Question 1

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 2

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

Accepted Answer

A) Factors other than changes in activity may affect costs. 
B) Cost classifications are reasonably accurate. 
C) Increases in inventories cause increase in total fixed costs. 
D) Unit costs remain the same over the relevant range. 
A) Factors other than changes in activity may affect costs. 
B) Cost classifications are reasonably accurate. 
C) Increases in inventories cause increase in total fixed costs. 
D) Unit costs remain the same over the relevant range.

Question 3

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 4

Old Canadian Company has sales of $500,000, variable costs of $425,000, and fixed costs of $25,000.New World Company has sales of $500,000, variable costs of $200,000, and fixed costs of $250,000.New World's margin of safety ratio is

Accepted Answer

A) .17. 
B) .33. 
C) .67. 
D) .83. 
A) .17. 
B) .33. 
C) .67. 
D) .83.

Question 5

A CVP income statement shows contribution margin and gross profit.

Accepted Answer

A) True 
 B)False

Question 6

The margin of safety is the difference between sales at break-even and sales at a determined activity level.

Accepted Answer

A) True 
 B)False

Question 7

A major benefit of using a contribution ratio format is that

Accepted Answer

A) it supports management's decision on its sales mix. 
B) it assists in determining the effect of sales on operating income. 
C) variable costs are isolated and can be easily reduced. 
D) it shows the impact of fixed costs on the sales mix. 
A) it supports management's decision on its sales mix. 
B) it assists in determining the effect of sales on operating income. 
C) variable costs are isolated and can be easily reduced. 
D) it shows the impact of fixed costs on the sales mix.

Question 8

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 9

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: $\begin{array}{cc}
\underline{\text { Unit data}} &\underline{\text { Audio computer }} & \underline{\text { Video computer} } \
\text {Selling price}&\$1,500&\$1,750\
\text {Variable costs}&\underline{1,100}&\underline{1,200}\
\text { Contribution margin}&\underline{\$400}&\underline{\$550}\
\text {  Sales mix}&75\%&25\%
\end{array}$
-What will be the total contribution margin at the break-even point?

Accepted Answer

A) $225,000 
B) $276,000 
C) $300,125 
D) $372,250 
A) $225,000 
B) $276,000 
C) $300,125 
D) $372,250

Question 10

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 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

Question 11

Sales are $60,000 and variable costs are $45,000.How much is the contribution margin ratio?

Accepted Answer

A) 75% 
B) 50% 
C) 25% 
D) Cannot be determined without more information. 
A) 75% 
B) 50% 
C) 25% 
D) Cannot be determined without more information.

Question 12

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 weighted-average contribution margin is

Accepted Answer

A) $437.50. 
B) $475.00. 
C) $1,125.00. 
D) $375.00. 
A) $437.50. 
B) $475.00. 
C) $1,125.00. 
D) $375.00.

Question 13

In using the contribution margin technique

Accepted Answer

A) a target profit is added to variable costs. 
B) a target profit is added to fixed costs. 
C) fixed costs must always be shown separate from other costs and the target. 
D) the target profit should be shown after the break-even analysis indicates zero profit or loss. 
A) a target profit is added to variable costs. 
B) a target profit is added to fixed costs. 
C) fixed costs must always be shown separate from other costs and the target. 
D) the target profit should be shown after the break-even analysis indicates zero profit or loss.

Question 14

A key reason for management to build in a margin of safety in its projections is

Accepted Answer

A) management can assess if its targets are reasonable in order to cover fixed costs. 
B) if sales do not reach the targeted number, management will not suffer the consequences. 
C) variable costs may fluctuate and this will affect the break-even calculation. 
D) it will show the operating profit if sales are not as expected. 
A) management can assess if its targets are reasonable in order to cover fixed costs. 
B) if sales do not reach the targeted number, management will not suffer the consequences. 
C) variable costs may fluctuate and this will affect the break-even calculation. 
D) it will show the operating profit if sales are not as expected.

Question 15

The break-even point is the point at which total sales equals total contribution margin.

Accepted Answer

A) True 
 B)False

Question 16

A major reason for using the contribution format income statement is that

Accepted Answer

A) it separates variable and fixed cost components. 
B) it increases information available to management. 
C) it allows management to establish what sales level is necessary to cover fixed costs. 
D) it indicates the sales mix of the company's products or services. 
A) it separates variable and fixed cost components. 
B) it increases information available to management. 
C) it allows management to establish what sales level is necessary to cover fixed costs. 
D) it indicates the sales mix of the company's products or services.

Question 17

Hartley, Inc.has one product with a selling price per unit of $250, the unit variable cost is $150, and the total monthly fixed costs are $750,000.How much is Hartley's contribution margin ratio?

Accepted Answer

A) 40% 
B) 60% 
C) 66.7% 
D) 75% 
A) 40% 
B) 60% 
C) 66.7% 
D) 75%

Question 18

At the break-even point of 2,000 units, variable costs are $55,000, and fixed costs are $32,000.How much is the selling price per unit?

Accepted Answer

A) $43.50 
B) $11.50 
C) $16 
D) not enough information 
A) $43.50 
B) $11.50 
C) $16 
D) not enough information

Question 19

If a company installs an automated factory which increases their fixed costs and lowers their variable costs, you might say they have decreased their operating leverage

Accepted Answer

A) True 
 B)False

Question 20

A CVP income statement separates costs based on behaviour.

Accepted Answer

A) True 
 B)False

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

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

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

Old Canadian Company has sales of $500,000, variable costs of $425,000, and fixed costs of $25,000.New World Company has sales of $500,000, variable costs of $200,000, and fixed costs of $250,000.New World's margin of safety ratio is

A CVP income statement shows contribution margin and gross profit.

The margin of safety is the difference between sales at break-even and sales at a determined activity level.

A major benefit of using a contribution ratio format is that

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?

In September, Smith Company had the following financial statement amounts related to producing 500 units: Direct materials \2 7,000 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?

Sales are $60,000 and variable costs are $45,000.How much is the contribution margin ratio?

In using the contribution margin technique

A key reason for management to build in a margin of safety in its projections is

The break-even point is the point at which total sales equals total contribution margin.

A major reason for using the contribution format income statement is that

Hartley, Inc.has one product with a selling price per unit of $250, the unit variable cost is $150, and the total monthly fixed costs are $750,000.How much is Hartley's contribution margin ratio?

At the break-even point of 2,000 units, variable costs are $55,000, and fixed costs are $32,000.How much is the selling price per unit?

If a company installs an automated factory which increases their fixed costs and lowers their variable costs, you might say they have decreased their operating leverage

A CVP income statement separates costs based on behaviour.

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

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Exam 6: Decision-Making: Costvolumeprofit

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

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

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

Old Canadian Company has sales of $500,000, variable costs of $425,000, and fixed costs of $25,000.New World Company has sales of $500,000, variable costs of $200,000, and fixed costs of $250,000.New World's margin of safety ratio is

A CVP income statement shows contribution margin and gross profit.

The margin of safety is the difference between sales at break-even and sales at a determined activity level.

A major benefit of using a contribution ratio format is that

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?

In September, Smith Company had the following financial statement amounts related to producing 500 units: Direct materials \2 7,000 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?

Sales are $60,000 and variable costs are $45,000.How much is the contribution margin ratio?

In using the contribution margin technique

A key reason for management to build in a margin of safety in its projections is

The break-even point is the point at which total sales equals total contribution margin.

A major reason for using the contribution format income statement is that

Hartley, Inc.has one product with a selling price per unit of $250, the unit variable cost is $150, and the total monthly fixed costs are $750,000.How much is Hartley's contribution margin ratio?

At the break-even point of 2,000 units, variable costs are $55,000, and fixed costs are $32,000.How much is the selling price per unit?

If a company installs an automated factory which increases their fixed costs and lowers their variable costs, you might say they have decreased their operating leverage

A CVP income statement separates costs based on behaviour.

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