Question 1

A margin of safety of 30% means that every dollar in revenue generates thirty cents in profit.

Accepted Answer

A) True 
 B)False  False

Question 2

Company A makes and sells a single product,unless otherwise indicated.What happens to break-even point when the variable cost per unit and selling price both decrease by the same amount?

Accepted Answer

Answers will vary
The break-even point is unchanged because the unit contribution margin is unaffected.

Question 3

For a company that sells several products,cost-volume-profit techniques cannot be used to calculate the sales volume required to yield a target level of profit.

Accepted Answer

A) True 
 B)False  False

Question 4

For 2013During the current year,Winchester Company sold 80,000 units at a selling price of $20 per unit.Variable cost per unit was $15,and Winchester's net income for the year was $40,000.What was the amount of Winchester's fixed costs?

Accepted Answer

A)  $360,000 
B)  $440,000 
C)  $1,160,000 
D)  $400,000 
A)  $360,000 
B)  $440,000 
C)  $1,160,000 
D)  $400,000

Question 5

Kingston Company sells its product for $200 per unit.The company's accountant provided the following cost information: $\begin{array}{|l|l|}
\hline \text { Manufacturing costs } & \$ 25,000+40 \% \text { of sales } \
\hline \text { Selling costs } & \$ 10,000+20 \% \text { of sales } \
\hline \text { Administrative costs } & \$ 15,000+10 \% \text { of sales } \
\hline
\end{array}$ What is Kingston Company's contribution margin ratio?

Accepted Answer

A)  30% 
B)  15% 
C)  35% 
D)  20% 
A)  30% 
B)  15% 
C)  35% 
D)  20%

Question 6

At its $60 selling price,Atlantic Company has sales of $15,000,variable manufacturing costs of $4,000,fixed manufacturing costs of $1,000,variable selling and administrative costs of $2,000 and fixed selling and administrative costs of $1,000.What is the company's contribution margin per unit?

Accepted Answer

A)  $26 
B)  $28 
C)  $44 
D)  $36 
A)  $26 
B)  $28 
C)  $44 
D)  $36

Question 7

Hatfield Company sells several different products.It calculated that,for the current year,it would break even if it achieved sales of $850,000.The company actually achieved sales of $856,000,but it incurred a loss of $6,500.What could have caused this result? The costs and selling prices for the individual products did not change.

Accepted Answer

Answers will vary
To perform break-even

Question 8

The records of Gemini Company show a contribution margin ratio of 40%.The company desires to earn a profit of $35,000 and has fixed costs of $70,000.What sales revenue would have to be generated in order to earn the desired profit?

Accepted Answer

A)  $87,500 
B)  $262,500 
C)  $175,000 
D)  $42,000 
A)  $87,500 
B)  $262,500 
C)  $175,000 
D)  $42,000

Question 9

Beacon Company makes a product that has a variable cost of $25 per unit and a selling price of $45 per unit.Annual fixed costs total $860,000.Beacon's net income last year was $240,000.Beacon's management is considering lowering the selling price to $40.
Required:
1)How many units did Beacon sell last year?
2)If Beacon Company wants to maintain the same level of income that it had last year,how many units would it have to sell at the new selling price of $35?

Accepted Answer

1)(Net income + Fixed costs)= Contributi

Question 10

If total fixed costs increase while variable costs and sales price are unchanged,what happens to the break-even point?

Accepted Answer

A)  The break-even point increases,and therefore more units must be sold to break even. 
B)  The break-even point decreases,and therefore fewer units must be sold to break even. 
C)  The break-even point remains the same. 
D)  The break-even point decreases and therefore more units must be sold to break even. 
A)  The break-even point increases,and therefore more units must be sold to break even. 
B)  The break-even point decreases,and therefore fewer units must be sold to break even. 
C)  The break-even point remains the same. 
D)  The break-even point decreases and therefore more units must be sold to break even.

Question 11

Lush Lawn,Inc.produces and sells electric lawn trimmers for $120 each.The variable costs of each mower total $80 while total monthly fixed costs are $6,000.Current monthly sales are $48,000.The company is considering a proposal that will decrease the selling price by 10%,increase monthly fixed costs by 50% and increase unit sales to 450 units per month.
Required:
1)Compute the company's current break-even point in units and dollars.
2)What is the company's current margin of safety in units,dollars,and percentage?
3)Compute the company's margin of safety in units assuming the proposal is accepted.
4)Compute the increase or decrease in profit assuming the proposal is accepted.

Accepted Answer

1)Break-even point in units: $6,000 ÷ ($

Question 12

To attain a target profit,the total gross margin generated from sales must be sufficient to cover total fixed costs plus the target profit.

Accepted Answer

A) True 
 B)False

Question 13

The margin of safety ratio can be defined as the:

Accepted Answer

A)  Excess of budgeted sales over break-even sales divided by break-even sales. 
B)  Excess of budgeted sales over break-even sales divided by budgeted sales. 
C)  Excess of budgeted sales over fixed costs divided by budgeted sales. 
D)  Excess of budgeted sales over variable costs divided by budgeted sales. 
A)  Excess of budgeted sales over break-even sales divided by break-even sales. 
B)  Excess of budgeted sales over break-even sales divided by budgeted sales. 
C)  Excess of budgeted sales over fixed costs divided by budgeted sales. 
D)  Excess of budgeted sales over variable costs divided by budgeted sales.

Question 14

Jarvis Company produces a product that has a selling price of $20.00 and a variable cost of $15.00 per unit.The company's fixed costs are $50,000.What is the break-even point measured in sales dollars?

Accepted Answer

A)  $150,000 
B)  $200,000 
C)  $62,500 
D)  $100,000 
A)  $150,000 
B)  $200,000 
C)  $62,500 
D)  $100,000

Question 15

Bloom Company has variable cost per unit of $20 and a sales price of $35 per unit.Its total fixed costs are $240,000.Which of the following is a correct statement?

Accepted Answer

A)  Company D's break-even point is 12,000 units. 
B)  If budgeted sales are 25,000 units,D's margin of safety is 10,000 units. 
C)  If Company D's variable cost per unit increases and nothing else changes,the margin of safety will decrease. 
D)  If Company D's variable cost per unit decreases and nothing else changes,the break-even point will stay the same. 
A)  Company D's break-even point is 12,000 units. 
B)  If budgeted sales are 25,000 units,D's margin of safety is 10,000 units. 
C)  If Company D's variable cost per unit increases and nothing else changes,the margin of safety will decrease. 
D)  If Company D's variable cost per unit decreases and nothing else changes,the break-even point will stay the same.

Question 16

Billings Company has developed the following budgeted income statement: $\begin{array}{|l|r|}
\hline \text { Sales Revenue }(2,300 \text { units } \times \$ 14 \text { sales price }) & \$ 32,200 \
\hline \text { Total Variable Expenses }(2,300 \times \$ 6 \text { per unit }) & \underline{(13,800)} \
\hline \text { Contribution Margin } & 18,400 \
\hline \text { Fixed Expenses } & \underline{(10,000)} \
\hline \text { Net Income } & \underline{\$ 8400}\
\hline\
\hline
\end{array}$ The Company is experimenting with new engineering techniques and believes it can reduce variable cost to $4.50 per unit and significantly improve the product.The innovations would double fixed costs but the company expects to be able to increase sales to 3,500 units.If this strategy is pursued the company's budgeted net income will:

Accepted Answer

A)  decrease by $4,250. 
B)  increase by $4,850. 
C)  increase by $13,250. 
D)  decrease by $4,150. 
A)  decrease by $4,250. 
B)  increase by $4,850. 
C)  increase by $13,250. 
D)  decrease by $4,150.

Question 17

Select the term from the list provided that best describes each of the following descriptions or definitions.

Accepted Answer

The answer of Select the term from the list provided...

Question 18

Consider the following cost-volume-profit graph:   Based on the information in the graph,the breakeven point in sales dollars is approximately equal to:

Accepted Answer

A)  $50,000. 
B)  $30,000. 
C)  $60,000. 
D)  $20,000. 
A)  $50,000. 
B)  $30,000. 
C)  $60,000. 
D)  $20,000.

Question 19

Which of the following is not one of the assumptions underlying cost-volume-profit analysis?

Accepted Answer

A)  Costs are linear. 
B)  Production equals sales. 
C)  All costs can be segregated into fixed and variable components. 
D)  The selling price increases or decreases with changes in sales volume. 
A)  Costs are linear. 
B)  Production equals sales. 
C)  All costs can be segregated into fixed and variable components. 
D)  The selling price increases or decreases with changes in sales volume.

Question 20

Ng Company sells one product that has a sales price of $20 per unit,variable costs of $12 per unit,and total fixed costs of $300,000.What is the amount of sales volume in dollars necessary to attain a desired profit of $100,000?

Accepted Answer

A)  $250,000 
B)  $750,000 
C)  $1,000,000 
D)  $666,667 
A)  $250,000 
B)  $750,000 
C)  $1,000,000 
D)  $666,667

A margin of safety of 30% means that every dollar in revenue generates thirty cents in profit.

Company A makes and sells a single product,unless otherwise indicated.What happens to break-even point when the variable cost per unit and selling price both decrease by the same amount?

For a company that sells several products,cost-volume-profit techniques cannot be used to calculate the sales volume required to yield a target level of profit.

For 2013During the current year,Winchester Company sold 80,000 units at a selling price of $20 per unit.Variable cost per unit was $15,and Winchester's net income for the year was $40,000.What was the amount of Winchester's fixed costs?

Kingston Company sells its product for $200 per unit.The company's accountant provided the following cost information: Manufacturing costs \ 25,000+40\% of sales Selling costs \ 10,000+20\% of sales Administrative costs \ 15,000+10\% of sales What is Kingston Company's contribution margin ratio?

At its $60 selling price,Atlantic Company has sales of $15,000,variable manufacturing costs of $4,000,fixed manufacturing costs of $1,000,variable selling and administrative costs of $2,000 and fixed selling and administrative costs of $1,000.What is the company's contribution margin per unit?

The records of Gemini Company show a contribution margin ratio of 40%.The company desires to earn a profit of $35,000 and has fixed costs of $70,000.What sales revenue would have to be generated in order to earn the desired profit?

If total fixed costs increase while variable costs and sales price are unchanged,what happens to the break-even point?

To attain a target profit,the total gross margin generated from sales must be sufficient to cover total fixed costs plus the target profit.

The margin of safety ratio can be defined as the:

Jarvis Company produces a product that has a selling price of $20.00 and a variable cost of $15.00 per unit.The company's fixed costs are $50,000.What is the break-even point measured in sales dollars?

Bloom Company has variable cost per unit of $20 and a sales price of $35 per unit.Its total fixed costs are $240,000.Which of the following is a correct statement?

Select the term from the list provided that best describes each of the following descriptions or definitions.

Consider the following cost-volume-profit graph: Based on the information in the graph,the breakeven point in sales dollars is approximately equal to:

Which of the following is not one of the assumptions underlying cost-volume-profit analysis?

Ng Company sells one product that has a sales price of $20 per unit,variable costs of $12 per unit,and total fixed costs of $300,000.What is the amount of sales volume in dollars necessary to attain a desired profit of $100,000?

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation,Tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters

Exam 3: Analysis of Cost,Volume,and Pricing to Increase Profitability

A margin of safety of 30% means that every dollar in revenue generates thirty cents in profit.

Company A makes and sells a single product,unless otherwise indicated.What happens to break-even point when the variable cost per unit and selling price both decrease by the same amount?

For a company that sells several products,cost-volume-profit techniques cannot be used to calculate the sales volume required to yield a target level of profit.

For 2013During the current year,Winchester Company sold 80,000 units at a selling price of $20 per unit.Variable cost per unit was $15,and Winchester's net income for the year was $40,000.What was the amount of Winchester's fixed costs?

Kingston Company sells its product for $200 per unit.The company's accountant provided the following cost information: Manufacturing costs \ 25,000+40\% of sales Selling costs \ 10,000+20\% of sales Administrative costs \ 15,000+10\% of sales What is Kingston Company's contribution margin ratio?

At its $60 selling price,Atlantic Company has sales of $15,000,variable manufacturing costs of $4,000,fixed manufacturing costs of $1,000,variable selling and administrative costs of $2,000 and fixed selling and administrative costs of $1,000.What is the company's contribution margin per unit?

The records of Gemini Company show a contribution margin ratio of 40%.The company desires to earn a profit of $35,000 and has fixed costs of $70,000.What sales revenue would have to be generated in order to earn the desired profit?

If total fixed costs increase while variable costs and sales price are unchanged,what happens to the break-even point?

To attain a target profit,the total gross margin generated from sales must be sufficient to cover total fixed costs plus the target profit.

The margin of safety ratio can be defined as the:

Jarvis Company produces a product that has a selling price of $20.00 and a variable cost of $15.00 per unit.The company's fixed costs are $50,000.What is the break-even point measured in sales dollars?

Bloom Company has variable cost per unit of $20 and a sales price of $35 per unit.Its total fixed costs are $240,000.Which of the following is a correct statement?

Select the term from the list provided that best describes each of the following descriptions or definitions.

Consider the following cost-volume-profit graph: Based on the information in the graph,the breakeven point in sales dollars is approximately equal to:

Which of the following is not one of the assumptions underlying cost-volume-profit analysis?

Ng Company sells one product that has a sales price of $20 per unit,variable costs of $12 per unit,and total fixed costs of $300,000.What is the amount of sales volume in dollars necessary to attain a desired profit of $100,000?

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation,Tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters