Question 1

The three methods used to study CVP analysis are graph method, contribution method, and equation method.

Accepted Answer

A) True 
 B)False  True

Question 2

Frazer Corp sells several products. Information of average revenue and costs is as follows:
 
What is the operating income earned if the company sells 20,000 units?

Accepted Answer

A)  $279,000 
B)  $296,000 
C)  $325,000 
D)  $227,000 
A)  $279,000 
B)  $296,000 
C)  $325,000 
D)  $227,000 D

Question 3

Firebird Ltd. sells packaged birdseed for $6.00 per package. Variable product costs are $3.00 per package. Fixed costs are $12,000 per period. How many packages must Firebird sell to earn a target operating income of $7,900?

Accepted Answer

A)  4,000 packages 
B)  2,633 packages 
C)  6,633 packages 
D)  3,317 packages 
A)  4,000 packages 
B)  2,633 packages 
C)  6,633 packages 
D)  3,317 packages C

Question 4

The breakeven point revenues is calculated by dividing ________.

Accepted Answer

A)  fixed costs by total revenues 
B)  fixed costs by contribution margin percentage 
C)  total revenues by fixed costs 
D)  contribution margin percentage by fixed costs 
A)  fixed costs by total revenues 
B)  fixed costs by contribution margin percentage 
C)  total revenues by fixed costs 
D)  contribution margin percentage by fixed costs

Question 5

Answer the following questions using the information below:
The following information is for the Jeffries Corporation:
  
-Assume the sales mix consists of three units of Product A and one unit of Product B. If the sales mix shifts to four units of Product A and one unit of Product B, then the breakeven point will ________.

Accepted Answer

A)  increase 
B)  stay the same 
C)  decrease 
D)  cannot be determined from this information 
A)  increase 
B)  stay the same 
C)  decrease 
D)  cannot be determined from this information

Question 6

Tally Corp. sells softwares during the recruiting seasons. During the current year, 14,000 software packages were sold resulting in $460,000 of sales revenue, $110,000 of variable costs, and $50,000 of fixed costs.
Contribution margin per software is ________.

Accepted Answer

A)  $32.86 
B)  $25.00 
C)  $29.29 
D)  $7.86 
A)  $32.86 
B)  $25.00 
C)  $29.29 
D)  $7.86

Question 7

Dr. Charles Hunter, MD, performs a certain outpatient procedure for $1,300. His fixed costs are $24,000 per month and his variable costs are $500 per procedure. Dr. Hunter currently plans to perform 400 procedures this month. What is the breakeven point for the month assuming that Dr. Hunter plans to perform the procedure 400 times?

Accepted Answer

A)  30 times 
B)  19 times 
C)  28 times 
D)  10 times 
A)  30 times 
B)  19 times 
C)  28 times 
D)  10 times

Question 8

Blistre Company operates on a contribution margin of 30% and currently has fixed costs of $550,000. Next year, sales are projected to be $3,100,000. An advertising campaign is being evaluated that costs an additional $120,000. How much would sales have to increase to justify the additional expenditure?

Accepted Answer

A)  $280,000 
B)  $930,000 
C)  $400,000 
D)  $550,000 
A)  $280,000 
B)  $930,000 
C)  $400,000 
D)  $550,000

Question 9

What is the breakeven point in units, assuming a product's selling price is $300, fixed costs are $18,000, unit variable costs are $20, and operating income is $6,000?

Accepted Answer

A)  22 units 
B)  86 units 
C)  60 units 
D)  65 units 
A)  22 units 
B)  86 units 
C)  60 units 
D)  65 units

Question 10

Tom's Tire Tower, Inc., sells tires for $110. The unit variable cost per tire is $85. Fixed costs total $475,000.
Required:
a.What is the contribution margin per tire?
b.What is the breakeven point in tires?
c.How many tires must be sold to earn a pretax income of $450,000?
d.What is the margin of safety, assuming 33,000 tires are sold?

Accepted Answer

a.Contribution margin per tire = $110 -

Question 11

Contribution Margin = Total revenues - Total variable costs

Accepted Answer

A) True 
 B)False

Question 12

If a company?'s breakeven revenue is $1,000 and its budgeted revenue is $1,250, then its margin of safety percentage is 20%.

Accepted Answer

A) True 
 B)False

Question 13

Tony Manufacturing produces a single product that sells for $100. Variable costs per unit equal $45. The company expects total fixed costs to be $78,000 for the next month at the projected sales level of 3,000 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately. Suppose management believes that a $85,000 increase in the monthly advertising expense will result in a considerable increase in sales. Sales must increase by ________ to justify this additional expenditure?

Accepted Answer

A)  850 units 
B)  1,546 units 
C)  1,412 units 
D)  1,419 units 
A)  850 units 
B)  1,546 units 
C)  1,412 units 
D)  1,419 units

Question 14

If the contribution margin ratio is 0.60, targeted operating income is $50,000, and fixed costs are $75,000, then sales volume in dollars is ________. (Round the final answer to the nearest dollar.)

Accepted Answer

A)  $312,500 
B)  $208,333 
C)  $125,000 
D)  $83,333 
A)  $312,500 
B)  $208,333 
C)  $125,000 
D)  $83,333

Question 15

An increase in the tax rate will increase the breakeven point.

Accepted Answer

A) True 
 B)False

Question 16

If a company's sales mix is 2 units of product A for every 3 units of product B, and the company sells 3,000 units in total of both products, only 2,000 units of product A will be sold.

Accepted Answer

A) True 
 B)False

Question 17

________ is the process of varying key estimates to identify those estimates that are the most critical to a decision.

Accepted Answer

A)  The graph method 
B)  A sensitivity analysis 
C)  The degree of operating leverage 
D)  Sales mix 
A)  The graph method 
B)  A sensitivity analysis 
C)  The degree of operating leverage 
D)  Sales mix

Question 18

If the sales mix shifts toward the lower-contribution-margin product, the breakeven quantity will decrease.

Accepted Answer

A) True 
 B)False

Question 19

You can find the breakeven revenues using total revenues, total variable costs, and total fixed costs; you don't need unit prices and costs.

Accepted Answer

A) True 
 B)False

Question 20

The classification of costs as variable and fixed depends on the relevant range, the length of the time horizon, and the specific decision situation.

Accepted Answer

A) True 
 B)False

The three methods used to study CVP analysis are graph method, contribution method, and equation method.

Frazer Corp sells several products. Information of average revenue and costs is as follows: What is the operating income earned if the company sells 20,000 units?

Firebird Ltd. sells packaged birdseed for $6.00 per package. Variable product costs are $3.00 per package. Fixed costs are $12,000 per period. How many packages must Firebird sell to earn a target operating income of $7,900?

The breakeven point revenues is calculated by dividing ________.

Tally Corp. sells softwares during the recruiting seasons. During the current year, 14,000 software packages were sold resulting in $460,000 of sales revenue, $110,000 of variable costs, and $50,000 of fixed costs. Contribution margin per software is ________.

What is the breakeven point in units, assuming a product's selling price is $300, fixed costs are $18,000, unit variable costs are $20, and operating income is $6,000?

Contribution Margin = Total revenues - Total variable costs

If a company?'s breakeven revenue is $1,000 and its budgeted revenue is $1,250, then its margin of safety percentage is 20%.

If the contribution margin ratio is 0.60, targeted operating income is $50,000, and fixed costs are $75,000, then sales volume in dollars is ________. (Round the final answer to the nearest dollar.)

An increase in the tax rate will increase the breakeven point.

If a company's sales mix is 2 units of product A for every 3 units of product B, and the company sells 3,000 units in total of both products, only 2,000 units of product A will be sold.

________ is the process of varying key estimates to identify those estimates that are the most critical to a decision.

If the sales mix shifts toward the lower-contribution-margin product, the breakeven quantity will decrease.

You can find the breakeven revenues using total revenues, total variable costs, and total fixed costs; you don't need unit prices and costs.

The classification of costs as variable and fixed depends on the relevant range, the length of the time horizon, and the specific decision situation.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters

Exam 3: Cost-Volume-Profit Analysis

The three methods used to study CVP analysis are graph method, contribution method, and equation method.

Frazer Corp sells several products. Information of average revenue and costs is as follows: What is the operating income earned if the company sells 20,000 units?

Firebird Ltd. sells packaged birdseed for $6.00 per package. Variable product costs are $3.00 per package. Fixed costs are $12,000 per period. How many packages must Firebird sell to earn a target operating income of $7,900?

The breakeven point revenues is calculated by dividing ________.

Tally Corp. sells softwares during the recruiting seasons. During the current year, 14,000 software packages were sold resulting in $460,000 of sales revenue, $110,000 of variable costs, and $50,000 of fixed costs. Contribution margin per software is ________.

What is the breakeven point in units, assuming a product's selling price is $300, fixed costs are $18,000, unit variable costs are $20, and operating income is $6,000?

Contribution Margin = Total revenues - Total variable costs

If a company?'s breakeven revenue is $1,000 and its budgeted revenue is $1,250, then its margin of safety percentage is 20%.

If the contribution margin ratio is 0.60, targeted operating income is $50,000, and fixed costs are $75,000, then sales volume in dollars is ________. (Round the final answer to the nearest dollar.)

An increase in the tax rate will increase the breakeven point.

If a company's sales mix is 2 units of product A for every 3 units of product B, and the company sells 3,000 units in total of both products, only 2,000 units of product A will be sold.

________ is the process of varying key estimates to identify those estimates that are the most critical to a decision.

If the sales mix shifts toward the lower-contribution-margin product, the breakeven quantity will decrease.

You can find the breakeven revenues using total revenues, total variable costs, and total fixed costs; you don't need unit prices and costs.

The classification of costs as variable and fixed depends on the relevant range, the length of the time horizon, and the specific decision situation.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters