Question 1

In applying the high-low method, what is the fixed cost?

Accepted Answer

A)  $35,000 
B)  $72,000 
C)  $28,000 
D)  $100,000 
A)  $35,000 
B)  $72,000 
C)  $28,000 
D)  $100,000

Question 2

In 2015, Stallman Co. had a break-even point of $800,000 based on a selling price of $10 per unit and fixed costs of $200,000. In 2016, the selling price and variable costs per unit did not change, but the break-even point increased to $840,000.
Instructions
(a) Compute the variable cost per unit and the contribution margin ratio for 2015.
(b) Using the contribution margin ratio, compute the increase in fixed costs for 2016.

Accepted Answer

The answer of In 2015, Stallman Co. had a break-even...

Question 3

An activity index identifies the activity that has a causal relationship with a particular cost.

Accepted Answer

A) True 
 B)False

Question 4

Ferris, Inc. has a unit selling price of $500, variable cost per unit of $300, and fixed costs of $260,000.
Instructions
Compute the break-even point in units and in sales dollars.

Accepted Answer

$500X - $300X - $260,000 = 0
B

Question 5

A mixed cost contains

Accepted Answer

A)  a variable element and a fixed element. 
B)  both selling and administrative costs. 
C)  both retailing and manufacturing costs. 
D)  both operating and nonoperating costs. 
A)  a variable element and a fixed element. 
B)  both selling and administrative costs. 
C)  both retailing and manufacturing costs. 
D)  both operating and nonoperating costs.

Question 6

CVP analysis is not important in

Accepted Answer

A)  calculating depreciation expense. 
B)  setting selling prices. 
C)  determining the product mix. 
D)  utilizing production facilities. 
A)  calculating depreciation expense. 
B)  setting selling prices. 
C)  determining the product mix. 
D)  utilizing production facilities.

Question 7

Weatherspoon Company has a product with a selling price per unit of $200, the unit variable cost is $110, and the total monthly fixed costs are $300,000. How much is Weatherspoon's contribution margin ratio?

Accepted Answer

A)  45% 
B)  55% 
C)  150% 
D)  182% 
A)  45% 
B)  55% 
C)  150% 
D)  182%

Question 8

Norton, Inc. has the following information available for September 2016.   
Instructions
(a) Prepare a CVP income statement that shows both total and per unit amounts.
(b) Compute Norton's breakeven in units.

Accepted Answer

@#IMG-DLM& (b) Sales = Variabl

Question 9

Armstrong Industries has a contribution margin of $240,000 and a contribution margin ratio of 30%. How much are total variable costs?

Accepted Answer

A)  $72,000 
B)  $560,000 
C)  $168,000 
D)  $800,000 
A)  $72,000 
B)  $560,000 
C)  $168,000 
D)  $800,000

Question 10

In CVP analysis, the term "cost" includes manufacturing costs, and selling and administrative expenses.

Accepted Answer

A) True 
 B)False

Question 11

Gordon Manufacturing earned net income of $100,000 during 2015. The company wants to earn net income of $40,000 more during 2016. The company's fixed costs are expected to be $147,000, and variable costs are expected to be 30% of sales.
Instructions
(a) Determine the required sales to meet the target net income during 2016.
(b) Fill in the dollar amounts for the summary income statement for 2016 below, based on your answer to part (a).

Accepted Answer

(a) 70%X - $147,000

Question 12

For an activity base to be useful in cost behavior analysis,

Accepted Answer

A)  the activity should always be stated in dollars. 
B)  there should be a correlation between changes in the level of activity and changes in costs. 
C)  the activity should always be stated in terms of units. 
D)  the activity level should be constant over a period of time. 
A)  the activity should always be stated in dollars. 
B)  there should be a correlation between changes in the level of activity and changes in costs. 
C)  the activity should always be stated in terms of units. 
D)  the activity level should be constant over a period of time.

Question 13

The contribution margin ratio of 40% means that 60 cents of each sales dollar is available to cover fixed costs and to produce a profit.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not an underlying assumption of CVP analysis?

Accepted Answer

A)  Changes in activity are the only factors that affect costs. 
B)  Cost classifications are reasonably accurate. 
C)  Beginning inventory is larger than ending inventory. 
D)  Sales mix is constant. 
A)  Changes in activity are the only factors that affect costs. 
B)  Cost classifications are reasonably accurate. 
C)  Beginning inventory is larger than ending inventory. 
D)  Sales mix is constant.

Question 15

Reliable Manufacturing wants to sell a sufficient quantity of products to earn a profit of $100,000. If the unit sales price is $10, unit variable cost is $8, and total fixed costs are $200,000, how many units must be sold to earn income of $100,000?

Accepted Answer

A)  150,000 units 
B)  100,000 units 
C)  37,500 units 
D)  1,500,000 units 
A)  150,000 units 
B)  100,000 units 
C)  37,500 units 
D)  1,500,000 units

Question 16

Kaplan, Inc. produces flash drives for computers, which it sells for $27 each. The variable cost to make each flash drive is $13. During April, 700 drives were sold. Fixed costs for April were $2 per unit for a total of $1,400 for the month. How much is the monthly break-even level of sales in dollars for Kaplan?

Accepted Answer

A)  $100 
B)  $2,700 
C)  $14,000 
D)  $8,400 
A)  $100 
B)  $2,700 
C)  $14,000 
D)  $8,400

Question 17

Cunningham Industries reported actual sales of $2,000,000, and fixed costs of $540,000. The contribution margin ratio is 30%.
Instructions
Compute the margin of safety in dollars and the margin of safety ratio.

Accepted Answer

Break-even point in dollars: $

Question 18

The contribution margin ratio is calculated by multiplying the unit contribution margin by the unit sales price.

Accepted Answer

A) True 
 B)False

Question 19

Cost activity indexes might help classify costs as

Accepted Answer

A)  temporary. 
B)  permanent. 
C)  variable. 
D)  transient. 
A)  temporary. 
B)  permanent. 
C)  variable. 
D)  transient.

Question 20

The difference between the costs at the high and low levels of activity represents the fixed cost element of a mixed cost.

Accepted Answer

A) True 
 B)False

Exam 18: Cost-Volume-Profit

In applying the high-low method, what is the fixed cost?

An activity index identifies the activity that has a causal relationship with a particular cost.

Ferris, Inc. has a unit selling price of $500, variable cost per unit of $300, and fixed costs of $260,000. Instructions Compute the break-even point in units and in sales dollars.

A mixed cost contains

CVP analysis is not important in

Weatherspoon Company has a product with a selling price per unit of $200, the unit variable cost is $110, and the total monthly fixed costs are $300,000. How much is Weatherspoon's contribution margin ratio?

Norton, Inc. has the following information available for September 2016. Instructions (a) Prepare a CVP income statement that shows both total and per unit amounts. (b) Compute Norton's breakeven in units.

Armstrong Industries has a contribution margin of $240,000 and a contribution margin ratio of 30%. How much are total variable costs?

In CVP analysis, the term "cost" includes manufacturing costs, and selling and administrative expenses.

For an activity base to be useful in cost behavior analysis,

The contribution margin ratio of 40% means that 60 cents of each sales dollar is available to cover fixed costs and to produce a profit.

Which of the following is not an underlying assumption of CVP analysis?

Reliable Manufacturing wants to sell a sufficient quantity of products to earn a profit of $100,000. If the unit sales price is $10, unit variable cost is $8, and total fixed costs are $200,000, how many units must be sold to earn income of $100,000?

Cunningham Industries reported actual sales of $2,000,000, and fixed costs of $540,000. The contribution margin ratio is 30%. Instructions Compute the margin of safety in dollars and the margin of safety ratio.

The contribution margin ratio is calculated by multiplying the unit contribution margin by the unit sales price.

Cost activity indexes might help classify costs as

The difference between the costs at the high and low levels of activity represents the fixed cost element of a mixed cost.

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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