Question 1

Cost structure refers to the relative proportion of fixed versus variable costs that a company incurs.

Accepted Answer

A) True 
 B)False

Question 2

Sales mix is a measure of the percentage increase in sales from period to period.

Accepted Answer

A) True 
 B)False

Question 3

Cost structure refers to the relative proportion of

Accepted Answer

A) selling expenses versus administrative expenses. 
B) selling and administrative expenses versus cost of goods sold. 
C) gross margin versus sales. 
D) fixed costs versus variable costs. 
A) selling expenses versus administrative expenses. 
B) selling and administrative expenses versus cost of goods sold. 
C) gross margin versus sales. 
D) fixed costs versus variable costs.

Question 4

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 contribution margin per unit?

Accepted Answer

A) $45,000 
B) $9,000 
C) $90 
D) $18 
A) $45,000 
B) $9,000 
C) $90 
D) $18

Question 5

What does the margin of safety measure?

Accepted Answer

A) how far prices can be changed before the CVP analysis is no longer valid 
B) how much sales can drop before the firm has an operating loss 
C) how far fixed costs can drop before the firm has an operating loss 
D) how far variable costs can rise before the firm has an operating loss 
A) how far prices can be changed before the CVP analysis is no longer valid 
B) how much sales can drop before the firm has an operating loss 
C) how far fixed costs can drop before the firm has an operating loss 
D) how far variable costs can rise before the firm has an operating loss

Question 6

Manuel Company's degree of operating leverage is 2.0.Techno Corporation's degree of operating leverage is 6.0.Techno's earnings would go up (or down)by ___ as much as Manual's with an equal increase (or decrease)in sales.

Accepted Answer

A) 1/3 
B) 2 times 
C) 3 times 
D) 6 times 
A) 1/3 
B) 2 times 
C) 3 times 
D) 6 times

Question 7

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 8

Which of the following is the correct formula for the contribution margin ratio?

Accepted Answer

A) sales - total variable cost 
B) (unit selling price - unit variable cost)÷ unit selling price 
C) unit selling price - unit variable cost 
D) (unit selling price - unit variable cost)÷ unit variable cost 
A) sales - total variable cost 
B) (unit selling price - unit variable cost)÷ unit selling price 
C) unit selling price - unit variable cost 
D) (unit selling price - unit variable cost)÷ unit variable cost

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

Sample, Inc.determined its unit variable cost increased by 15%.Which one of the following will NOT increase as a direct result?

Accepted Answer

A) total costs 
B) total variable costs 
C) contribution margin 
D) the break-even point 
A) total costs 
B) total variable costs 
C) contribution margin 
D) the break-even point

Question 11

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 12

The weighted-average contribution margin of all the products is calculated when determining the break-even sales for a multi-product firm.

Accepted Answer

A) True 
 B)False

Question 13

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

Question 14

For a company with multiple products, the break-even point in dollars is variable costs divided by the weighted-average contribution margin ratio.

Accepted Answer

A) True 
 B)False

Question 15

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 16

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 17

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 18

At the break-even point, total revenue equals total fixed costs plus total variable costs.

Accepted Answer

A) True 
 B)False

Question 19

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.
Per unit data on the two products is presented blow: $\begin{array}{cc}
\underline{\text { Unit data}} &\underline{\text { Audio computer }} & \underline{\text { Video computer} } \
\text {Selling price}&\$1,500&\$1,750\
\text {Variable costs}&\underline{1,100}&\underline{1,200}\
\text { Contribution margin}&\underline{\$400}&\underline{\$550}\
\text {  Sales mix}&75\%&25\%
\end{array}$
-The break-even point in units is

Accepted Answer

A) 267. 
B) 632. 
C) 686. 
D) 800. 
A) 267. 
B) 632. 
C) 686. 
D) 800.

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

Cost structure refers to the relative proportion of fixed versus variable costs that a company incurs.

Sales mix is a measure of the percentage increase in sales from period to period.

Cost structure refers to the relative proportion of

What does the margin of safety measure?

Manuel Company's degree of operating leverage is 2.0.Techno Corporation's degree of operating leverage is 6.0.Techno's earnings would go up (or down)by ___ as much as Manual's with an equal increase (or decrease)in sales.

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

Which of the following is the correct formula for the contribution margin ratio?

The margin of safety ratio

Sample, Inc.determined its unit variable cost increased by 15%.Which one of the following will NOT increase as a direct result?

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%?

The weighted-average contribution margin of all the products is calculated when determining the break-even sales for a multi-product firm.

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?

For a company with multiple products, the break-even point in dollars is variable costs divided by the weighted-average contribution margin ratio.

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

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%.

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

At the break-even point, total revenue equals total fixed costs plus total variable costs.

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 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

Cost structure refers to the relative proportion of fixed versus variable costs that a company incurs.

Sales mix is a measure of the percentage increase in sales from period to period.

Cost structure refers to the relative proportion of

What does the margin of safety measure?

Manuel Company's degree of operating leverage is 2.0.Techno Corporation's degree of operating leverage is 6.0.Techno's earnings would go up (or down)by ___ as much as Manual's with an equal increase (or decrease)in sales.

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

Which of the following is the correct formula for the contribution margin ratio?

The margin of safety ratio

Sample, Inc.determined its unit variable cost increased by 15%.Which one of the following will NOT increase as a direct result?

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%?

The weighted-average contribution margin of all the products is calculated when determining the break-even sales for a multi-product firm.

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?

For a company with multiple products, the break-even point in dollars is variable costs divided by the weighted-average contribution margin ratio.

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

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%.

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

At the break-even point, total revenue equals total fixed costs plus total variable costs.

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 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