Question 1

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  False

Question 2

Which is not true concerning sales mix?

Accepted Answer

A) Sales mix is the relative percentage in which each product is sold when a company sells more than one product. 
B) Sales mix is important to managers because different products often have substantially different contribution margins. 
C) Sales mix does not affect break-even analysis. 
D) The computation of weighted-average unit contribution margin is useful in sales mix analysis. 
A) Sales mix is the relative percentage in which each product is sold when a company sells more than one product. 
B) Sales mix is important to managers because different products often have substantially different contribution margins. 
C) Sales mix does not affect break-even analysis. 
D) The computation of weighted-average unit contribution margin is useful in sales mix analysis. C

Question 3

Organizer Company has fixed costs of $200,000 and variable costs are 60% of sales.How much will Organizer Company report as sales when its net income equals $20,000?

Accepted Answer

A) $550,000 
B) $366,667 
C) $520,000 
D) $132,000 
A) $550,000 
B) $366,667 
C) $520,000 
D) $132,000 A

Question 4

If O'Brien Company has a margin of safety ratio of .60, it could sustain a 60 percent decline in sales before it would be operating at a loss.

Accepted Answer

A) True 
 B)False

Question 5

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 6

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 7

A CVP income statement classifies costs into two sections based on behaviour.

Accepted Answer

A) True 
 B)False

Question 8

Use the following information for questions
In September, Smith Company had the following financial statement amounts related to producing 500 units: $\begin{array}{ll}
\text { Direct materials}&\$27,000 \
\text { Depreciation expense.}&11,000 \
\text {Sales revenue }&95,000 \
\text {Direct labour. }&23,000 \
\text {Rent expense }& 25,000\
\end{array}$

-How much is total contribution margin for September?

Accepted Answer

A) $45,000 
B) $9,000 
C) $68,000 
D) $20,000 
A) $45,000 
B) $9,000 
C) $68,000 
D) $20,000

Question 9

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 10

Which one of the following is the format of a CVP income statement?

Accepted Answer

A) sales - variable costs = fixed costs + net income 
B) sales - fixed costs - variable costs - operating expenses = net income 
C) sales - cost of goods sold - operating expenses = net income 
D) sales - variable costs - fixed costs = net income 
A) sales - variable costs = fixed costs + net income 
B) sales - fixed costs - variable costs - operating expenses = net income 
C) sales - cost of goods sold - operating expenses = net income 
D) sales - variable costs - fixed costs = net income

Question 11

In a competitive business environment, using break-even analysis would be least effective

Accepted Answer

A) in making new agreements with its unions at contract time. 
B) in adjusting the company's prices on its products or services. 
C) changing the mix of its products offered. 
D) when changing its advertising program to emphasize its new product line. 
A) in making new agreements with its unions at contract time. 
B) in adjusting the company's prices on its products or services. 
C) changing the mix of its products offered. 
D) when changing its advertising program to emphasize its new product line.

Question 12

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 13

A division sold 280,000 calculators during 2016: $\begin{array}{c}
\begin{array}{lll}
\text {Sales.}\
\text {Variable costs:}\
\text {Materials}\
\text {Order processing}\
\text {Billing labour}\
\text {Delivery costs}\
\text {Selling expenses}\
\text {Total variable costs}\
\text {Fixed costs}
\end{array}
\begin{array}{lll}
&\$5,600,000\
\
\$1,400,000\
280,000\
1,120,000\
840,000\
\underline{560,000}\
&4,200,000\
&\$750,000
\end{array}
\end{array}$
 How much is the contribution margin per unit, rounded to the nearest cent?

Accepted Answer

A) $17.32 
B) $15.00 
C) $7.00 
D) $5.00 
A) $17.32 
B) $15.00 
C) $7.00 
D) $5.00

Question 14

If Conan Corporation sells two products with a sales mix of 75%-25%, and the respective contribution margins are $100 and $300, then weighted-average unit contribution margin is $150.

Accepted Answer

A) True 
 B)False

Question 15

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 16

If fixed costs are $100,000 and weighted-average unit contribution margin is $50, then the break-even point in units is 2,000 units.

Accepted Answer

A) True 
 B)False

Question 17

Tykee Company has the following data: Variable costs are 75% of the unit selling price.
The contribution margin per unit is $400.
The fixed costs are $600,000.
Which of the following expresses the break-even point in dollars?

Accepted Answer

A) .25 x 600,000 = X 
B) 600,000 ÷.75 = X 
C) ($600,000 ÷ $400)x .75 = X 
D) $600,000 ÷ .25 = X 
A) .25 x 600,000 = X 
B) 600,000 ÷.75 = X 
C) ($600,000 ÷ $400)x .75 = X 
D) $600,000 ÷ .25 = X

Question 18

An assumption of CVP analysis is that all costs can be classified as either variable or fixed.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Use the following information for questions
In September, Smith Company had the following financial statement amounts related to producing 500 units: $\begin{array}{ll}
\text { Direct materials}&\$27,000 \
\text { Depreciation expense.}&11,000 \
\text {Sales revenue }&95,000 \
\text {Direct labour. }&23,000 \
\text {Rent expense }& 25,000\
\end{array}$

-How much is the net profit, (loss), for September?

Accepted Answer

A) $45,000 
B) $9,000 
C) $68,000 
D) $20,000 
A) $45,000 
B) $9,000 
C) $68,000 
D) $20,000

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

Which is not true concerning sales mix?

Organizer Company has fixed costs of $200,000 and variable costs are 60% of sales.How much will Organizer Company report as sales when its net income equals $20,000?

If O'Brien Company has a margin of safety ratio of .60, it could sustain a 60 percent decline in sales before it would be operating at a loss.

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

A CVP income statement classifies costs into two sections based on behaviour.

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

Which one of the following is the format of a CVP income statement?

In a competitive business environment, using break-even analysis would be least effective

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?

If Conan Corporation sells two products with a sales mix of 75%-25%, and the respective contribution margins are $100 and $300, then weighted-average unit contribution margin is $150.

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?

If fixed costs are $100,000 and weighted-average unit contribution margin is $50, then the break-even point in units is 2,000 units.

Tykee Company has the following data: Variable costs are 75% of the unit selling price. The contribution margin per unit is $400. The fixed costs are $600,000. Which of the following expresses the break-even point in dollars?

An assumption of CVP analysis is that all costs can be classified as either variable or fixed.

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job-Order Cost Accounting

Process Cost Accounting

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: Decision-Making: Costvolumeprofit

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

Which is not true concerning sales mix?

Organizer Company has fixed costs of $200,000 and variable costs are 60% of sales.How much will Organizer Company report as sales when its net income equals $20,000?

If O'Brien Company has a margin of safety ratio of .60, it could sustain a 60 percent decline in sales before it would be operating at a loss.

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

A CVP income statement classifies costs into two sections based on behaviour.

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

Which one of the following is the format of a CVP income statement?

In a competitive business environment, using break-even analysis would be least effective

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?

If Conan Corporation sells two products with a sales mix of 75%-25%, and the respective contribution margins are $100 and $300, then weighted-average unit contribution margin is $150.

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?

If fixed costs are $100,000 and weighted-average unit contribution margin is $50, then the break-even point in units is 2,000 units.

Tykee Company has the following data: Variable costs are 75% of the unit selling price. The contribution margin per unit is $400. The fixed costs are $600,000. Which of the following expresses the break-even point in dollars?

An assumption of CVP analysis is that all costs can be classified as either variable or fixed.

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job-Order Cost Accounting

Process Cost Accounting

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