Question 1

Goose Bay Sync's management established its target net income for the year.What did the company do?

Accepted Answer

A) It estimated its break-even income level for the year. 
B) It calculated its contribution margin. 
C) It determined the behaviour of its costs. 
D) It established its desired annual income for its product lines. 
A) It estimated its break-even income level for the year. 
B) It calculated its contribution margin. 
C) It determined the behaviour of its costs. 
D) It established its desired annual income for its product lines. D

Question 2

NoWeeds, Inc.has variable costs equal to 25% of sales.Its selling price is $95 per unit.If NoWeeds sells one unit more than the number of break-even units, how much will profit increase?

Accepted Answer

A) $71.25 
B) $23.75 
C) $32.50 
D) $380.00 
A) $71.25 
B) $23.75 
C) $32.50 
D) $380.00 A

Question 3

A major reason for using the contribution format income statement is that

Accepted Answer

A) it separates variable and fixed cost components. 
B) it increases information available to management. 
C) it allows management to establish what sales level is necessary to cover fixed costs. 
D) it indicates the sales mix of the company's products or services. 
A) it separates variable and fixed cost components. 
B) it increases information available to management. 
C) it allows management to establish what sales level is necessary to cover fixed costs. 
D) it indicates the sales mix of the company's products or services. C

Question 4

Martin Worldwide sells a single product with a contribution margin of $12 per unit and fixed costs of $24,000.How much is Martin's break-even point?

Accepted Answer

A) 2,500 units 
B) $12,000 
C) $24,000 
D) 2,000 units 
A) 2,500 units 
B) $12,000 
C) $24,000 
D) 2,000 units

Question 5

Swashbuckler, Inc.produces buckets.The selling price is $20 per unit and the variable costs are $8 per bucket.Fixed costs per month are $4,800.If Swashbuckler sells 10 more units beyond break even, how much does profit increase as a result?

Accepted Answer

A) $120 
B) $400 
C) $600 
D) $12,000 
A) $120 
B) $400 
C) $600 
D) $12,000

Question 6

Proops Company has a weighted-average unit contribution margin of $30 for its two products: Drew and Carey.Expected sales for Proops are 40,000 Drews and 60,000 Careys.Fixed expenses are $1,800,000.At the expected sales level, Proops' net income will be

Accepted Answer

A) $(300,000). 
B) $0. 
C) $1,200,000. 
D) $3,000,000. 
A) $(300,000). 
B) $0. 
C) $1,200,000. 
D) $3,000,000.

Question 7

The following information is available for Chap Company: $\begin{array}{llcc}
  \text {  Sales} \ldots \ldots \ldots \ldots \ldots \ldots \ldots\ldots \ldots \ldots\ldots \ldots \ldots &\$350,000\
 \text { Total fixed expenses } \ldots \ldots \ldots \ldots \ldots\ldots \ldots&\$60,000\
 \text {  Cost of goods sold} \ldots \ldots \ldots \ldots \ldots\ldots \ldots\ldots &120,000\
 \text { Total variable expenses } \ldots \ldots \ldots \ldots \ldots\ldots&100,000\
\end{array}$
 Which amount would you find on Chap's CVP income statement?

Accepted Answer

A) contribution margin of $250,000 
B) contribution margin of $190,000 
C) gross profit of $230,000 
D) gross profit of $190,000 
A) contribution margin of $250,000 
B) contribution margin of $190,000 
C) gross profit of $230,000 
D) gross profit of $190,000

Question 8

Select the correct statement concerning the cost volume-profit graph that follows:

Accepted Answer

A) The point identified by 'B' is the break-even point. 
B) Line F is the break-even line. 
C) Line F is the variable cost line. 
D) Line E is the total cost line. 
A) The point identified by 'B' is the break-even point. 
B) Line F is the break-even line. 
C) Line F is the variable cost line. 
D) Line E is the total cost line.

Question 9

The margin of safety ratio

Accepted Answer

A) is calculated as actual sales divided by break-even sales. 
B) indicates what percent decline in sales could be sustained before the company would operate at a loss. 
C) measures the ratio of fixed costs to variable costs. 
D) is used to determine the break-even point. 
A) is calculated as actual sales divided by break-even sales. 
B) indicates what percent decline in sales could be sustained before the company would operate at a loss. 
C) measures the ratio of fixed costs to variable costs. 
D) is used to determine the break-even point.

Question 10

Estes Company sells two types of computer chips.The sales mix is 30% (Chip A)and 70% (Chip B).Chip A has variable costs per unit of $20 and a selling price of $40.Chip B has variable costs per unit of $25 and a selling price of $55.The weighted-average unit contribution margin for Estes is

Accepted Answer

A) $23.00. 
B) $25.00. 
C) $27.00. 
D) $50.50. 
A) $23.00. 
B) $25.00. 
C) $27.00. 
D) $50.50.

Question 11

In CVP analysis, what does the term "cost" mean?

Accepted Answer

A) It includes all fixed and variable costs of products. 
B) It includes all costs which are part of cost of goods sold. 
C) It includes manufacturing costs plus selling and administrative expenses. 
D) It includes all manufacturing costs. 
A) It includes all fixed and variable costs of products. 
B) It includes all costs which are part of cost of goods sold. 
C) It includes manufacturing costs plus selling and administrative expenses. 
D) It includes all manufacturing costs.

Question 12

A key reason for management to build in a margin of safety in its projections is

Accepted Answer

A) management can assess if its targets are reasonable in order to cover fixed costs. 
B) if sales do not reach the targeted number, management will not suffer the consequences. 
C) variable costs may fluctuate and this will affect the break-even calculation. 
D) it will show the operating profit if sales are not as expected. 
A) management can assess if its targets are reasonable in order to cover fixed costs. 
B) if sales do not reach the targeted number, management will not suffer the consequences. 
C) variable costs may fluctuate and this will affect the break-even calculation. 
D) it will show the operating profit if sales are not as expected.

Question 13

The following monthly data are available for Wackadoos, Inc.which produces only one product: Selling price per unit, $42; Unit variable expenses, $14; Total fixed expenses, $42,000; Actual sales for the month of June, 4,000 units.How much is the margin of safety for the company for June?

Accepted Answer

A) $70,000 
B) $105,000 
C) $63,000 
D) $2,500 
A) $70,000 
B) $105,000 
C) $63,000 
D) $2,500

Question 14

A CVP income statement

Accepted Answer

A) shows contribution margin and gross profit. 
B) classifies costs into three sections based on behaviour. 
C) separates costs based on behaviour. 
D) shows revenue less fixed costs as contribution margin. 
A) shows contribution margin and gross profit. 
B) classifies costs into three sections based on behaviour. 
C) separates costs based on behaviour. 
D) shows revenue less fixed costs as contribution margin.

Question 15

Use the following information for items 
Brad Sherwood Corporation sells two types of computers; one is designed for audio applications and the other for video applications.Sherwood incurs $300,125 in fixed costs.
 $\text { Per-unit data on the two products is presented blow: }$
$\begin{array}{llcc}
  \underline{\text { Unit data } } &\underline{\text { Audio computer } }&\underline{ \text { Video computer }}\
 \text {Selling price  } &\$1,500&\$1,750\
 \text {  Variable costs  } &\underline{1,100}&\underline{1,200}\
 \text { Contribution margin }& \underline{\$400}&\underline{\$550}\
 \text { Salses mix } &75\%&25\%\

\end{array}$

-How many audio computers will be sold at the break-even point?

Accepted Answer

A) 477 
B) 172 
C) 515 
D) 158 
A) 477 
B) 172 
C) 515 
D) 158

Question 16

Select the correct statement concerning the cost-volume-profit graph that follows:

Accepted Answer

A) The point identified by 'A' is the break-even point. 
B) Line F is the break-even line. 
C) Line D is the variable cost line. 
D) At point B, profits equal total costs. 
A) The point identified by 'A' is the break-even point. 
B) Line F is the break-even line. 
C) Line D is the variable cost line. 
D) At point B, profits equal total costs.

Question 17

A major benefit of using a contribution ratio format is that

Accepted Answer

A) it supports management's decision on its sales mix. 
B) it assists in determining the effect of sales on operating income. 
C) variable costs are isolated and can be easily reduced. 
D) it shows the impact of fixed costs on the sales mix. 
A) it supports management's decision on its sales mix. 
B) it assists in determining the effect of sales on operating income. 
C) variable costs are isolated and can be easily reduced. 
D) it shows the impact of fixed costs on the sales mix.

Question 18

Use the following information for items 
Ed Green Corporation has two divisions; Outdoor Sports and Indoor Sports.The sales mix is 60% for Outdoor Sports and 40% for Indoor Sports.Green incurs $2,420,000 in fixed costs.The contribution margin ratio for the Outdoor Sports Division is 40%, while for the Indoor Sports Division it is 50%.
-The weighted-average contribution margin ratio is

Accepted Answer

A) 44%. 
B) 45%. 
C) 46%. 
D) 50%. 
A) 44%. 
B) 45%. 
C) 46%. 
D) 50%.

Question 19

What aspect of business would have the greatest impact of a break-even analysis calculation?

Accepted Answer

A) highly fluctuating costs from suppliers 
B) annual increases in fixed costs such as power 
C) annual decreases due to overall corporate cost savings 
D) changes in sales estimates from management 
A) highly fluctuating costs from suppliers 
B) annual increases in fixed costs such as power 
C) annual decreases due to overall corporate cost savings 
D) changes in sales estimates from management

Question 20

ABC Bread sells a box of bagels with a contribution margin of 62.5%.Its fixed costs are $150,000 per year.How many sales dollars does ABC Bread need to break even per year if bagels are its only product?

Accepted Answer

A) $93,750 
B) $150,000 
C) $240,000 
D) $90,000 
A) $93,750 
B) $150,000 
C) $240,000 
D) $90,000

Goose Bay Sync's management established its target net income for the year.What did the company do?

NoWeeds, Inc.has variable costs equal to 25% of sales.Its selling price is $95 per unit.If NoWeeds sells one unit more than the number of break-even units, how much will profit increase?

A major reason for using the contribution format income statement is that

Martin Worldwide sells a single product with a contribution margin of $12 per unit and fixed costs of $24,000.How much is Martin's break-even point?

Swashbuckler, Inc.produces buckets.The selling price is $20 per unit and the variable costs are $8 per bucket.Fixed costs per month are $4,800.If Swashbuckler sells 10 more units beyond break even, how much does profit increase as a result?

Proops Company has a weighted-average unit contribution margin of $30 for its two products: Drew and Carey.Expected sales for Proops are 40,000 Drews and 60,000 Careys.Fixed expenses are $1,800,000.At the expected sales level, Proops' net income will be

Select the correct statement concerning the cost volume-profit graph that follows:

The margin of safety ratio

Estes Company sells two types of computer chips.The sales mix is 30% (Chip A)and 70% (Chip B).Chip A has variable costs per unit of $20 and a selling price of $40.Chip B has variable costs per unit of $25 and a selling price of $55.The weighted-average unit contribution margin for Estes is

In CVP analysis, what does the term "cost" mean?

A key reason for management to build in a margin of safety in its projections is

The following monthly data are available for Wackadoos, Inc.which produces only one product: Selling price per unit, $42; Unit variable expenses, $14; Total fixed expenses, $42,000; Actual sales for the month of June, 4,000 units.How much is the margin of safety for the company for June?

A CVP income statement

Select the correct statement concerning the cost-volume-profit graph that follows:

A major benefit of using a contribution ratio format is that

What aspect of business would have the greatest impact of a break-even analysis calculation?

ABC Bread sells a box of bagels with a contribution margin of 62.5%.Its fixed costs are $150,000 per year.How many sales dollars does ABC Bread need to break even per year if bagels are its only product?

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job Order Costing

Process Costing

Activity-Based-Costing

Incremental Analysis

Alternative Inventory Costing Methods: a Decision-Making Perspective

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters

Exam 6: Cost-Volume-Profit

Goose Bay Sync's management established its target net income for the year.What did the company do?

NoWeeds, Inc.has variable costs equal to 25% of sales.Its selling price is $95 per unit.If NoWeeds sells one unit more than the number of break-even units, how much will profit increase?

A major reason for using the contribution format income statement is that

Martin Worldwide sells a single product with a contribution margin of $12 per unit and fixed costs of $24,000.How much is Martin's break-even point?

Swashbuckler, Inc.produces buckets.The selling price is $20 per unit and the variable costs are $8 per bucket.Fixed costs per month are $4,800.If Swashbuckler sells 10 more units beyond break even, how much does profit increase as a result?

Proops Company has a weighted-average unit contribution margin of $30 for its two products: Drew and Carey.Expected sales for Proops are 40,000 Drews and 60,000 Careys.Fixed expenses are $1,800,000.At the expected sales level, Proops' net income will be

Select the correct statement concerning the cost volume-profit graph that follows:

The margin of safety ratio

Estes Company sells two types of computer chips.The sales mix is 30% (Chip A)and 70% (Chip B).Chip A has variable costs per unit of $20 and a selling price of $40.Chip B has variable costs per unit of $25 and a selling price of $55.The weighted-average unit contribution margin for Estes is

In CVP analysis, what does the term "cost" mean?

A key reason for management to build in a margin of safety in its projections is

The following monthly data are available for Wackadoos, Inc.which produces only one product: Selling price per unit, $42; Unit variable expenses, $14; Total fixed expenses, $42,000; Actual sales for the month of June, 4,000 units.How much is the margin of safety for the company for June?

A CVP income statement

Select the correct statement concerning the cost-volume-profit graph that follows:

A major benefit of using a contribution ratio format is that

What aspect of business would have the greatest impact of a break-even analysis calculation?

ABC Bread sells a box of bagels with a contribution margin of 62.5%.Its fixed costs are $150,000 per year.How many sales dollars does ABC Bread need to break even per year if bagels are its only product?

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job Order Costing

Process Costing

Activity-Based-Costing

Incremental Analysis

Alternative Inventory Costing Methods: a Decision-Making Perspective

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters