Question 1

The margin of safety is a key concept of CVP analysis. The margin of safety is the

Accepted Answer

A)  contribution margin rate. 
B)  difference between budgeted contribution margin and actual contribution margin. 
C)  difference between budgeted contribution margin and break-even contribution margin. 
D)  difference between budgeted sales and break-even sales. 
A)  contribution margin rate. 
B)  difference between budgeted contribution margin and actual contribution margin. 
C)  difference between budgeted contribution margin and break-even contribution margin. 
D)  difference between budgeted sales and break-even sales.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Dawson Corporation
Dawson Corporation predicts it will produce and sell 40,000 units of its sole product in the current year. At that level of volume, it projects a sales price of $30 per unit, a contribution margin ratio of 40 percent, and fixed costs of $5 per unit.
Refer to Dawson Corporation. What is the company's projected breakeven point in dollars and units?

Accepted Answer

Given the CM ratio of 40 percent, and th

Question 4

The __________________________________________________ is computed by dividing the contribution margin by profit before tax.

Accepted Answer

degree of

Question 5

Variable costs per unit remain unchanged with levels of production.

Accepted Answer

A) True 
 B)False

Question 6

Cost-volume-profit relationships that are curvilinear may be analyzed linearly by considering only

Accepted Answer

A)  fixed and mixed costs. 
B)  relevant fixed costs. 
C)  relevant variable costs. 
D)  a relevant range of volume. 
A)  fixed and mixed costs. 
B)  relevant fixed costs. 
C)  relevant variable costs. 
D)  a relevant range of volume.

Question 7

What major assumption do multi-product firms need to make in using CVP analysis that single-product firms need not make?

Accepted Answer

The assumption that must be imposed is a

Question 8

Management is considering replacing an existing sales commission compensation plan with a fixed salary plan. If the change is adopted, the company's

Accepted Answer

A)  break-even point must increase. 
B)  margin of safety must decrease. 
C)  operating leverage must increase. 
D)  profit must increase. 
A)  break-even point must increase. 
B)  margin of safety must decrease. 
C)  operating leverage must increase. 
D)  profit must increase.

Question 9

After the break-even point is reached, each dollar of contribution margin is a dollar of before-tax profit.

Accepted Answer

A) True 
 B)False

Question 10

A process that focuses only on factors that change from one course of action to another is referred to as ___________________________________.

Accepted Answer

incrementa

Question 11

Ford Company The following information relates to financial projections of Ford Company:
  Refer to Ford Company. If Ford Company achieves its projections, what will be its degree of operating leverage?

Accepted Answer

A)  6.25 
B)  1.19 
C)  1.68 
D)  3.00 
A)  6.25 
B)  1.19 
C)  1.68 
D)  3.00

Question 12

Andrew is interested in entering the catfish farming business. He estimates if he enters this business, his fixed costs would be $50,000 per year and his variable costs would equal 30 percent of sales. If each catfish sells for $2, how many catfish would Andrew need to sell to generate a profit that is equal to 10 percent of sales?

Accepted Answer

A)  40,000 
B)  41,667 
C)  35,000 
D)  No level of sales can generate a 10 percent net return on sales. 
A)  40,000 
B)  41,667 
C)  35,000 
D)  No level of sales can generate a 10 percent net return on sales.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

The most useful information derived from a cost-volume-profit chart is the

Accepted Answer

A)  amount of sales revenue needed to cover enterprise variable costs. 
B)  amount of sales revenue needed to cover enterprise fixed costs. 
C)  relationship among revenues, variable costs, and fixed costs at various levels of activity. 
D)  volume or output level at which the enterprise breaks even. 
A)  amount of sales revenue needed to cover enterprise variable costs. 
B)  amount of sales revenue needed to cover enterprise fixed costs. 
C)  relationship among revenues, variable costs, and fixed costs at various levels of activity. 
D)  volume or output level at which the enterprise breaks even.

Question 15

Total variable costs vary directly with levels of production.

Accepted Answer

A) True 
 B)False

Question 16

Palmer Company Below is an income statement for Palmer Company:
  Refer to Palmer Company. What is Palmer's degree of operating leverage?

Accepted Answer

A)  3.67 
B)  5.33 
C)  1.45 
D)  2.67 
A)  3.67 
B)  5.33 
C)  1.45 
D)  2.67

Question 17

Jordan Company Jordan Company manufactures a single product. Each unit sells for $15. The firm's projected costs are listed below:
  Refer to Jordan Company. What is Jordan's projected degree of operating leverage for the current year?

Accepted Answer

A)  2.25 
B)  1.80 
C)  3.75 
D)  1.67 
A)  2.25 
B)  1.80 
C)  3.75 
D)  1.67

Question 18

Mark Smith Company Below is an income statement for Mark Smith Company:
  Refer to Mark Smith Company. What is the company's degree of operating leverage (DOL)?

Accepted Answer

A)  2.67 
B)  3.2 
C)  5.33 
D)  10.67 
A)  2.67 
B)  3.2 
C)  5.33 
D)  10.67

Question 19

There is an inverse relationship between degree of operating leverage and the margin of safety.

Accepted Answer

A) True 
 B)False

Question 20

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.

The margin of safety is a key concept of CVP analysis. The margin of safety is the

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

The __________________________________________________ is computed by dividing the contribution margin by profit before tax.

Variable costs per unit remain unchanged with levels of production.

Cost-volume-profit relationships that are curvilinear may be analyzed linearly by considering only

What major assumption do multi-product firms need to make in using CVP analysis that single-product firms need not make?

Management is considering replacing an existing sales commission compensation plan with a fixed salary plan. If the change is adopted, the company's

After the break-even point is reached, each dollar of contribution margin is a dollar of before-tax profit.

A process that focuses only on factors that change from one course of action to another is referred to as ___________________________________.

Ford Company The following information relates to financial projections of Ford Company: Refer to Ford Company. If Ford Company achieves its projections, what will be its degree of operating leverage?

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

The most useful information derived from a cost-volume-profit chart is the

Total variable costs vary directly with levels of production.

Palmer Company Below is an income statement for Palmer Company: Refer to Palmer Company. What is Palmer's degree of operating leverage?

Jordan Company Jordan Company manufactures a single product. Each unit sells for $15. The firm's projected costs are listed below: Refer to Jordan Company. What is Jordan's projected degree of operating leverage for the current year?

Mark Smith Company Below is an income statement for Mark Smith Company: Refer to Mark Smith Company. What is the company's degree of operating leverage (DOL)?

There is an inverse relationship between degree of operating leverage and the margin of safety.

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

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 is a key concept of CVP analysis. The margin of safety is the

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

The __________________________________________________ is computed by dividing the contribution margin by profit before tax.

Variable costs per unit remain unchanged with levels of production.

Cost-volume-profit relationships that are curvilinear may be analyzed linearly by considering only

What major assumption do multi-product firms need to make in using CVP analysis that single-product firms need not make?

Management is considering replacing an existing sales commission compensation plan with a fixed salary plan. If the change is adopted, the company's

After the break-even point is reached, each dollar of contribution margin is a dollar of before-tax profit.

A process that focuses only on factors that change from one course of action to another is referred to as ___________________________________.

Ford Company The following information relates to financial projections of Ford Company: Refer to Ford Company. If Ford Company achieves its projections, what will be its degree of operating leverage?

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

The most useful information derived from a cost-volume-profit chart is the

Total variable costs vary directly with levels of production.

Palmer Company Below is an income statement for Palmer Company: Refer to Palmer Company. What is Palmer's degree of operating leverage?

Jordan Company Jordan Company manufactures a single product. Each unit sells for $15. The firm's projected costs are listed below: Refer to Jordan Company. What is Jordan's projected degree of operating leverage for the current year?

Mark Smith Company Below is an income statement for Mark Smith Company: Refer to Mark Smith Company. What is the company's degree of operating leverage (DOL)?

There is an inverse relationship between degree of operating leverage and the margin of safety.

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

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