Question 1

A cost structure which relies more heavily on fixed costs makes the company

Accepted Answer

A)  more sensitive to changes in sales revenue. 
B)  less sensitive to changes in sales revenue. 
C)  either more or less sensitive to changes in sales revenue, depending on other factors. 
D)  have a lower break-even point. 
A)  more sensitive to changes in sales revenue. 
B)  less sensitive to changes in sales revenue. 
C)  either more or less sensitive to changes in sales revenue, depending on other factors. 
D)  have a lower break-even point.

Question 2

The contribution margin ratio is

Accepted Answer

A)  sales divided by contribution margin. 
B)  sales divided by fixed expenses. 
C)  sales divided by variable expenses. 
D)  contribution margin divided by sales. 
A)  sales divided by contribution margin. 
B)  sales divided by fixed expenses. 
C)  sales divided by variable expenses. 
D)  contribution margin divided by sales.

Question 3

The sales mix percentages for Novotna's Boston and Seattle Divisions are 70% and 30%. The contribution margin ratios are: Boston (40%) and Seattle (30%). Fixed costs are $2,220,000. What is Novotna's break-even point in dollars?

Accepted Answer

A)  $777,000 
B)  $6,000,000 
C)  $6,342,856 
D)  $6,727,272 
A)  $777,000 
B)  $6,000,000 
C)  $6,342,856 
D)  $6,727,272

Question 4

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%.
-The weighted-average contribution margin ratio is

Accepted Answer

A)  37%. 
B)  40%. 
C)  43%. 
D)  50%. 
A)  37%. 
B)  40%. 
C)  43%. 
D)  50%.

Question 5

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 6

When a company is in its early stages of operation, its primary goal is to generate a target net income.

Accepted Answer

A) True 
 B)False

Question 7

Outsourcing production will

Accepted Answer

A)  reduce fixed costs and increase variable costs. 
B)  reduce variable costs and increase fixed costs. 
C)  have no effect on the relative proportion of fixed and variable costs. 
D)  make the company more susceptible to economic swings. 
A)  reduce fixed costs and increase variable costs. 
B)  reduce variable costs and increase fixed costs. 
C)  have no effect on the relative proportion of fixed and variable costs. 
D)  make the company more susceptible to economic swings.

Question 8

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 9

The margin of safety tells a company how far sales can drop before it will be operating at a loss.

Accepted Answer

A) True 
 B)False

Question 10

Moonwalker's CVP income statement included sales of 5,000 units, a selling price of $100, variable expenses of $60 per unit, and fixed expenses of $110,000. Net income is

Accepted Answer

A)  $500,000. 
B)  $200,000. 
C)  $190,000. 
D)  $90,000. 
A)  $500,000. 
B)  $200,000. 
C)  $190,000. 
D)  $90,000.

Question 11

In 2016, Raleigh sold 1,000 units at $500 each, and earned net income of $40,000. Variable expenses were $300 per unit, and fixed expenses were $160,000. The same selling price is expected for 2017. Raleigh's variable cost per unit will rise by 10% in 2017 due to increasing material costs, so they are tentatively planning to cut fixed costs by $10,000. How many units must Raleigh sell in 2017 to maintain the same income level as 2016?

Accepted Answer

A)  882 
B)  1,000 
C)  1,056 
D)  1,118 
A)  882 
B)  1,000 
C)  1,056 
D)  1,118

Question 12

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 13

DeMont Tax Services provides primarily two lines of service: accounting and tax. Accounting-related services represent 60% of its revenue and provide a contribution margin ratio of 30%. Tax services represent 40% of its revenue and provide a 40% contribution margin ratio. The company's fixed costs are $4,590,000.
Instructions
(a) Calculate the revenue from each type of service that the company must achieve to break even.
(b) The company has a desired net income of $1,700,000. What amount of revenue would DeMont earn from tax services if it achieves this goal with the current sales mix?

Accepted Answer

The answer of DeMont Tax Services provides primarily two lines...

Question 14

Shanahan Co. of Dublin, Ireland is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled draftsmen. Mike Shanahan the owner, is considering replacing the draftsmen with a computerized drafting system.
However, before making the change, Mike would like to know the consequences of the change, since the volume of business varies significantly from year to year. Shown below are CVP income statements for each alternative.
Instructions
(a) Determine the degree of operating leverage for each alternative.
(b) Which alternative would produce the higher net income if sales increased by $300,000?

Accepted Answer

The answer of Shanahan Co. of Dublin, Ireland is contemplating...

Question 15

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 16

If contribution margin is $140,000, sales is $300,000, and net income is $40,000, then variable and fixed expenses are

Accepted Answer

The answer of If contribution margin is $140,000, sales is...

Question 17

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 be the total contribution margin at the break-even point?

Accepted Answer

A)  $5,730,699 
B)  $6,660,000 
C)  $6,720,000 
D)  $7,740,000 
A)  $5,730,699 
B)  $6,660,000 
C)  $6,720,000 
D)  $7,740,000

Question 18

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

Accepted Answer

The answer of ___________________ refers to the relative proportion of...

Question 19

Oscar Corporation produces and sells three products. Unit data concerning each product is shown below.   
The company has 2,000 hours of labor available to build inventory in anticipation of the company's peak season. Management is trying to decide which product should be produced. The direct labor hourly rate is $15.
Instructions
(a) Determine the number of direct labor hours per unit.
(b) Determine the contribution margin per direct labor hour.
(c) Determine which product should be produced and the total contribution margin for that product.

Accepted Answer

(a) Product X: $45 /$15 = 3 hours per un

Question 20

Brooks Corporation can sell all the units it can produce of either Plain or Fancy but not both. Plain has a unit contribution margin of $72 and takes two machine hours to make and Fancy has a unit contribution margin of $90 and takes three machine hours to make. There are 2,400 machine hours available to manufacture a product. What should Brooks do?

Accepted Answer

A)  Make Fancy which creates $18 more profit per unit than Plain does. 
B)  Make Plain which creates $6 more profit per machine hour than Fancy does. 
C)  Make Plain because more units can be made and sold than Fancy. 
D)  The same total profits exist regardless of which product is made. 
A)  Make Fancy which creates $18 more profit per unit than Plain does. 
B)  Make Plain which creates $6 more profit per machine hour than Fancy does. 
C)  Make Plain because more units can be made and sold than Fancy. 
D)  The same total profits exist regardless of which product is made.

Exam 19: Cost-Volume-Profit Analysis: Additional Issues

A cost structure which relies more heavily on fixed costs makes the company

The contribution margin ratio is

The sales mix percentages for Novotna's Boston and Seattle Divisions are 70% and 30%. The contribution margin ratios are: Boston (40%) and Seattle (30%). Fixed costs are $2,220,000. What is Novotna's break-even point in dollars?

When a company is in its early stages of operation, its primary goal is to generate a target net income.

Outsourcing production will

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

The margin of safety tells a company how far sales can drop before it will be operating at a loss.

Moonwalker's CVP income statement included sales of 5,000 units, a selling price of $100, variable expenses of $60 per unit, and fixed expenses of $110,000. Net income is

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

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.

If contribution margin is $140,000, sales is $300,000, and net income is $40,000, then variable and fixed expenses are

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

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations Perpetual Approach

Inventories Periodic Approach

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Stock Transactions, and Stockholders Equity

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Time Value of Money

Investments

Payroll Accounting

Subsidiary Ledgers and Special Journals

Other Significant Liabilities

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