Question 1

If a firm is currently at the break-even point, and it sells one more unit, what will happen to its operating profit?

Accepted Answer

A) It will increase by the unit selling price. 
B) It will decrease by the unit variable cost. 
C) It will increase by the unit contribution margin. 
D) It will increase by the fixed cost divided by the unit contribution margin. 
A) It will increase by the unit selling price. 
B) It will decrease by the unit variable cost. 
C) It will increase by the unit contribution margin. 
D) It will increase by the fixed cost divided by the unit contribution margin.

Question 2

Which one of the following calculates the break-even point in units?

Accepted Answer

A) Divide total fixed costs by the contribution margin per unit. 
B) Divide fixed cost per unit by the contribution margin per unit. 
C) Divide total contribution margin by the number of units sold. 
D) Divide total fixed costs by the contribution margin ratio. 
A) Divide total fixed costs by the contribution margin per unit. 
B) Divide fixed cost per unit by the contribution margin per unit. 
C) Divide total contribution margin by the number of units sold. 
D) Divide total fixed costs by the contribution margin ratio.

Question 3

NEKP Inc.sells two versions of its product: Standard and Deluxe.The Standard model has a 15 percent profit margin and the Deluxe model has a 17 percent profit margin.The Standard model has a 30 percent contribution margin and the Deluxe has a 23 percent contribution margin.If other factors are equal, which product should NEKP emphasize to its customers?

Accepted Answer

A) the Standard model 
B) the Deluxe model 
C) Selling either results in the same additional income for the company. 
D) Not enough information is given. 
A) the Standard model 
B) the Deluxe model 
C) Selling either results in the same additional income for the company. 
D) Not enough information is given.

Question 4

Niagara Winery has fixed costs of $10,000 per year.Its warehouse sells wine with a contribution margin of 20%.How much in sales does Sonoma need to break even per year if wine is its only product?

Accepted Answer

A) $8,000 
B) $2,000 
C) $12,500 
D) $50,000 
A) $8,000 
B) $2,000 
C) $12,500 
D) $50,000

Question 5

Forms, Inc.wants to sell a sufficient quantity of products to earn an after-tax profit of $40,000.If the unit sales price is $10, unit variable cost is $8, and total fixed costs are $80,000, how many units must be sold to earn income of $40,000? Forms, Inc.has a tax rate of 40%.

Accepted Answer

A) 73,334 units 
B) 18,334 units 
C) 40,000 units 
D) 90,000 units 
A) 73,334 units 
B) 18,334 units 
C) 40,000 units 
D) 90,000 units

Question 6

Which one of the following is an assumption of CVP analysis?

Accepted Answer

A) Sales in units remain constant. 
B) All costs are variable. 
C) The change in beginning and ending inventories is reflected in the analysis. 
D) The behaviour of costs and revenues are linear within the relevant range. 
A) Sales in units remain constant. 
B) All costs are variable. 
C) The change in beginning and ending inventories is reflected in the analysis. 
D) The behaviour of costs and revenues are linear within the relevant range.

Question 7

Which concept answers the following question: 'If budgeted revenues are above break even and decline, how far can they fall before the break-even point is reached?'

Accepted Answer

A) contribution margin 
B) relevant range of operations 
C) operating leverage 
D) margin of safety 
A) contribution margin 
B) relevant range of operations 
C) operating leverage 
D) margin of safety

Question 8

T'pol Corporation is considering a plan that will increase total units sold.The plan will cause a shift from high- to low-margin sales.The plan will

Accepted Answer

A) definitely increase net income. 
B) definitely decrease net income. 
C) not change net income. 
D) either increase, decrease, or not affect net income; more information is needed. 
A) definitely increase net income. 
B) definitely decrease net income. 
C) not change net income. 
D) either increase, decrease, or not affect net income; more information is needed.

Question 9

A company has total fixed costs of $180,000 and a contribution margin ratio of 30%.How much sales are necessary to break even?

Accepted Answer

A) $540,000 
B) $600,000 
C) $54,000 
D) $126,000 
A) $540,000 
B) $600,000 
C) $54,000 
D) $126,000

Question 10

In which one of the following calculations would CVP analysis be most important?

Accepted Answer

A) calculating depreciation expense 
B) setting selling prices 
C) determining how many employees to hire 
D) estimating units to be produced at capacity 
A) calculating depreciation expense 
B) setting selling prices 
C) determining how many employees to hire 
D) estimating units to be produced at capacity

Question 11

Barcelona Bagpipes produces two models: Model 24 has sales of 200 units with a contribution margin of $35 each; Model 26 has sales of 75 units with a contribution margin of $37 each.If sales of Model 26 increase by 50 units, how much will profit change?

Accepted Answer

A) $1,850 increase 
B) $1,750 increase 
C) $3,600 increase 
D) $7,400 increase 
A) $1,850 increase 
B) $1,750 increase 
C) $3,600 increase 
D) $7,400 increase

Question 12

Sulingo, Inc.calculated how many units it needed in order to earn net income totalling $67,750 for the month.What calculation did Sulingo perform?

Accepted Answer

A) [Variable costs + ($67,750 / 1 - tax rate)] ÷ contribution margin ratio 
B) [Fixed costs + ($67,750 / 1 + tax rate)] ÷ contribution margin ratio 
C) [Fixed costs + ($67,750 / 1 - tax rate)] ÷ contribution margin per unit 
D) [Variable costs + ($67,750 / tax rate)] ÷ contribution margin per unit 
A) [Variable costs + ($67,750 / 1 - tax rate)] ÷ contribution margin ratio 
B) [Fixed costs + ($67,750 / 1 + tax rate)] ÷ contribution margin ratio 
C) [Fixed costs + ($67,750 / 1 - tax rate)] ÷ contribution margin per unit 
D) [Variable costs + ($67,750 / tax rate)] ÷ contribution margin per unit

Question 13

Where is the break-even point located in a CVP graph?

Accepted Answer

A) at the intersection of the sales line and the fixed cost line 
B) at the intersection of the variable cost line and the fixed cost line 
C) at the intersection of the total cost line and the sales line 
D) at the intersection of the mixed cost line and the sales line 
A) at the intersection of the sales line and the fixed cost line 
B) at the intersection of the variable cost line and the fixed cost line 
C) at the intersection of the total cost line and the sales line 
D) at the intersection of the mixed cost line and the sales line

Question 14

In a sales mix situation, at any level of units sold, net income will be higher if

Accepted Answer

A) more higher contribution margin units are sold than lower contribution margin units. 
B) more lower contribution margin units are sold than higher contribution margin units. 
C) more fixed expenses are incurred. 
D) weighted-average unit contribution margin decreases. 
A) more higher contribution margin units are sold than lower contribution margin units. 
B) more lower contribution margin units are sold than higher contribution margin units. 
C) more fixed expenses are incurred. 
D) weighted-average unit contribution margin decreases.

Question 15

Using the contribution margin format income statement, which of the following will result from an increase of one unit sold?

Accepted Answer

A) Variable costs will increase in direct relation to the contribution margin ratio. 
B) Variable costs will decrease in direct relation to the contribution margin ratio. 
C) Every unit of product sold will decrease income by the contribution margin. 
D) Every unit of product sold will increase income by the contribution margin. 
A) Variable costs will increase in direct relation to the contribution margin ratio. 
B) Variable costs will decrease in direct relation to the contribution margin ratio. 
C) Every unit of product sold will decrease income by the contribution margin. 
D) Every unit of product sold will increase income by the contribution margin.

Question 16

A company requires $600,000 in sales to meet its target net income after tax.Its contribution margin is 40%, and fixed costs are $80,000.How much is the target net income, given that its after-tax rate is 70%?

Accepted Answer

A) $400,000 
B) $160,000 
C) $48,000 
D) $112,000 
A) $400,000 
B) $160,000 
C) $48,000 
D) $112,000

Question 17

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 break-even point in dollars is

Accepted Answer

A) $985,600. 
B) $4,869,565. 
C) $4,977,777. 
D) $5,500,000. 
A) $985,600. 
B) $4,869,565. 
C) $4,977,777. 
D) $5,500,000.

Question 18

Companies generally set sales targets higher than break-even figures because

Accepted Answer

A) it indicates the sales needed to attain a certain level of profit. 
B) assists in planning for new equipment if sales can be reached. 
C) an income objective is set that can be communicated throughout the company. 
D) break-even analysis may not be effective in all situations. 
A) it indicates the sales needed to attain a certain level of profit. 
B) assists in planning for new equipment if sales can be reached. 
C) an income objective is set that can be communicated throughout the company. 
D) break-even analysis may not be effective in all situations.

Question 19

It is critical for management to understand its overall sales mix when using contribution margin income statements because

Accepted Answer

A) variable cost allocations between products may be difficult to determine. 
B) fixed cost allocations between products may be difficult to determine. 
C) overhead allocation must be spread evenly across all product lines. 
D) different products can have widely differing contribution margins even with the same level of sales. 
A) variable cost allocations between products may be difficult to determine. 
B) fixed cost allocations between products may be difficult to determine. 
C) overhead allocation must be spread evenly across all product lines. 
D) different products can have widely differing contribution margins even with the same level of sales.

Question 20

In September, Smith Company had the following financial statement amounts related to producing 500 units: $\begin{array}{lc}
\text { Direct materials } & \$ 27,000 \
\text { Depreciation expense } &11,000 \
\text { Sales revenue } & 95,000 \
\text { Direct labour } & 23,000 \
\text { Rent expense } & 25,000
\end{array}$ How much is the break-even point, rounded to the nearest whole number?

Accepted Answer

A) $18 units 
B) $50 units 
C) $122 units 
D) 400 units 
A) $18 units 
B) $50 units 
C) $122 units 
D) 400 units

If a firm is currently at the break-even point, and it sells one more unit, what will happen to its operating profit?

Which one of the following calculates the break-even point in units?

Niagara Winery has fixed costs of $10,000 per year.Its warehouse sells wine with a contribution margin of 20%.How much in sales does Sonoma need to break even per year if wine is its only product?

Forms, Inc.wants to sell a sufficient quantity of products to earn an after-tax profit of $40,000.If the unit sales price is $10, unit variable cost is $8, and total fixed costs are $80,000, how many units must be sold to earn income of $40,000? Forms, Inc.has a tax rate of 40%.

Which one of the following is an assumption of CVP analysis?

Which concept answers the following question: 'If budgeted revenues are above break even and decline, how far can they fall before the break-even point is reached?'

T'pol Corporation is considering a plan that will increase total units sold.The plan will cause a shift from high- to low-margin sales.The plan will

A company has total fixed costs of $180,000 and a contribution margin ratio of 30%.How much sales are necessary to break even?

In which one of the following calculations would CVP analysis be most important?

Barcelona Bagpipes produces two models: Model 24 has sales of 200 units with a contribution margin of $35 each; Model 26 has sales of 75 units with a contribution margin of $37 each.If sales of Model 26 increase by 50 units, how much will profit change?

Sulingo, Inc.calculated how many units it needed in order to earn net income totalling $67,750 for the month.What calculation did Sulingo perform?

Where is the break-even point located in a CVP graph?

In a sales mix situation, at any level of units sold, net income will be higher if

Using the contribution margin format income statement, which of the following will result from an increase of one unit sold?

A company requires $600,000 in sales to meet its target net income after tax.Its contribution margin is 40%, and fixed costs are $80,000.How much is the target net income, given that its after-tax rate is 70%?

Companies generally set sales targets higher than break-even figures because

It is critical for management to understand its overall sales mix when using contribution margin income statements because

In September, Smith Company had the following financial statement amounts related to producing 500 units: Direct materials \ 27,000 Depreciation expense 11,000 Sales revenue 95,000 Direct labour 23,000 Rent expense 25,000 How much is the break-even point, rounded to the nearest whole number?

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

If a firm is currently at the break-even point, and it sells one more unit, what will happen to its operating profit?

Which one of the following calculates the break-even point in units?

Niagara Winery has fixed costs of $10,000 per year.Its warehouse sells wine with a contribution margin of 20%.How much in sales does Sonoma need to break even per year if wine is its only product?

Forms, Inc.wants to sell a sufficient quantity of products to earn an after-tax profit of $40,000.If the unit sales price is $10, unit variable cost is $8, and total fixed costs are $80,000, how many units must be sold to earn income of $40,000? Forms, Inc.has a tax rate of 40%.

Which one of the following is an assumption of CVP analysis?

Which concept answers the following question: 'If budgeted revenues are above break even and decline, how far can they fall before the break-even point is reached?'

T'pol Corporation is considering a plan that will increase total units sold.The plan will cause a shift from high- to low-margin sales.The plan will

A company has total fixed costs of $180,000 and a contribution margin ratio of 30%.How much sales are necessary to break even?

In which one of the following calculations would CVP analysis be most important?

Barcelona Bagpipes produces two models: Model 24 has sales of 200 units with a contribution margin of $35 each; Model 26 has sales of 75 units with a contribution margin of $37 each.If sales of Model 26 increase by 50 units, how much will profit change?

Sulingo, Inc.calculated how many units it needed in order to earn net income totalling $67,750 for the month.What calculation did Sulingo perform?

Where is the break-even point located in a CVP graph?

In a sales mix situation, at any level of units sold, net income will be higher if

Using the contribution margin format income statement, which of the following will result from an increase of one unit sold?

A company requires $600,000 in sales to meet its target net income after tax.Its contribution margin is 40%, and fixed costs are $80,000.How much is the target net income, given that its after-tax rate is 70%?

Companies generally set sales targets higher than break-even figures because

It is critical for management to understand its overall sales mix when using contribution margin income statements because

In September, Smith Company had the following financial statement amounts related to producing 500 units: Direct materials \ 27,000 Depreciation expense 11,000 Sales revenue 95,000 Direct labour 23,000 Rent expense 25,000 How much is the break-even point, rounded to the nearest whole number?

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