Question 1

The margin of safety ratio is

Accepted Answer

A) expected sales divided by break-even sales. 
B) expected sales less break-even sales. 
C) margin of safety in dollars divided by expected sales. 
D) margin of safety in dollars divided by break-even sales. 
A) expected sales divided by break-even sales. 
B) expected sales less break-even sales. 
C) margin of safety in dollars divided by expected sales. 
D) margin of safety in dollars divided by break-even sales.

Question 2

The break-even point in dollars is variable costs divided by the weighted-average contribution margin ratio.

Accepted Answer

A) True 
 B)False

Question 3

In 2016, Hagar Corp.sold 3,000 units at $500 each.Variable expenses were $350 per unit, and fixed expenses were $780,000.The same variable expenses per unit and fixed expenses are expected for 2017.If Hagar cuts selling price by 4%, what is Hagar's break-even point in units for 2017?

Accepted Answer

A) 5,200 
B) 5,416 
C) 5,760 
D) 6,000 
A) 5,200 
B) 5,416 
C) 5,760 
D) 6,000

Question 4

Ramirez Corporation sells two types of computer hard drives.The sales mix is 30% (Q-Drive) and 70% (Q-Drive Plus).Q-Drive has variable costs per unit of $90 and a selling price of $150.Q-Drive Plus has variable costs per unit of $105 and a selling price of $195.Ramirez's fixed costs are $891,000.How many units of Q-Drive would be sold at the break-even point?

Accepted Answer

A) 3,300 
B) 4,455 
C) 11,000 
D) 7,700 
A) 3,300 
B) 4,455 
C) 11,000 
D) 7,700

Question 5

The degree of operating leverage

Accepted Answer

A) does not provide a reliable measure of a company's earnings volatility. 
B) cannot be used to compare companies. 
C) is computed by dividing total contribution margin by net income. 
D) measures how much of each sales dollar is available to cover fixed expenses. 
A) does not provide a reliable measure of a company's earnings volatility. 
B) cannot be used to compare companies. 
C) is computed by dividing total contribution margin by net income. 
D) measures how much of each sales dollar is available to cover fixed expenses.

Question 6

Use the following information for questions 
Nielson Corp. sells its product for $6,600 per unit. Variable costs per unit are: manufacturing, $3,600, and selling and administrative, $75. Fixed costs are: $18,000 manufacturing overhead, and $24,000 selling and administrative. There was no beginning inventory at 1/1/15. Production was 20 units per year in 2015-2017. Sales were 20 units in 2015, 16 units in 2016, and 24 units in 2017.
-Income under absorption costing for 2017 is

Accepted Answer

A) $19,800. 
B) $23,400. 
C) $24,600. 
D) $28,200. 
A) $19,800. 
B) $23,400. 
C) $24,600. 
D) $28,200.

Question 7

When a company assigns the costs of direct materials, direct labor, and both variable and fixed manufacturing overhead to products, that company is using

Accepted Answer

A) operations costing. 
B) absorption costing. 
C) variable costing. 
D) product costing. 
A) operations costing. 
B) absorption costing. 
C) variable costing. 
D) product costing.

Question 8

Net income under absorption costing is higher than net income under variable costing

Accepted Answer

A) when units produced exceed units sold. 
B) when units produced equal units sold. 
C) when units produced are less than units sold. 
D) regardless of the relationship between units produced and units sold. 
A) when units produced exceed units sold. 
B) when units produced equal units sold. 
C) when units produced are less than units sold. 
D) regardless of the relationship between units produced and units sold.

Question 9

In 2016, Teller Company sold 3,000 units at $600 each.Variable expenses were $420 per unit, and fixed expenses were $240,000.What was Teller's 2016 net income?

Accepted Answer

A) $300,000 
B) $540,000 
C) $1,260,000 
D) $1,800,000 
A) $300,000 
B) $540,000 
C) $1,260,000 
D) $1,800,000

Question 10

When production exceeds sales,

Accepted Answer

A) ending inventory under variable costing will exceed ending inventory under absorption costing. 
B) ending inventory under absorption costing will exceed ending inventory under variable costing. 
C) ending inventory under absorption costing will be equal to ending inventory under variable costing. 
D) ending inventory under absorption costing may exceed, be equal to, or be less than ending inventory under variable costing. 
A) ending inventory under variable costing will exceed ending inventory under absorption costing. 
B) ending inventory under absorption costing will exceed ending inventory under variable costing. 
C) ending inventory under absorption costing will be equal to ending inventory under variable costing. 
D) ending inventory under absorption costing may exceed, be equal to, or be less than ending inventory under variable costing.

Question 11

A shift from low-margin sales to high-margin sales

Accepted Answer

A) may increase net income, even though there is a decline in total units sold. 
B) will always increase net income. 
C) will always decrease net income. 
D) will always decrease units sold. 
A) may increase net income, even though there is a decline in total units sold. 
B) will always increase net income. 
C) will always decrease net income. 
D) will always decrease units sold.

Question 12

Use the following information for questions 
Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Swanson incurs $6,660,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%.
-What will sales be for the Sporting Goods Division at the break-even point?

Accepted Answer

A) $5,400,000 
B) $6,300,000 
C) $10,067,442 
D) $11,700,000 
A) $5,400,000 
B) $6,300,000 
C) $10,067,442 
D) $11,700,000

Question 13

A shift from high-margin sales to low-margin sales

Accepted Answer

A) may decrease net income, even though there is an increase in total units sold. 
B) will always decrease net income. 
C) will always increase net income. 
D) will always increase units sold. 
A) may decrease net income, even though there is an increase in total units sold. 
B) will always decrease net income. 
C) will always increase net income. 
D) will always increase units sold.

Question 14

When a company has limited resources to manufacture products, it should manufacture those products which have the highest unit contribution margin.

Accepted Answer

A) True 
 B)False

Question 15

Operating leverage refers to the extent to which a company's net income reacts to a given change in fixed costs.

Accepted Answer

A) True 
 B)False

Question 16

When units produced exceed units sold, income under absorption costing is higher than income under variable costing.

Accepted Answer

A) True 
 B)False

Question 17

In CVP analysis, cost includes manufacturing costs but not selling and administrative expenses.

Accepted Answer

A) True 
 B)False

Question 18

Warner Manufacturing reported sales of $2,000,000 last year (100,000 units at $20 each), when the break-even point was 80,000 units.Warner's margin of safety ratio is

Accepted Answer

A) 20%. 
B) 25%. 
C) 80%. 
D) 120%. 
A) 20%. 
B) 25%. 
C) 80%. 
D) 120%.

Question 19

Use the following information for questions .
Roosevelt Corporation has a weighted-average unit contribution margin of $30 for its two products, Standard and Supreme. Expected sales for Roosevelt are 40,000 Standard and 60,000 Supreme. Fixed expenses are $1,800,000.
-At the expected sales level, Roosevelt's 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 20

Use the following information for questions .
Roosevelt Corporation has a weighted-average unit contribution margin of $30 for its two products, Standard and Supreme. Expected sales for Roosevelt are 40,000 Standard and 60,000 Supreme. Fixed expenses are $1,800,000.
-How many Standards would Roosevelt sell at the break-even point?

Accepted Answer

A) 24,000 
B) 36,000 
C) 40,000 
D) 60,000 
A) 24,000 
B) 36,000 
C) 40,000 
D) 60,000

The margin of safety ratio is

The break-even point in dollars is variable costs divided by the weighted-average contribution margin ratio.

In 2016, Hagar Corp.sold 3,000 units at $500 each.Variable expenses were $350 per unit, and fixed expenses were $780,000.The same variable expenses per unit and fixed expenses are expected for 2017.If Hagar cuts selling price by 4%, what is Hagar's break-even point in units for 2017?

The degree of operating leverage

When a company assigns the costs of direct materials, direct labor, and both variable and fixed manufacturing overhead to products, that company is using

Net income under absorption costing is higher than net income under variable costing

In 2016, Teller Company sold 3,000 units at $600 each.Variable expenses were $420 per unit, and fixed expenses were $240,000.What was Teller's 2016 net income?

When production exceeds sales,

A shift from low-margin sales to high-margin sales

A shift from high-margin sales to low-margin sales

When a company has limited resources to manufacture products, it should manufacture those products which have the highest unit contribution margin.

Operating leverage refers to the extent to which a company's net income reacts to a given change in fixed costs.

When units produced exceed units sold, income under absorption costing is higher than income under variable costing.

In CVP analysis, cost includes manufacturing costs but not selling and administrative expenses.

Warner Manufacturing reported sales of $2,000,000 last year (100,000 units at $20 each), when the break-even point was 80,000 units.Warner's margin of safety ratio is

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Time Value of Money

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Exam 6: Reporting and Analyzing Inventory

The margin of safety ratio is

The break-even point in dollars is variable costs divided by the weighted-average contribution margin ratio.

In 2016, Hagar Corp.sold 3,000 units at $500 each.Variable expenses were $350 per unit, and fixed expenses were $780,000.The same variable expenses per unit and fixed expenses are expected for 2017.If Hagar cuts selling price by 4%, what is Hagar's break-even point in units for 2017?

The degree of operating leverage

When a company assigns the costs of direct materials, direct labor, and both variable and fixed manufacturing overhead to products, that company is using

Net income under absorption costing is higher than net income under variable costing

In 2016, Teller Company sold 3,000 units at $600 each.Variable expenses were $420 per unit, and fixed expenses were $240,000.What was Teller's 2016 net income?

When production exceeds sales,

A shift from low-margin sales to high-margin sales

A shift from high-margin sales to low-margin sales

When a company has limited resources to manufacture products, it should manufacture those products which have the highest unit contribution margin.

Operating leverage refers to the extent to which a company's net income reacts to a given change in fixed costs.

When units produced exceed units sold, income under absorption costing is higher than income under variable costing.

In CVP analysis, cost includes manufacturing costs but not selling and administrative expenses.

Warner Manufacturing reported sales of $2,000,000 last year (100,000 units at $20 each), when the break-even point was 80,000 units.Warner's margin of safety ratio is

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Time Value of Money

Filters