Question 1

A company's break-even point would change if there were an increase in:

Accepted Answer

A)  Sales volume 
B)  Total fixed costs due to a plant addition 
C)  Total production volume 
D)  Total variable costs due to higher production volume 
A)  Sales volume 
B)  Total fixed costs due to a plant addition 
C)  Total production volume 
D)  Total variable costs due to higher production volume

Question 2

As fixed costs increase, the break-even point in units will:

Accepted Answer

A)  Increase 
B)  Decrease 
C)  Remain the same 
D)  Unable to determine without variable cost information 
A)  Increase 
B)  Decrease 
C)  Remain the same 
D)  Unable to determine without variable cost information

Question 3

Exhibit 21-3 The following partial income statement is available for Lauria Company:
 
- Refer to Exhibit 21-3. Given the data above, the contribution margin per unit is:

Accepted Answer

A)  $20 
B)  $30 
C)  $45 
D)  $75 
A)  $20 
B)  $30 
C)  $45 
D)  $75

Question 4

If total costs are $27,000 and $36,000 for activity levels of 5,000 and 8,000, respectively, how much are fixed costs?

Accepted Answer

A)  $12,000 
B)  $8,000 
C)  $6,000 
D)  $0 
A)  $12,000 
B)  $8,000 
C)  $6,000 
D)  $0

Question 5

When the variable cost ratio decreases, the:

Accepted Answer

A)  Contribution margin as a percentage of net sales increases 
B)  Contribution margin as a percentage of net sales decreases 
C)  Break-even point increases 
D)  Fixed cost per unit increases 
A)  Contribution margin as a percentage of net sales increases 
B)  Contribution margin as a percentage of net sales decreases 
C)  Break-even point increases 
D)  Fixed cost per unit increases

Question 6

Everclean Company cleans draperies. It charges $75 to clean a full-size drape, and its variable and fixed costs are $45 per drape and $8,000 per year, respectively. Given this data, approximately how many drapes must the company clean to break even?

Accepted Answer

A)  134 
B)  267 
C)  300 
D)  320 
A)  134 
B)  267 
C)  300 
D)  320

Question 7

Stanley Company manufactures and sells one product for $200 per unit. The variable costs per unit are $140, and monthly total fixed costs are $7,500. Last month Stanley sold 100 units and expects sales to remain the same for the current month. If fixed costs increase by $1,500, what is the break-even point for the current month?

Accepted Answer

A)  $12,800 
B)  $25,000 
C)  $30,000 
D)  $45,000 
A)  $12,800 
B)  $25,000 
C)  $30,000 
D)  $45,000

Question 8

Exhibit 21-6 The graph below illustrates various cost behavior patterns in XYZ Company.
 
-Refer to Exhibit 21-6. In the graph above, the variable costs are represented by:

Accepted Answer

A)  Line A 
B)  Line B 
C)  Area C 
D)  Area D 
A)  Line A 
B)  Line B 
C)  Area C 
D)  Area D

Question 9

Which of the following costs would LEAST likely be a variable cost?

Accepted Answer

A)  Indirect materials 
B)  Direct labor 
C)  Sales commissions 
D)  Plant manager's salary 
A)  Indirect materials 
B)  Direct labor 
C)  Sales commissions 
D)  Plant manager's salary

Question 10

XYZ Company generally produces between 200 and 350 units of product. Its fixed costs, within this relevant range, are $50,000. Its variable costs at 250 units of production are $10 per unit. What are the fixed costs per unit at 250 and 300 units of production, respectively? (Round to the nearest dollar.)

Accepted Answer

A)  $10 and $200 
B)  $250 and $143 
C)  $200 and $167 
D)  Answer cannot be determined from data given 
A)  $10 and $200 
B)  $250 and $143 
C)  $200 and $167 
D)  Answer cannot be determined from data given

Question 11

Operating leverage is:

Accepted Answer

A)  The proportion of total units represented by each product 
B)  A measure of risk 
C)  A measure of operating performance 
D)  None of these are correct 
A)  The proportion of total units represented by each product 
B)  A measure of risk 
C)  A measure of operating performance 
D)  None of these are correct

Question 12

Everclean Company cleans draperies. It charges $75 to clean a full-size drape, and its variable and fixed costs are $40 per drape and $8,000 per year, respectively. Given this data, how many drapes must the company clean to make $50,000 profit?

Accepted Answer

A)  967 
B)  1,657 
C)  2,000 
D)  2,320 
A)  967 
B)  1,657 
C)  2,000 
D)  2,320

Question 13

Jones Company sells two products, Gumbo and Jumbo. Gumbo has a 45% contribution margin and Jumbo has a 55% contribution margin. Given these contribution margin percentages and assuming that other factors are equal, what should Jones Company do?

Accepted Answer

A)  It should emphasize Gumbo 
B)  It should emphasize Jumbo 
C)  It should emphasize both products, since they are equally profitable 
D)  No recommendation can be made from the data given 
A)  It should emphasize Gumbo 
B)  It should emphasize Jumbo 
C)  It should emphasize both products, since they are equally profitable 
D)  No recommendation can be made from the data given

Question 14

Sales mix refers to:

Accepted Answer

A)  The differing volumes of sales from year to year 
B)  The different contribution margins achieved on the different products during the year 
C)  The relative proportions of different products that constitute total sales 
D)  The mix of fixed and variable costs on the products sold during the year 
A)  The differing volumes of sales from year to year 
B)  The different contribution margins achieved on the different products during the year 
C)  The relative proportions of different products that constitute total sales 
D)  The mix of fixed and variable costs on the products sold during the year

Question 15

Which of the following items is NOT a key factor involved in cost-volume-profit (C-V-P) analysis?

Accepted Answer

A)  Time value of money 
B)  Fixed and variable costs 
C)  Sales revenue 
D)  The mix of products sold 
A)  Time value of money 
B)  Fixed and variable costs 
C)  Sales revenue 
D)  The mix of products sold

Question 16

If two firms have the same sales prices for their merchandise once fixed costs are covered, the firm with a higher variable cost rate will have:

Accepted Answer

A)  Greater increases in profits as sales increase 
B)  Smaller increases in profits as sales increase 
C)  The same increase in profits as sales increase 
D)  None of these are correct 
A)  Greater increases in profits as sales increase 
B)  Smaller increases in profits as sales increase 
C)  The same increase in profits as sales increase 
D)  None of these are correct

Question 17

If fixed costs are $40,000 and total costs are $200,000 at an activity level of 8,000 units, variable costs are approximately:

Accepted Answer

A)  $5 per unit 
B)  $20 per unit 
C)  $25 per unit 
D)  $40 per unit 
A)  $5 per unit 
B)  $20 per unit 
C)  $25 per unit 
D)  $40 per unit

Question 18

To maximize its profits, a company should pay the highest sales commissions on those products with the:

Accepted Answer

A)  Highest contribution margin 
B)  Highest prices 
C)  Lowest variable costs 
D)  Lowest fixed costs 
A)  Highest contribution margin 
B)  Highest prices 
C)  Lowest variable costs 
D)  Lowest fixed costs

Question 19

Relevant ranges must be considered for:

Accepted Answer

A)  Fixed costs 
B)  Variable costs 
C)  Both fixed and variable costs 
D)  Neither fixed nor variable costs 
A)  Fixed costs 
B)  Variable costs 
C)  Both fixed and variable costs 
D)  Neither fixed nor variable costs

Question 20

Exhibit 21-4 Cash2U Company had the following income statement:
 
-Refer to Exhibit 21-4. Given the data above, Cash2U Company's contribution margin percentage is:

Accepted Answer

A)  40% 
B)  45% 
C)  50% 
D)  55% 
A)  40% 
B)  45% 
C)  50% 
D)  55%

Exam 21: Cost Behavior and Decisions Using C-V-P Analysis

A company's break-even point would change if there were an increase in:

As fixed costs increase, the break-even point in units will:

Exhibit 21-3 The following partial income statement is available for Lauria Company: - Refer to Exhibit 21-3. Given the data above, the contribution margin per unit is:

If total costs are $27,000 and $36,000 for activity levels of 5,000 and 8,000, respectively, how much are fixed costs?

When the variable cost ratio decreases, the:

Everclean Company cleans draperies. It charges $75 to clean a full-size drape, and its variable and fixed costs are $45 per drape and $8,000 per year, respectively. Given this data, approximately how many drapes must the company clean to break even?

Exhibit 21-6 The graph below illustrates various cost behavior patterns in XYZ Company. -Refer to Exhibit 21-6. In the graph above, the variable costs are represented by:

Which of the following costs would LEAST likely be a variable cost?

Operating leverage is:

Everclean Company cleans draperies. It charges $75 to clean a full-size drape, and its variable and fixed costs are $40 per drape and $8,000 per year, respectively. Given this data, how many drapes must the company clean to make $50,000 profit?

Jones Company sells two products, Gumbo and Jumbo. Gumbo has a 45% contribution margin and Jumbo has a 55% contribution margin. Given these contribution margin percentages and assuming that other factors are equal, what should Jones Company do?

Sales mix refers to:

Which of the following items is NOT a key factor involved in cost-volume-profit (C-V-P) analysis?

If two firms have the same sales prices for their merchandise once fixed costs are covered, the firm with a higher variable cost rate will have:

If fixed costs are $40,000 and total costs are $200,000 at an activity level of 8,000 units, variable costs are approximately:

To maximize its profits, a company should pay the highest sales commissions on those products with the:

Relevant ranges must be considered for:

Exhibit 21-4 Cash2U Company had the following income statement: -Refer to Exhibit 21-4. Given the data above, Cash2U Company's contribution margin percentage is:

Accounting Information: Users and Uses

Financial Statements: An Overview

The Accounting Cycle: The Mechanics of Accounting

Completing the Accounting Cycle

Internal Controls: Ensuring the Integrity of Financial Information

Receivables: Selling a Product or a Service

Inventory and the Cost of Sales

Completing the Operating Cycle

Investments: Property, Plant, and Equipment and Intangible Assets

Financing: Long-Term Liabilities

Financing: Equity

Investments: Debt and Equity Securities

Statement of Cash Flows

Analyzing Financial Statements

Management Accounting and Cost Concepts

Cost Flows and Business Organizations

Activity-Based Costing

Budgeting and Control

Controlling Cost and Profit

Inventory Management and Variable and Absorption Costing

Relevant Information and Decisions

Capital Investment Decisions

New Measures of Performance

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