenue at break-even?

Accepted Answer

A) $387,200 
B) $778,800 
C) $968,000 
D) $1,288,700

Question 15

To determine the number of units that must be sold to earn a target operating income,one can use the equation for operating income and replace the operating income term with the target operating income.

Accepted Answer

A) True 
 B)False

Question 16

Orbee Company sells a product for $24. Variable costs are $14 per unit, and total fixed costs are $6,000. What is the per unit contribution margin?

Accepted Answer

A) ! $4 
B) $10 
C) $14

Question 17

Desjardin's makes power tools. The budgeted sales are $550,000, budgeted variable costs are $230,000, and budgeted fixed costs are $227,500.
-Refer to the Figure.What is the contribution ratio?

Accepted Answer

A) 35% 
B) 50% 
C) 58% 
D) 65%

Question 18

What is the break-even point?

Accepted Answer

A) Total revenue minus total cost. 
B) Profit is greater than zero. 
C) Total contribution margin equals total fixed cost. 
D) Margin of safety is positive.

Question 19

Which of the following measures the percentage change in profits resulting from a percentage change in sales?

Accepted Answer

A) variable cost leverage 
B) contribution margin ratio 
C) degree of operating leverage 
D) sales margin ratio

Question 20

Most firms would like to earn operating income equal to the break-even point.

Accepted Answer

A) True 
 B)False

Exam 4: Costvolumeprofit Analysis: a Managerial Planning Tool

Suppose the selling price per unit increases.What will be the effect on the break-even point in units?

The linear equation for total cost is (unit variable cost × units)+ fixed cost.

In a multi-product firm,if the sales mix changes,the break-even points for each product will not change.

Which of the following measures the sensitivity of profit changes to changes in sales volume?

The absorption income statement provides a good check to determine if the sale of a certain number of units really results in operating income of the given amount.

What are the assumptions underlying cost-volume-profit analysis?

What is the ratio of fixed expenses to the contribution margin ratio?

Match each item with the correct statement below. -Break-even point

Match each item with the correct statement below. -Sales revenue minus total variable cost or price minus unit variable cost

It is impossible to calculate the break-even point for individual products in a multiple product firm because many of the fixed costs are common to a number of products.

To determine the number of units that must be sold to earn a target operating income,one can use the equation for operating income and replace the operating income term with the target operating income.

Orbee Company sells a product for $24. Variable costs are $14 per unit, and total fixed costs are $6,000. What is the per unit contribution margin?

Desjardin's makes power tools. The budgeted sales are $550,000, budgeted variable costs are $230,000, and budgeted fixed costs are $227,500. -Refer to the Figure.What is the contribution ratio?

What is the break-even point?

Which of the following measures the percentage change in profits resulting from a percentage change in sales?

Most firms would like to earn operating income equal to the break-even point.