Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

For CVP analysis, both variable and fixed costs are assumed to have a linear relationship within the relevant range of activity.

Accepted Answer

A) True 
 B)False

Question 3

The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

Accepted Answer

A) True 
 B)False

Question 4

The increased use of automation and less use of the work force in companies has caused a trend towards an increase in

Accepted Answer

A)  both variable and fixed costs. 
B)  fixed costs and a decrease in variable costs. 
C)  variable costs and a decrease in fixed costs. 
D)  variable costs and no change in fixed costs. 
A)  both variable and fixed costs. 
B)  fixed costs and a decrease in variable costs. 
C)  variable costs and a decrease in fixed costs. 
D)  variable costs and no change in fixed costs.

Question 5

Sales are $500,000 and variable costs are $330,000. What is the contribution margin ratio?

Accepted Answer

A)  52% 
B)  34% 
C)  66% 
D)  Cannot be determined because amounts are not expressed per unit. 
A)  52% 
B)  34% 
C)  66% 
D)  Cannot be determined because amounts are not expressed per unit.

Question 6

For planning purposes, mixed costs are generally grouped with fixed costs.

Accepted Answer

A) True 
 B)False

Question 7

The relevant range of activity refers to the

Accepted Answer

A)  geographical areas where the company plans to operate. 
B)  activity level where all costs are curvilinear. 
C)  levels of activity over which the company expects to operate. 
D)  level of activity where all costs are constant. 
A)  geographical areas where the company plans to operate. 
B)  activity level where all costs are curvilinear. 
C)  levels of activity over which the company expects to operate. 
D)  level of activity where all costs are constant.

Question 8

Lansbury Manufacturing produces hair brushes. The selling price is $20 per unit and the variable costs are $8 per brush. Fixed costs per month are $4,800. If Lansbury sells 30 more units beyond breakeven, how much does profit increase as a result?

Accepted Answer

A)  $360 
B)  $600 
C)  $240 
D)  $1,200 
A)  $360 
B)  $600 
C)  $240 
D)  $1,200

Question 9

A division sold 200,000 calculators during 2017:   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 10

At the high level of activity in November, 7,000 machine hours were run and power costs were $18,000. In April, a month of low activity, 2,000 machine hours were run and power costs amounted to $9,000. Using the high-low method, the estimated fixed cost element of power costs is

Accepted Answer

A)  $18,000. 
B)  $9,000. 
C)  $5,400. 
D)  $12,600. 
A)  $18,000. 
B)  $9,000. 
C)  $5,400. 
D)  $12,600.

Question 11

In the Restin Company, maintenance costs are a mixed cost. At the low level of activity (80 direct labor hours), maintenance costs are $600. At the high level of activity (200 direct labor hours), maintenance costs are $1,100. Using the high-low method, what is the variable maintenance cost per unit and the total fixed maintenance cost?

Accepted Answer

The answer of In the Restin Company, maintenance costs are...

Question 12

In using the high-low method, the fixed cost

Accepted Answer

A)  is determined by subtracting the total cost at the high level of activity from the total cost at the low activity level. 
B)  is determined by adding the total variable cost to the total cost at the low activity level. 
C)  is determined before the total variable cost. 
D)  may be determined by subtracting the total variable cost from either the total cost at the low or high activity level. 
A)  is determined by subtracting the total cost at the high level of activity from the total cost at the low activity level. 
B)  is determined by adding the total variable cost to the total cost at the low activity level. 
C)  is determined before the total variable cost. 
D)  may be determined by subtracting the total variable cost from either the total cost at the low or high activity level.

Question 13

Frazier Manufacturing Company collected the following production data for the past month:   If the high-low method is used, what is the monthly total cost equation?

Accepted Answer

A)  Total cost = $13,200 + $33/unit 
B)  Total cost = $16,500 + $30/unit 
C)  Total cost = $0 + $45/unit 
D)  Total cost = $9,900 + $36/unit 
A)  Total cost = $13,200 + $33/unit 
B)  Total cost = $16,500 + $30/unit 
C)  Total cost = $0 + $45/unit 
D)  Total cost = $9,900 + $36/unit

Question 14

Required sales in dollars to meet a target net income is computed by dividing

Accepted Answer

A)  fixed costs plus target net income by unit contribution margin. 
B)  variable costs plus target net income by unit contribution margin. 
C)  fixed costs plus target net income by contribution margin ratio. 
D)  total costs plus target net income by contribution margin ratio. 
A)  fixed costs plus target net income by unit contribution margin. 
B)  variable costs plus target net income by unit contribution margin. 
C)  fixed costs plus target net income by contribution margin ratio. 
D)  total costs plus target net income by contribution margin ratio.

Question 15

The _______________ point is when total revenues equal total costs.

Accepted Answer

The answer of The _______________ point is when total revenues...

Question 16

Determine the missing amounts.

Accepted Answer

A. $300 - $165 = $135
B. $135 ÷ $300 = 4

Question 17

If graphed, fixed costs that behave in a curvilinear fashion resemble a(n)

Accepted Answer

A)  S-curve. 
B)  inverted S-curve. 
C)  straight line. 
D)  stair-step pattern. 
A)  S-curve. 
B)  inverted S-curve. 
C)  straight line. 
D)  stair-step pattern.

Question 18

Montoya Manufacturing has fixed costs of $3,000,000 and variable costs are 40% of sales. What are the required sales if Montoya desires net income of $300,000?

Accepted Answer

A)  $5,500,000 
B)  $5,000,000 
C)  $8,250,000 
D)  $7,500,000 
A)  $5,500,000 
B)  $5,000,000 
C)  $8,250,000 
D)  $7,500,000

Question 19

In CVP analysis, the term "cost"

Accepted Answer

A)  includes only manufacturing costs. 
B)  means cost of goods sold. 
C)  includes manufacturing costs plus selling and administrative expenses. 
D)  excludes all fixed manufacturing costs. 
A)  includes only manufacturing costs. 
B)  means cost of goods sold. 
C)  includes manufacturing costs plus selling and administrative expenses. 
D)  excludes all fixed manufacturing costs.

Question 20

Sweet Manufacturing is planning to sell 400,000 hammers for $6 per unit. The contribution margin ratio is 20%. If Sweet will break even at this level of sales, what are the fixed costs?

Accepted Answer

A)  $480,000 
B)  $1,120,000 
C)  $1,600,000 
D)  $1,920,000 
A)  $480,000 
B)  $1,120,000 
C)  $1,600,000 
D)  $1,920,000

Exam 18: Cost-Volume-Profit

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

For CVP analysis, both variable and fixed costs are assumed to have a linear relationship within the relevant range of activity.

The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

The increased use of automation and less use of the work force in companies has caused a trend towards an increase in

Sales are $500,000 and variable costs are $330,000. What is the contribution margin ratio?

For planning purposes, mixed costs are generally grouped with fixed costs.

The relevant range of activity refers to the

Lansbury Manufacturing produces hair brushes. The selling price is $20 per unit and the variable costs are $8 per brush. Fixed costs per month are $4,800. If Lansbury sells 30 more units beyond breakeven, how much does profit increase as a result?

A division sold 200,000 calculators during 2017: How much is the unit contribution margin?

At the high level of activity in November, 7,000 machine hours were run and power costs were $18,000. In April, a month of low activity, 2,000 machine hours were run and power costs amounted to $9,000. Using the high-low method, the estimated fixed cost element of power costs is

In using the high-low method, the fixed cost

Frazier Manufacturing Company collected the following production data for the past month: If the high-low method is used, what is the monthly total cost equation?

Required sales in dollars to meet a target net income is computed by dividing

The _______________ point is when total revenues equal total costs.

Determine the missing amounts.

If graphed, fixed costs that behave in a curvilinear fashion resemble a(n)

Montoya Manufacturing has fixed costs of $3,000,000 and variable costs are 40% of sales. What are the required sales if Montoya desires net income of $300,000?

In CVP analysis, the term "cost"

Sweet Manufacturing is planning to sell 400,000 hammers for $6 per unit. The contribution margin ratio is 20%. If Sweet will break even at this level of sales, what are the fixed costs?

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 Analysis: Additional Issues

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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