Question 1

Absorption costing is more useful than variable costing in determining a company's break-even point.

Accepted Answer

A) True 
 B)False

Question 2

Austin,Brown,and Freeman Companies
Below are income statements that apply to three companies: Austin,Brown,and Freeman:
                    Austin Co.       Brown Co.       Freeman Co.               Sales       $100       $100       $100               Variable costs        (10)        (20)        (30)               Contribution margin       $ 90       $ 80       $ 70               Fixed costs        (30)        (20)        (10)               Profit before taxes       $ 60       $ 60       $ 60      
Refer to Austin,Brown,and Freeman Companies.At sales of $100,which firm has the highest margin of safety?

Accepted Answer

A) Austin Company 
B) Brown Company 
C) Freeman Company 
D) They all have the same margin of safety. 
A) Austin Company 
B) Brown Company 
C) Freeman Company 
D) They all have the same margin of safety.

Question 3

Cost-volume-profit analysis is a technique available to management to understand better the interrelationships of several factors that affect a firm's profit.As with many such techniques,the accountant oversimplifies the real world by making assumptions.Which of the following is not a major assumption underlying CVP analysis?

Accepted Answer

A) All costs incurred by a firm can be separated into their fixed and variable components. 
B) The product selling price per unit is constant at all volume levels. 
C) Operating efficiency and employee productivity are constant at all volume levels. 
D) For multi-product situations,the sales mix can vary at all volume levels. 
A) All costs incurred by a firm can be separated into their fixed and variable components. 
B) The product selling price per unit is constant at all volume levels. 
C) Operating efficiency and employee productivity are constant at all volume levels. 
D) For multi-product situations,the sales mix can vary at all volume levels.

Question 4

In a multi-product environment,CVP analysis makes the assumption that a company's sales mix is constant.

Accepted Answer

A) True 
 B)False

Question 5

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.Based on the cost and revenue structure on the income statement,what was Putnam's break-even point in dollars?

Accepted Answer

A) $300,000 
B) $400,000 
C) $425,000 
D) $450,000 
A) $300,000 
B) $400,000 
C) $425,000 
D) $450,000

Question 6

Horner Company
Horner Company manufactures a single product.Each unit sells for $15.The firm's projected costs are listed below:
$\begin{array}{lc}
\text { Variable costs per unit: } & \
\text { Prochuction } & \$ 5  \
\text { SG\&A } &  \$ 1 \
\text { Fixed costs: } &  \
\text { Prochuction } & \$ 40,000 \
\text { SG\&A } & \$ 60,000\
\text { Estimated volume } & 20,000 \text { units }
\end{array}$

Refer to Horner Company.What is Horner's projected margin of safety for the current year?

Accepted Answer

A) $133,333 
B) $150,000 
C) $80,000 
D) $100,000 
A) $133,333 
B) $150,000 
C) $80,000 
D) $100,000

Question 7

The most useful information derived from a cost-volume-profit chart is the

Accepted Answer

A) amount of sales revenue needed to cover enterprise variable costs. 
B) amount of sales revenue needed to cover enterprise fixed costs. 
C) relationship among revenues,variable costs,and fixed costs at various levels of activity. 
D) volume or output level at which the enterprise breaks even. 
A) amount of sales revenue needed to cover enterprise variable costs. 
B) amount of sales revenue needed to cover enterprise fixed costs. 
C) relationship among revenues,variable costs,and fixed costs at various levels of activity. 
D) volume or output level at which the enterprise breaks even.

Question 8

Fixed costs per unit vary inversely with levels of production.

Accepted Answer

A) True 
 B)False

Question 9

Information concerning Lynch Corporation's Product A follows:
Sales                                      $ \$ 400,000 $
Variable costs                          300,000
Fixed costs                                50,000

Assuming that Lynch increased sales of Product A by 25 percent,what should the profit from Product A be?

Accepted Answer

A) $ 50,000 
B) $ 62,500 
C) $ 75,000 
D) $170,000 
A) $ 50,000 
B) $ 62,500 
C) $ 75,000 
D) $170,000

Question 10

Incremental analysis focuses on factors that change from one decision to another.

Accepted Answer

A) True 
 B)False

Question 11

Surfside Corporation
Surfside Corporation manufactures and sells two products: A and B.The operating results of the company are as follows:
                                              $\text {\underline{ Product $ A $} }$ $\text {\underline{ Procluct B} }$
$\begin{array}{lll}
\text { Sales in units } & 2,000 & 3,000 \
\text { Sales price per unit } & \$ 10 & \$ 5 \
\text { Variable costs per unit } & 7 & 3
\end{array}$

In addition,the company incurred total fixed costs in the amount of $9,000.

Accepted Answer

A) 3,000 
B) 4,000 
C) 3,600 
D) 3,500 
A) 3,000 
B) 4,000 
C) 3,600 
D) 3,500

Question 12

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.What is Castle's break-even point in sales dollars?

Accepted Answer

BEP dollars = FC/CMR
For multiple produc

Question 13

Variable costing is more useful than absorption costing in determining a company's break-even point.

Accepted Answer

A) True 
 B)False

Question 14

Jean Simmons Company
Below is an income statement for Jean Simmons Company:
Sales                                                                          $ \$ 300,000 $
Variable costs                                                          $\underline{(150,000)}$
Contribution margin                                                  $150,000
Fixed costs                                                            $\underline{(100,000)}$
Profit before taxes                                                  $\underline{\$50,000}$

Refer to Jean Simmons Company.What was the company's margin of safety?

Accepted Answer

A) $50,000 
B) $100,000 
C) $150,000 
D) $25,000 
A) $50,000 
B) $100,000 
C) $150,000 
D) $25,000

Question 15

The method of cost accounting that lends itself to break-even analysis is

Accepted Answer

A) variable. 
B) standard. 
C) absolute. 
D) absorption. 
A) variable. 
B) standard. 
C) absolute. 
D) absorption.

Question 16

A company's break-even point is the level where total revenues equal total costs.

Accepted Answer

A) True 
 B)False

Question 17

How do changes in volume affect the break-even point?

Accepted Answer

Within the relevant range,the

Question 18

On a CVP graph,the total revenue line intersects the y-axis at zero.

Accepted Answer

A) True 
 B)False

Question 19

A process that focuses only on factors that change from one course of action to another is referred to as _________.

Accepted Answer

increm ent

Question 20

Variable costs per unit vary directly with levels of production.

Accepted Answer

A) True 
 B)False

Absorption costing is more useful than variable costing in determining a company's break-even point.

In a multi-product environment,CVP analysis makes the assumption that a company's sales mix is constant.

The most useful information derived from a cost-volume-profit chart is the

Fixed costs per unit vary inversely with levels of production.

Information concerning Lynch Corporation's Product A follows: Sales $\$ 400,000$ Variable costs 300,000 Fixed costs 50,000 Assuming that Lynch increased sales of Product A by 25 percent,what should the profit from Product A be?

Incremental analysis focuses on factors that change from one decision to another.

Variable costing is more useful than absorption costing in determining a company's break-even point.

The method of cost accounting that lends itself to break-even analysis is

A company's break-even point is the level where total revenues equal total costs.

How do changes in volume affect the break-even point?

On a CVP graph,the total revenue line intersects the y-axis at zero.

A process that focuses only on factors that change from one course of action to another is referred to as _________.

Variable costs per unit vary directly with levels of production.

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

	Austin Co.	Brown Co.	Freeman Co.
Sales	$100	$100	$100
Variable costs	(10)	(20)	(30)
Contribution margin	$ 90	$ 80	$ 70
Fixed costs	(30)	(20)	(10)
Profit before taxes	$ 60	$ 60	$ 60

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

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

Absorption costing is more useful than variable costing in determining a company's break-even point.

In a multi-product environment,CVP analysis makes the assumption that a company's sales mix is constant.

The most useful information derived from a cost-volume-profit chart is the

Fixed costs per unit vary inversely with levels of production.

Information concerning Lynch Corporation's Product A follows: Sales $400,000 \$ 400,000 $400,000 Variable costs 300,000 Fixed costs 50,000 Assuming that Lynch increased sales of Product A by 25 percent,what should the profit from Product A be?

Incremental analysis focuses on factors that change from one decision to another.

Variable costing is more useful than absorption costing in determining a company's break-even point.

The method of cost accounting that lends itself to break-even analysis is

A company's break-even point is the level where total revenues equal total costs.

How do changes in volume affect the break-even point?

On a CVP graph,the total revenue line intersects the y-axis at zero.

A process that focuses only on factors that change from one course of action to another is referred to as _________.

Variable costs per unit vary directly with levels of production.

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

Information concerning Lynch Corporation's Product A follows: Sales $\$ 400,000$ Variable costs 300,000 Fixed costs 50,000 Assuming that Lynch increased sales of Product A by 25 percent,what should the profit from Product A be?