Question 1

Total fixed costs remain unchanged with levels of production.

Accepted Answer

A) True 
 B)False  True

Question 2

The ____________ is computed by dividing the contribution margin by profit before tax.

Accepted Answer

degree of operating leverage

Question 3

Bridges Corporation
Bridges Corporation manufactures and sells two products: A and B.
B.The projected information on these two products for the coming year is presented below:
                                           $\text {\underline{ Product A} }$ $\text {\underline{ Product B} }$
$\begin{array}{lcc}
\text { Sales in units } & 4,000 & 1,000 \
\text { Sales price per unit } & \$ 12 & \$ 8 \
\text { Variable costsper unit } & 8 & 4
\end{array}$
 
Total fixed costs for the company are projected at $10,000.
Refer to Bridges Corporation.How many units would the company need to sell to produce an income before income taxes equal to 15 percent of sales?
Again,using a unit of sales mix as the unit of analysis,one unit of sales mix sells for $56.Since the contribution margin is $20 on one unit of sales mix,the CM ratio on one unit of sales mix is $20/$56 = .3571.This implies that variable costs as a percentage of sales are equal to 1 - .3571 = .6429.Income before income taxes equal to 15 percent of sales can be found by solving a formula of the following type:
Sales - VC - FC = Income before income taxes
In this particular case,we solve the following formula:
Sales - (.6429 ´ Sales)- $10,000 = (.15 ´ Sales)
Solving for Sales,we get $48,286.We can find out how many units of sales mix are required to generate sales of $48,286 by dividing $48,286 by $56 = 863.These 863 units of sales mix each contain 5 units of product,so the correct answer would be 863 ´ 5 = 4,315 units of product,3,452 of Product A and 863 of Product

Accepted Answer

Again,using a unit of sales mix as the unit of analysis,one unit of sales mix sells for $56.Since the contribution margin is $20 on one unit of sales mix,the CM ratio on one unit of sales mix is $20/$56 = .3571.This implies that variable costs as a percentage of sales are equal to 1 - .3571 = .6429.Income before income taxes equal to 15 percent of sales can be found by solving a formula of the following type:
Sales - VC - FC = Income before income taxes
In this particular case,we solve the following formula:
Sales - (.6429 ´ Sales)- $10,000 = (.15 ´ Sales)
Solving for Sales,we get $48,286.We can find out how many units of sales mix are required to generate sales of $48,286 by dividing $48,286 by $56 = 863.These 863 units of sales mix each contain 5 units of product,so the correct answer would be 863 ´ 5 = 4,315 units of product,3,452 of Product A and 863 of Product B.

Question 4

Stewart Company
The following information relates to financial projections of Stewart Company:
Projected sales                                                        60,000 units
Projected variable costs                                           $ \$ 2.00 $ per unit
Projectedfixed costs                                                $ \$ 50,000 $ per year
Projected unit sales price                                        $ \$ 7.00 $

Refer to Stewart Company.If Stewart Company achieves its projections,what will be its degree of operating leverage?

Accepted Answer

A) 6.00 
B) 1.20 
C) 1.68 
D) 2.40 
A) 6.00 
B) 1.20 
C) 1.68 
D) 2.40

Question 5

Whitmore Corporation
Whitmore Corporation predicts it will produce and sell 40,000 units of its sole product in the current year.At that level of volume,it projects a sales price of $30 per unit,a contribution margin ratio of 40 percent,and fixed costs of $5 per unit.
Refer to Whitmore Corporation.What would the company's projected profit be if it produced and sold 30,000 units?

Accepted Answer

None

Question 6

CVP analysis requires costs to be categorized as

Accepted Answer

A) either fixed or variable. 
B) direct or indirect. 
C) product or period. 
D) standard or actual. 
A) either fixed or variable. 
B) direct or indirect. 
C) product or period. 
D) standard or actual.

Question 7

As projected net income increases the

Accepted Answer

A) degree of operating leverage declines. 
B) margin of safety stays constant. 
C) break-even point goes down. 
D) contribution margin ratio goes up. 
A) degree of operating leverage declines. 
B) margin of safety stays constant. 
C) break-even point goes down. 
D) contribution margin ratio goes up.

Question 8

Putnam Company
Below is an income statement for Putnam Company:
Sales                                                       $ 600,000 
Variable costs                                         $\underline{\$150,000}$
Contribution margin                               $ \$ 450,000 $ 
Fixed costs                                              $\underline{(300,000)}$
Profit before taxes                                    $\underline{\$150,000}$

Refer to Putnam Company.Assuming that the fixed costs are expected to remain at $300,000 for the coming year and the sales price per unit and variable costs per unit are also expected to remain constant,how much profit before taxes will be produced if the company anticipates sales for the coming year rising to 125 percent of the current year's level?

Accepted Answer

A) $112,500 
B) $187,500 
C) $262,500 
D) $300,000 
A) $112,500 
B) $187,500 
C) $262,500 
D) $300,000

Question 9

Castle Corporation
The following questions are based on the following data pertaining to two types of products manufactured by Castle Corporation:
                    Per unit                             Sales price       Variable costs               Product Y       $120       $ 70               Product Z       $500       $200      
Fixed costs total $300,000 annually.The expected mix in units is 60 percent for Product Y and 40 percent for Product Z.
Refer to Castle Corporation.How much is Castle's break-even point sales in units?

Accepted Answer

BEP units = FC/(unit SP - unit VC)or uni

Question 10

Total fixed costs vary inversely with levels of production.

Accepted Answer

A) True 
 B)False

Question 11

Whitmore Corporation
Whitmore Corporation predicts it will produce and sell 40,000 units of its sole product in the current year.At that level of volume,it projects a sales price of $30 per unit,a contribution margin ratio of 40 percent,and fixed costs of $5 per unit.
Refer to Whitmore Corporation.What is the company's projected breakeven point in dollars and units?

Accepted Answer

Given the CM ratio of 40 percent,and the

Question 12

Total variable product costs vary directly with levels of production.

Accepted Answer

A) True 
 B)False

Question 13

Contribution margin divided by revenue is referred to as the _______________.

Accepted Answer

contributi

Question 14

In CVP analysis,linear functions are assumed for

Accepted Answer

A) contribution margin per unit. 
B) fixed cost per unit. 
C) total costs per unit. 
D) all of the above. 
A) contribution margin per unit. 
B) fixed cost per unit. 
C) total costs per unit. 
D) all of the above.

Question 15

The following information pertains to Venus Company's cost-volume-profit relationships:
Break-even point in units sold                        1,000
Variable costs per unit                                    $ \$ 500 $
Total fixed costs                                            $ \$ 150.000 $
How much will be contributed to profit before taxes by the 1,001st unit sold?

Accepted Answer

A) $650 
B) $500 
C) $150 
D) $0 
A) $650 
B) $500 
C) $150 
D) $0

Question 16

To compute the break-even point in units,which of the following formulas is used?

Accepted Answer

A) FC/CM per unit 
B) FC/CM ratio 
C) CM/CM ratio 
D) (FC+V
C) /CM ratio 
A) FC/CM per unit 
B) FC/CM ratio 
C) CM/CM ratio 
D) (FC+V
C) /CM ratio

Question 17

Parker Company
Below is an income statement for Parker Company:
Sales                                                                          $ \$ 400,000 $
Variable costs                                                          $\underline{(125,000)}$
Contribution margin                                                  $275,000
Fixed costs                                                            $\underline{(200,000)}$
Profit before taxes                                                  $\underline{\$75,000}$

Refer to Parker Company.What was Parker's margin of safety?

Accepted Answer

A) $200,000 
B) $75,000 
C) $100,000 
D) $109,091 
A) $200,000 
B) $75,000 
C) $100,000 
D) $109,091

Question 18

In a multiple-product firm,the product that has the highest contribution margin per unit will

Accepted Answer

A) generate more profit for each $1 of sales than the other products. 
B) have the highest contribution margin ratio. 
C) generate the most profit for each unit sold. 
D) have the lowest variable costs per unit. 
A) generate more profit for each $1 of sales than the other products. 
B) have the highest contribution margin ratio. 
C) generate the most profit for each unit sold. 
D) have the lowest variable costs per unit.

Question 19

CVP analysis relies on the assumptions that costs are either strictly fixed or strictly variable.Consistent with these assumptions,as volume decreases total

Accepted Answer

A) fixed costs decrease. 
B) variable costs remain constant. 
C) costs decrease. 
D) costs remain constant. 
A) fixed costs decrease. 
B) variable costs remain constant. 
C) costs decrease. 
D) costs remain constant.

Question 20

Parker Company
Below is an income statement for Parker Company:
Sales                                                                          $ \$ 400,000 $
Variable costs                                                          $\underline{(125,000)}$
Contribution margin                                                  $275,000
Fixed costs                                                            $\underline{(200,000)}$
Profit before taxes                                                  $\underline{\$75,000}$

Refer to Parker Company.Assuming that the fixed costs are expected to remain at $200,000 for the coming year and the sales price per unit and variable costs per unit are also expected to remain constant,how much profit before taxes will be produced if the company anticipates sales for the coming year rising to 130 percent of the current year's level?

Accepted Answer

A) $97,500 
B) $195,000 
C) $157,500 
D) A prediction cannot be made from the information given. 
A) $97,500 
B) $195,000 
C) $157,500 
D) A prediction cannot be made from the information given.

Total fixed costs remain unchanged with levels of production.

The ____________ is computed by dividing the contribution margin by profit before tax.

CVP analysis requires costs to be categorized as

As projected net income increases the

Total fixed costs vary inversely with levels of production.

Total variable product costs vary directly with levels of production.

Contribution margin divided by revenue is referred to as the _______________.

In CVP analysis,linear functions are assumed for

The following information pertains to Venus Company's cost-volume-profit relationships: Break-even point in units sold 1,000 Variable costs per unit $\$ 500$ Total fixed costs $\$ 150.000$ How much will be contributed to profit before taxes by the 1,001st unit sold?

To compute the break-even point in units,which of the following formulas is used?

Parker Company Below is an income statement for Parker Company: Sales $\$ 400,000$ Variable costs $\underline{(125,000)}$ Contribution margin $275,000 Fixed costs $\underline{(200,000)}$ Profit before taxes $\underline{\$75,000}$ Refer to Parker Company.What was Parker's margin of safety?

In a multiple-product firm,the product that has the highest contribution margin per unit will

CVP analysis relies on the assumptions that costs are either strictly fixed or strictly variable.Consistent with these assumptions,as volume decreases total

Introduction to Cost Accounting

Cost Terminology and Cost Behaviors

Predetermined Overhead Rates, Flexible Budgets, and Absorptionvariable Costing

Activity-Based Management and Activity-Based Costing

Job Order Costing

Process Costing

Standard Costing and Variance Analysis

The Master Budget

Relevant Information for Decision Making

Allocation of Joint Costs and Accounting for By-Products

Introduction to Cost Management Systems

Responsibility Accounting,support Department Allocations,and Transfer Pricing

Performance Measurement, balanced Scorecards, and Performance Rewards

Capital Budgeting

Managing Costs and Uncertainty

Implementing Quality Concepts

Inventory and Production Management

Emerging Management Practices

Filters

	Per unit
	Sales price	Variable costs
Product Y	$120	$ 70
Product Z	$500	$200

Exam 9: Break-Even Point and Cost-Volume-Profit Analysis

Total fixed costs remain unchanged with levels of production.

The ____________ is computed by dividing the contribution margin by profit before tax.

CVP analysis requires costs to be categorized as

As projected net income increases the

Total fixed costs vary inversely with levels of production.

Total variable product costs vary directly with levels of production.

Contribution margin divided by revenue is referred to as the _______________.

In CVP analysis,linear functions are assumed for

The following information pertains to Venus Company's cost-volume-profit relationships: Break-even point in units sold 1,000 Variable costs per unit $500 \$ 500 $500 Total fixed costs $150.000 \$ 150.000 $150.000 How much will be contributed to profit before taxes by the 1,001st unit sold?

To compute the break-even point in units,which of the following formulas is used?

In a multiple-product firm,the product that has the highest contribution margin per unit will

CVP analysis relies on the assumptions that costs are either strictly fixed or strictly variable.Consistent with these assumptions,as volume decreases total

Introduction to Cost Accounting

Cost Terminology and Cost Behaviors

Predetermined Overhead Rates, Flexible Budgets, and Absorptionvariable Costing

Activity-Based Management and Activity-Based Costing

Job Order Costing

Process Costing

Standard Costing and Variance Analysis

The Master Budget

Relevant Information for Decision Making

Allocation of Joint Costs and Accounting for By-Products

Introduction to Cost Management Systems

Responsibility Accounting,support Department Allocations,and Transfer Pricing

Performance Measurement, balanced Scorecards, and Performance Rewards

Capital Budgeting

Managing Costs and Uncertainty

Implementing Quality Concepts

Inventory and Production Management

Emerging Management Practices

Filters

The following information pertains to Venus Company's cost-volume-profit relationships: Break-even point in units sold 1,000 Variable costs per unit $\$ 500$ Total fixed costs $\$ 150.000$ How much will be contributed to profit before taxes by the 1,001st unit sold?