Question 1

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  True

Question 2

If a firm's net income does not change as its volume changes, the firm('s)

Accepted Answer

A)  must be in the service industry. 
B)  must have no fixed costs. 
C)  sales price must equal $0. 
D)  sales price must equal its variable costs. 
A)  must be in the service industry. 
B)  must have no fixed costs. 
C)  sales price must equal $0. 
D)  sales price must equal its variable costs. D

Question 3

Shelton Company Below is an income statement for Shelton Company:
  Refer to Shelton Company. What was Shelton's margin of safety?

Accepted Answer

A)  $150,000 
B)  $175,000 
C)  $200,000 
D)  $300,000 
A)  $150,000 
B)  $175,000 
C)  $200,000 
D)  $300,000 C

Question 4

In a CVP graph, the area between the total cost line and the total revenue line represents total

Accepted Answer

A)  contribution margin. 
B)  variable costs. 
C)  fixed costs. 
D)  profit. 
A)  contribution margin. 
B)  variable costs. 
C)  fixed costs. 
D)  profit.

Question 5

What important information is conveyed by the margin of safety calculation in CVP analysis?

Accepted Answer

The break-even point in CVP analysis is

Question 6

The contribution margin ratio always increases when the

Accepted Answer

A)  variable costs as a percentage of net sales increase. 
B)  variable costs as a percentage of net sales decrease. 
C)  break-even point increases. 
D)  break-even point decreases. 
A)  variable costs as a percentage of net sales increase. 
B)  variable costs as a percentage of net sales decrease. 
C)  break-even point increases. 
D)  break-even point decreases.

Question 7

Consider the equation X = Sales - [(CM/Sales) ´ (Sales)]. What is X?

Accepted Answer

A)  net income 
B)  fixed costs 
C)  contribution margin 
D)  variable costs 
A)  net income 
B)  fixed costs 
C)  contribution margin 
D)  variable costs

Question 8

Alford, Brooks, and Fitch Companies Below are income statements that apply to three companies: Alford, Brooks, and Fitch:
  Refer to Alford, Brooks, and Fitch Companies. Within the relevant range, if sales go up by $1 for each firm, which firm will experience the greatest increase in profit?

Accepted Answer

A)  Alpha Company 
B)  Beta Company 
C)  Fitch Company 
D)  can't be determined from the information given 
A)  Alpha Company 
B)  Beta Company 
C)  Fitch Company 
D)  can't be determined from the information given

Question 9

Total fixed costs vary inversely with levels of production.

Accepted Answer

A) True 
 B)False

Question 10

Dividing total fixed costs by the contribution margin ratio yields break-even point in units.

Accepted Answer

A) True 
 B)False

Question 11

Moonbeam Corporation Moonbeam Corporation manufactures and sells two products: A and B. The operating results of the company are as follows:
  In addition, the company incurred total fixed costs in the amount of $9,000.
Refer to Moonbeam Corporation. If the company would have sold a total of 6,000 units, consistent with CVP assumptions how many of those units would you expect to be Product B?

Accepted Answer

A)  3,000 
B)  4,000 
C)  3,600 
D)  3,500 
A)  3,000 
B)  4,000 
C)  3,600 
D)  3,500

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

At the break-even point, fixed costs are always

Accepted Answer

A)  less than the contribution margin. 
B)  equal to the contribution margin. 
C)  more than the contribution margin. 
D)  more than the variable cost. 
A)  less than the contribution margin. 
B)  equal to the contribution margin. 
C)  more than the contribution margin. 
D)  more than the variable cost.

Question 14

The method of cost accounting that lends itself to break-even analysis is

Accepted Answer

A)  variable. 
B)  standard. 
C)  absolute. 
D)  absorption. 
A)  variable. 
B)  standard. 
C)  absolute. 
D)  absorption.

Question 15

The Horner Company makes three products. The cost data for these three products is as follows:
   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:

Accepted Answer

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

Question 16

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:
   Total fixed costs for the company are projected at $10,000.
Refer to Price Corporation. Compute Price Corporation's projected break-even point in total units.

Accepted Answer

The company anticipates a sales mix cons

Question 17

Which of the following will decrease the break-even point?

Accepted Answer

A)  yes yes yes 
B)  yes no yes 
C)  yes no no 
D)  no yes no 
A)  yes yes yes 
B)  yes no yes 
C)  yes no no 
D)  no yes no

Question 18

Ideal Company Ideal Company produces and sells a single product. Information on its costs follow:
  Refer to Ideal Company. Assume Ideal Company produced and sold 5,000 units. At this level of activity, it produced a profit of $18,000. What was Ideal Company's sales price per unit?

Accepted Answer

A)  $15.00 
B)  $11.40 
C)  $9.60 
D)  $10.00 
A)  $15.00 
B)  $11.40 
C)  $9.60 
D)  $10.00

Question 19

Teal Company The following information relates to financial projections of Teal Company:
  Refer to Teal Company. How many units would Teal Company need to sell to earn a profit before taxes of $10,000?

Accepted Answer

A)  25,714 
B)  10,000 
C)  8,571 
D)  12,000 
A)  25,714 
B)  10,000 
C)  8,571 
D)  12,000

Question 20

If a company's variable costs per unit were to increase but its unit selling price stays constant, the effect on a profit-volume graph would be that the

Accepted Answer

A)  contribution margin line would shift upward parallel to the present line. 
B)  contribution margin line would shift downward parallel to the present line. 
C)  slope of the contribution margin line would be pronounced (steeper). 
D)  slope of the contribution margin line would be less pronounced (flatter). 
A)  contribution margin line would shift upward parallel to the present line. 
B)  contribution margin line would shift downward parallel to the present line. 
C)  slope of the contribution margin line would be pronounced (steeper). 
D)  slope of the contribution margin line would be less pronounced (flatter).

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.

If a firm's net income does not change as its volume changes, the firm('s)

Shelton Company Below is an income statement for Shelton Company: Refer to Shelton Company. What was Shelton's margin of safety?

In a CVP graph, the area between the total cost line and the total revenue line represents total

What important information is conveyed by the margin of safety calculation in CVP analysis?

The contribution margin ratio always increases when the

Consider the equation X = Sales - [(CM/Sales) ´ (Sales)]. What is X?

Alford, Brooks, and Fitch Companies Below are income statements that apply to three companies: Alford, Brooks, and Fitch: Refer to Alford, Brooks, and Fitch Companies. Within the relevant range, if sales go up by $1 for each firm, which firm will experience the greatest increase in profit?

Total fixed costs vary inversely with levels of production.

Dividing total fixed costs by the contribution margin ratio yields break-even point in units.

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

At the break-even point, fixed costs are always

The method of cost accounting that lends itself to break-even analysis is

The Horner Company makes three products. The cost data for these three products is as follows: 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:

Which of the following will decrease the break-even point?

Ideal Company Ideal Company produces and sells a single product. Information on its costs follow: Refer to Ideal Company. Assume Ideal Company produced and sold 5,000 units. At this level of activity, it produced a profit of $18,000. What was Ideal Company's sales price per unit?

Teal Company The following information relates to financial projections of Teal Company: Refer to Teal Company. How many units would Teal Company need to sell to earn a profit before taxes of $10,000?

If a company's variable costs per unit were to increase but its unit selling price stays constant, the effect on a profit-volume graph would be that the

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

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.

If a firm's net income does not change as its volume changes, the firm('s)

Shelton Company Below is an income statement for Shelton Company: Refer to Shelton Company. What was Shelton's margin of safety?

In a CVP graph, the area between the total cost line and the total revenue line represents total

What important information is conveyed by the margin of safety calculation in CVP analysis?

The contribution margin ratio always increases when the

Consider the equation X = Sales - [(CM/Sales) ´ (Sales)]. What is X?

Alford, Brooks, and Fitch Companies Below are income statements that apply to three companies: Alford, Brooks, and Fitch: Refer to Alford, Brooks, and Fitch Companies. Within the relevant range, if sales go up by $1 for each firm, which firm will experience the greatest increase in profit?

Total fixed costs vary inversely with levels of production.

Dividing total fixed costs by the contribution margin ratio yields break-even point in units.

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

At the break-even point, fixed costs are always

The method of cost accounting that lends itself to break-even analysis is

The Horner Company makes three products. The cost data for these three products is as follows: 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:

Which of the following will decrease the break-even point?

Ideal Company Ideal Company produces and sells a single product. Information on its costs follow: Refer to Ideal Company. Assume Ideal Company produced and sold 5,000 units. At this level of activity, it produced a profit of $18,000. What was Ideal Company's sales price per unit?

Teal Company The following information relates to financial projections of Teal Company: Refer to Teal Company. How many units would Teal Company need to sell to earn a profit before taxes of $10,000?

If a company's variable costs per unit were to increase but its unit selling price stays constant, the effect on a profit-volume graph would be that the

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