Question 1

The margin of safety would be negative if a company('s)

Accepted Answer

A) was presently operating at a volume that is below the break-even point. 
B) present fixed costs were less than its contribution margin. 
C) variable costs exceeded its fixed costs. 
D) degree of operating leverage is greater than 100. 
A) was presently operating at a volume that is below the break-even point. 
B) present fixed costs were less than its contribution margin. 
C) variable costs exceeded its fixed costs. 
D) degree of operating leverage is greater than 100.

Question 2

Information concerning Clarkson Corporation's Product A follows: $\begin{array}{ll}
\text { Sales } & \$ 300,000 \
\text { Variable costs } & 240,000 \
\text { Fixed costs } & 40,000
\end{array}$ Assuming that Clarkson increased sales of Product A by 20 percent,what should the profit from Product A be?

Accepted Answer

A) $20,000 
B) $24,000 
C) $32,000 
D) $80,000 
A) $20,000 
B) $24,000 
C) $32,000 
D) $80,000

Question 3

The relationship between a company's variable costs and fixed costs is referred to as its ______________________________.

Accepted Answer

The answer of The relationship between a company's variable costs...

Question 4

Price Corporation
Price Corporation manufactures and sells two products: A and
B.The projected information on these two products for the coming year is presented below:
 $\begin{array}{lll}
&Product~ A&Product~ B\\hline
\text { Sales in units } & 4,000 & 1,000 \
\text { Sales price per unit } & \$ 12 & \$ 8 \
\text { Variable costs per unit } & 8 & 4
\end{array}$ Total fixed costs for the company are projected at $10,000.
Refer to Price Corporation.How many units would the company need to sell to produce an income before income taxes equal to 15 percent of sales?

Accepted Answer

Again,using a unit of sales mix as the u

Question 5

Total variable costs vary directly with levels of production.

Accepted Answer

A) True 
 B)False

Question 6

CVP analysis requires costs to be categorized as

Accepted Answer

A) either fixed or variable. 
B) direct or indirect. 
C) product or period. 
D) standard or actual. 
A) either fixed or variable. 
B) direct or indirect. 
C) product or period. 
D) standard or actual.

Question 7

Shelton Company Below is an income statement for Shelton Company:
$\begin{array}{ll}
\text { Sales } & \$ 600,000 \
\text { Variable costs } & \underline{(150,000)} \
\text { Contribution margin } & \$ 450,000 \
\text { Fixed costs } & \underline{(300,000)} \
\text { Profit before taxes } & \underline{\$ 150,000}
\end{array}$ Refer to Shelton Company.Based on the cost and revenue structure on the income statement,what was Shelton's break-even point in dollars?

Accepted Answer

A) $300,000 
B) $400,000 
C) $425,000 
D) $450,000 
A) $300,000 
B) $400,000 
C) $425,000 
D) $450,000

Question 8

Shelton Company Below is an income statement for Shelton Company:
$\begin{array}{ll}
\text { Sales } & \$ 600,000 \
\text { Variable costs } & \underline{(150,000)} \
\text { Contribution margin } & \$ 450,000 \
\text { Fixed costs } & \underline{(300,000)} \
\text { Profit before taxes } & \underline{\$ 150,000}
\end{array}$ Refer to Shelton Company.Assuming that the fixed costs are expected to remain at $300,000 for the coming year and the sales price per unit and variable costs per unit are also expected to remain constant,how much profit before taxes will be produced if the company anticipates sales for the coming year rising to 125 percent of the current year's level?

Accepted Answer

A) $112,500 
B) $187,500 
C) $262,500 
D) $300,000 
A) $112,500 
B) $187,500 
C) $262,500 
D) $300,000

Question 9

Variable costs per unit vary directly with levels of production.

Accepted Answer

A) True 
 B)False

Question 10

CVP analysis relies on the assumptions that costs are either strictly fixed or strictly variable.Consistent with these assumptions,as volume decreases total

Accepted Answer

A) fixed costs decrease. 
B) variable costs remain constant. 
C) costs decrease. 
D) costs remain constant. 
A) fixed costs decrease. 
B) variable costs remain constant. 
C) costs decrease. 
D) costs remain constant.

Question 11

When using CVP analysis to determine sales level for a desired amount of profit,the profit is treated as an additional cost to be covered.

Accepted Answer

A) True 
 B)False

Question 12

A firm's break-even point in dollars can be found in one calculation using which of the following formulas?

Accepted Answer

A) FC/CM per unit 
B) VC/CM 
C) FC/CM ratio 
D) VC/CM ratio 
A) FC/CM per unit 
B) VC/CM 
C) FC/CM ratio 
D) VC/CM ratio

Question 13

A managerial preference for a very low degree of operating leverage might indicate that

Accepted Answer

A) an increase in sales volume is expected. 
B) a decrease in sales volume is expected. 
C) the firm is very unprofitable. 
D) the firm has very high fixed costs. 
A) an increase in sales volume is expected. 
B) a decrease in sales volume is expected. 
C) the firm is very unprofitable. 
D) the firm has very high fixed costs.

Question 14

Castle Corporation
The following questions are based on the following data pertaining to two types of products manufactured by Castle Corporation:
 $\begin{array}{|l|l|l|}
\hline & \text { Per unit } & \
\hline & \text { Sales price } & \text { Variable costs } \
\hline \text { Prochuct } Y & \$ 120 & \$ 70 \
\hline \text { Prochuct Z } & \$ 500 & \$ 200 \
\hline
\end{array}$ Fixed costs total $300,000 annually.The expected mix in units is 60 percent for Product Y and 40 percent for Product Z.
Refer to Castle Corporation.What is Castle's break-even point in sales dollars?

Accepted Answer

BEP dollars = FC/CMR For multiple produc

Question 15

Variable costing is more useful than absorption costing in determining a company's break-even point.

Accepted Answer

A) True 
 B)False

Question 16

The margin of safety is computed by dividing 1 by the degree of operating leverage.

Accepted Answer

A) True 
 B)False

Question 17

Total fixed costs remain unchanged with levels of production.

Accepted Answer

A) True 
 B)False

Question 18

A company's break-even point is the level where total revenues equal total costs.

Accepted Answer

A) True 
 B)False

Question 19

Information concerning Simmons Corporation's Product A follows: $\begin{array}{ll}
\text { Sales } & \$ 400,000 \
\text { Variable costs } & 300,000 \
\text { Fixed costs } & 50,000
\end{array}$ Assuming that Simmons increased sales of Product A by 25 percent,what should the profit from Product A be?

Accepted Answer

A) $ 50,000 
B) $ 62,500 
C) $ 75,000 
D) $170,000 
A) $ 50,000 
B) $ 62,500 
C) $ 75,000 
D) $170,000

Question 20

The Horner Company makes three products.The cost data for these three products is as follows:
 $\begin{array}{llll}
&Product~ A&Product~ B&Product ~C\\hline
\text { Selling price } & \$ 10 & \$ 20 & \$ 40 \
\text { Variable costs } & 7 & 12 & 16
\end{array}$ Total annual fixed costs are $840,000.The firm's experience has been that about 20 percent of dollar sales come from product A,60 percent from B,and 20 percent from 
C.
Required:
 a. $\text { Compute break-even in sales dollars }$ 
 b. $\text { Determine the number of units to be sold at the break-even point }$

Accepted Answer

The answer of The Horner Company makes three products.The cost...

The margin of safety would be negative if a company('s)

Information concerning Clarkson Corporation's Product A follows: Sales \ 300,000 Variable costs 240,000 Fixed costs 40,000 Assuming that Clarkson increased sales of Product A by 20 percent,what should the profit from Product A be?

The relationship between a company's variable costs and fixed costs is referred to as its ______________________________.

Total variable costs vary directly with levels of production.

CVP analysis requires costs to be categorized as

Shelton Company Below is an income statement for Shelton Company: Sales \ 600,000 Variable costs Contribution margin \ 450,000 Fixed costs Profit before taxes Refer to Shelton Company.Based on the cost and revenue structure on the income statement,what was Shelton's break-even point in dollars?

Variable costs per unit vary directly with levels of production.

CVP analysis relies on the assumptions that costs are either strictly fixed or strictly variable.Consistent with these assumptions,as volume decreases total

When using CVP analysis to determine sales level for a desired amount of profit,the profit is treated as an additional cost to be covered.

A firm's break-even point in dollars can be found in one calculation using which of the following formulas?

A managerial preference for a very low degree of operating leverage might indicate that

Variable costing is more useful than absorption costing in determining a company's break-even point.

The margin of safety is computed by dividing 1 by the degree of operating leverage.

Total fixed costs remain unchanged with levels of production.

A company's break-even point is the level where total revenues equal total costs.

Information concerning Simmons Corporation's Product A follows: Sales \ 400,000 Variable costs 300,000 Fixed costs 50,000 Assuming that Simmons increased sales of Product A by 25 percent,what should the profit from Product A be?

Introduction to Cost Accounting

Cost Terminology and Cost Behaviors

Predetermined Overhead Rates, flexible Budgets, and Absorptionvariable Costing

Activity-Based Management and Activity-Based Costing

Job Order Costing

Process Costing

Standard Costing and Variance Analysis

The Master Budget

Relevant Information for Decision Making

Allocation of Joint Costs and Accounting for By-Products

Introduction to Cost Management Systems

Responsibility Accounting, support Department Allocations, and Transfer Pricing

Performance Measurement, balanced Scorecards, and Performance Rewards

Capital Budgeting

Managing Costs and Uncertainty

Implementing Quality Concepts

Inventory and Production Management

Emerging Management Practices

Filters

Exam 9: Break-Even Point and Cost-Volume-Profit Analysis

The margin of safety would be negative if a company('s)

Information concerning Clarkson Corporation's Product A follows: Sales \ 300,000 Variable costs 240,000 Fixed costs 40,000 Assuming that Clarkson increased sales of Product A by 20 percent,what should the profit from Product A be?

The relationship between a company's variable costs and fixed costs is referred to as its ______________________________.

Total variable costs vary directly with levels of production.

CVP analysis requires costs to be categorized as

Shelton Company Below is an income statement for Shelton Company: Sales \ 600,000 Variable costs Contribution margin \ 450,000 Fixed costs Profit before taxes Refer to Shelton Company.Based on the cost and revenue structure on the income statement,what was Shelton's break-even point in dollars?

Variable costs per unit vary directly with levels of production.

CVP analysis relies on the assumptions that costs are either strictly fixed or strictly variable.Consistent with these assumptions,as volume decreases total

When using CVP analysis to determine sales level for a desired amount of profit,the profit is treated as an additional cost to be covered.

A firm's break-even point in dollars can be found in one calculation using which of the following formulas?

A managerial preference for a very low degree of operating leverage might indicate that

Variable costing is more useful than absorption costing in determining a company's break-even point.

The margin of safety is computed by dividing 1 by the degree of operating leverage.

Total fixed costs remain unchanged with levels of production.

A company's break-even point is the level where total revenues equal total costs.

Information concerning Simmons Corporation's Product A follows: Sales \ 400,000 Variable costs 300,000 Fixed costs 50,000 Assuming that Simmons increased sales of Product A by 25 percent,what should the profit from Product A be?

Introduction to Cost Accounting

Cost Terminology and Cost Behaviors

Predetermined Overhead Rates, flexible Budgets, and Absorptionvariable Costing

Activity-Based Management and Activity-Based Costing

Job Order Costing

Process Costing

Standard Costing and Variance Analysis

The Master Budget

Relevant Information for Decision Making

Allocation of Joint Costs and Accounting for By-Products

Introduction to Cost Management Systems

Responsibility Accounting, support Department Allocations, and Transfer Pricing

Performance Measurement, balanced Scorecards, and Performance Rewards

Capital Budgeting

Managing Costs and Uncertainty

Implementing Quality Concepts

Inventory and Production Management

Emerging Management Practices

Filters