Question 1

The margin of safety is the difference between contribution margin and fixed costs.

Accepted Answer

A) True 
 B)False

Question 2

The following information is available for Wade Corp.: $$\begin{array} { l r l } 
\text { Sales } & \$ 580,000 & \text { Total fixed expenses } \$ 150,000 \
\text { Cost of goods sold } & 390,000 & \text { Total variable expenses } 360,000
\end{array}$$ A CVP income statement would report

Accepted Answer

A) gross profit of $190,000. 
B) contribution margin of $430,000. 
C) gross profit of $220,000. 
D) contribution margin of $220,000. 
A) gross profit of $190,000. 
B) contribution margin of $430,000. 
C) gross profit of $220,000. 
D) contribution margin of $220,000.

Question 3

Keene, Inc.produces flash drives for computers, which it sells for $20 each.Each flash drive costs $6 of variable costs to make.During March, 1,000 drives were sold.Fixed costs for March were $5.60 per unit for a total of $5,600 for the month.If variable costs decrease by 10%, what happens to the break-even level of units per month for Keene?

Accepted Answer

A) It is 10% higher than the original break-even point. 
B) It decreases about 16 units. 
C) It decreases about 40 units. 
D) It depends on the number of units the company expects to produce and sell. 
A) It is 10% higher than the original break-even point. 
B) It decreases about 16 units. 
C) It decreases about 40 units. 
D) It depends on the number of units the company expects to produce and sell.

Question 4

Zehms, Inc.has a unit contribution margin of $30 and a contribution margin ratio of 60%.How much is the selling price of each unit?

Accepted Answer

A) $50 
B) $75 
C) $18 
D) Cannot be determined without more information. 
A) $50 
B) $75 
C) $18 
D) Cannot be determined without more information.

Question 5

Contribution margin is

Accepted Answer

A) the amount of revenue remaining after deducting fixed costs. 
B) available to cover fixed costs and contribute to income for the company. 
C) sales less fixed costs. 
D) unit selling price less unit fixed costs. 
A) the amount of revenue remaining after deducting fixed costs. 
B) available to cover fixed costs and contribute to income for the company. 
C) sales less fixed costs. 
D) unit selling price less unit fixed costs.

Question 6

If the unit contribution margin is $1 and unit sales are 10,000 units above the break-even volume, then net income will be $10,000.

Accepted Answer

A) True 
 B)False

Question 7

An activity index identifies the activity that has a causal relationship with a particular cost.

Accepted Answer

A) True 
 B)False

Question 8

Cost behavior analysis is a study of how a firm's costs

Accepted Answer

A) relate to competitors' costs. 
B) relate to general price level changes. 
C) respond to changes in the level of business activity. 
D) respond to changes in the gross national product. 
A) relate to competitors' costs. 
B) relate to general price level changes. 
C) respond to changes in the level of business activity. 
D) respond to changes in the gross national product.

Question 9

Select the correct statement concerning the cost-volume-profit graph at right:

Accepted Answer

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

Question 10

Both variable and fixed costs are included in calculating the contribution margin.

Accepted Answer

A) True 
 B)False

Question 11

Which is the true statement?

Accepted Answer

A) In a CVP income statement, costs and expenses are classified only by function. 
B) The CVP income statement is prepared for both internal and external use. 
C) The CVP income statement shows contribution margin instead of gross profit. 
D) In a traditional income statement, costs and expenses are classified as either variable or fixed. 
A) In a CVP income statement, costs and expenses are classified only by function. 
B) The CVP income statement is prepared for both internal and external use. 
C) The CVP income statement shows contribution margin instead of gross profit. 
D) In a traditional income statement, costs and expenses are classified as either variable or fixed.

Question 12

Which of the following costs are variable? $$\begin{array} { c c c } 
\text { Cost } &  10,000 \text { Units }&  30,000 \text { Units }  \
1 . & \$ 100,000 & \$ 300,000 \
2 . & 40,000 & 240,000 \
3 . & 90,000 & 90,000 \
4 . & 50,000 & 150,000
\end{array}$$

Accepted Answer

A) 1 and 2 
B) 1 and 4 
C) only 1 
D) only 2 
A) 1 and 2 
B) 1 and 4 
C) only 1 
D) only 2

Question 13

A division sold 200,000 calculators during 2017: $\begin{array}{lr}\text { Sales }&&\$2,000,000\
\text { Variable costs: }\
\text { Materials } & \$ 380,000 \
\text { Order processing } & 150,000 \
\text { Billing labor } & 110,000 \
\text { Selling expenses } & 60,000\
\text { Total variable costs }&&700,000\
\text { Fixed costs }&&1,000,000
\end{array}$ How much is the unit contribution margin?

Accepted Answer

A) $1.00 
B) $3.50 
C) $8.50 
D) $6.50 
A) $1.00 
B) $3.50 
C) $8.50 
D) $6.50

Question 14

Kaplan, Inc.produces flash drives for computers, which it sells for $27 each.The variable cost to make each flash drive is $13.During April, 700 drives were sold.Fixed costs for April were $2 per unit for a total of $1,400 for the month.How much is the monthly break-even level of sales in dollars for Kaplan?

Accepted Answer

A) $100 
B) $2,700 
C) $14,000 
D) $8,400 
A) $100 
B) $2,700 
C) $14,000 
D) $8,400

Question 15

If the activity level increases 10%, total variable costs will

Accepted Answer

A) remain the same. 
B) increase by more than 10%. 
C) decrease by less than 10%. 
D) increase 10%. 
A) remain the same. 
B) increase by more than 10%. 
C) decrease by less than 10%. 
D) increase 10%.

Question 16

If the activity index decreases, total variable costs will decrease proportionately.

Accepted Answer

A) True 
 B)False

Question 17

Gribble Company's high and low level of activity last year was 60,000 units of product produced in May and 20,000 units produced in November.Machine maintenance costs were $156,000 in May and $60,000 in November.Using the high-low method, determine an estimate of total maintenance cost for a month in which production is expected to be 45,000 units.

Accepted Answer

A) $135,000 
B) $144,000 
C) $117,000 
D) $120,000 
A) $135,000 
B) $144,000 
C) $117,000 
D) $120,000

Question 18

Contribution margin is the amount of revenues remaining after deducting cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 19

The following monthly data are available for Seasons Company 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 20

For purposes of CVP analysis, mixed costs must be classified into their fixed and variable elements.

Accepted Answer

A) True 
 B)False

The margin of safety is the difference between contribution margin and fixed costs.

The following information is available for Wade Corp.: Sales \ 580,000 Total fixed expenses \ 150,000 Cost of goods sold 390,000 Total variable expenses 360,000 A CVP income statement would report

Zehms, Inc.has a unit contribution margin of $30 and a contribution margin ratio of 60%.How much is the selling price of each unit?

Contribution margin is

If the unit contribution margin is $1 and unit sales are 10,000 units above the break-even volume, then net income will be $10,000.

An activity index identifies the activity that has a causal relationship with a particular cost.

Cost behavior analysis is a study of how a firm's costs

Select the correct statement concerning the cost-volume-profit graph at right:

Both variable and fixed costs are included in calculating the contribution margin.

Which is the true statement?

Which of the following costs are variable? Cost 10,000 Units 30,000 Units 1. \ 100,000 \ 300,000 2. 40,000 240,000 3. 90,000 90,000 4. 50,000 150,000

A division sold 200,000 calculators during 2017: Sales \2 ,000,000 Variable costs: Materials \ 380,000 Order processing 150,000 Billing labor 110,000 Selling expenses 60,000 Total variable costs 700,000 Fixed costs 1,000,000 How much is the unit contribution margin?

If the activity level increases 10%, total variable costs will

If the activity index decreases, total variable costs will decrease proportionately.

Contribution margin is the amount of revenues remaining after deducting cost of goods sold.

The following monthly data are available for Seasons Company 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?

For purposes of CVP analysis, mixed costs must be classified into their fixed and variable elements.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Reporting and Analyzing Inventory

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 5: Merchandising Operations and the Multiple-Step Income Statement

The margin of safety is the difference between contribution margin and fixed costs.

The following information is available for Wade Corp.: Sales \ 580,000 Total fixed expenses \ 150,000 Cost of goods sold 390,000 Total variable expenses 360,000 A CVP income statement would report

Zehms, Inc.has a unit contribution margin of $30 and a contribution margin ratio of 60%.How much is the selling price of each unit?

Contribution margin is

If the unit contribution margin is $1 and unit sales are 10,000 units above the break-even volume, then net income will be $10,000.

An activity index identifies the activity that has a causal relationship with a particular cost.

Cost behavior analysis is a study of how a firm's costs

Select the correct statement concerning the cost-volume-profit graph at right:

Both variable and fixed costs are included in calculating the contribution margin.

Which is the true statement?

Which of the following costs are variable? Cost 10,000 Units 30,000 Units 1. \ 100,000 \ 300,000 2. 40,000 240,000 3. 90,000 90,000 4. 50,000 150,000

A division sold 200,000 calculators during 2017: Sales \2 ,000,000 Variable costs: Materials \ 380,000 Order processing 150,000 Billing labor 110,000 Selling expenses 60,000 Total variable costs 700,000 Fixed costs 1,000,000 How much is the unit contribution margin?

If the activity level increases 10%, total variable costs will

If the activity index decreases, total variable costs will decrease proportionately.

Contribution margin is the amount of revenues remaining after deducting cost of goods sold.

The following monthly data are available for Seasons Company 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?

For purposes of CVP analysis, mixed costs must be classified into their fixed and variable elements.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Reporting and Analyzing Inventory

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