Question 1

If you were drawing a cost-volume-profit graph for a company,what lines would you plot on the graph?

Accepted Answer

Answers will vary
The three li

Question 2

On a cost-volume-profit graph,the total revenue line begins at the break-even point and slopes upward to the right.

Accepted Answer

A) True 
 B)False

Question 3

An increase in total fixed costs increases the break-even point.

Accepted Answer

A) True 
 B)False

Question 4

Rocky Mountain Bottling Company produces a soft drink that is sold for a dollar.At production and sales of 800,000 units,the company pays $600,000 in production costs,half of which are fixed costs.At that volume,general,selling,and administrative costs amount to $250,000 of which $70,000 are fixed costs.What is the amount of contribution margin per unit?

Accepted Answer

A)  $0.40 
B)  $0.5375 
C)  $0.25 
D)  None of these is correct. 
A)  $0.40 
B)  $0.5375 
C)  $0.25 
D)  None of these is correct.

Question 5

Sharon Company has variable costs of $80 per unit,total fixed costs of $200,000,and a break-even point of 5,000 units.If the sales price per unit is increased by $10,how many units must Sharon Company sell to break-even?

Accepted Answer

A)  4,000 units 
B)  5,000 units 
C)  6,000 units 
D)  3,000 units 
A)  4,000 units 
B)  5,000 units 
C)  6,000 units 
D)  3,000 units

Question 6

Assuming a company uses a markup equal to 25% of cost,the cost of a product that sells for $100 is $75.

Accepted Answer

A) True 
 B)False

Question 7

Consider the following cost-volume-profit graph:   The line designated by the letter (B)represents which of the following?

Accepted Answer

A)  Variable cost 
B)  Break-even 
C)  Total revenue 
D)  Total cost 
A)  Variable cost 
B)  Break-even 
C)  Total revenue 
D)  Total cost

Question 8

One of the advantages of target costing is that it specifically considers the probable market price for the product.

Accepted Answer

A) True 
 B)False

Question 9

Phillips Company can sell 15,000 units of its new product at a selling price of $116.The unit cost is $72.The company's target profit is 40% of sales.The Vice President of Marketing has learned that a competitor plans to introduce a similar product for $104.The Vice President has recommended that Phillips match the competitor's price.She believes the lower selling price will increase sales volume by 20%.
Required:
1)Compute the company's net income assuming the product is sold for $116 and the costs remain at $72.Assume there were no additional costs.
2)Compute the product's target cost if it is sold at a $116 selling price.
3)Compute the company's net income if the target cost computed in Requirement 2 is achieved.
4)Compute the change in income from Requirement 1 if the product is sold for $104,costs remain at $72,and volume is increased by 20%.

Accepted Answer

1)Profit assuming $116 selling price and

Question 10

On a cost-volume-profit graph,the total revenue line lies below the total cost line to the left of the break-even point.

Accepted Answer

A) True 
 B)False

Question 11

When computing the break-even point in units,a company should round to the next whole unit because partial units ordinarily are not sold.

Accepted Answer

A) True 
 B)False

Question 12

Write an equation for each item provided: Contribution margin per unit $=$_____________
Contribution margin ratio $=$____________
Break-even in units $=$___________
Break-even in dollars $=$______________
Units required to achieve desired profit =______________
Dollars required to achieve desired profit =_______________
Margin of safety ratio $=$_______________

Accepted Answer

Contribution margin per unit = Unit sell

Question 13

How would a company use target pricing to identify the desired cost for a product or service?

Accepted Answer

Answers will vary
First,the company woul

Question 14

Select the incorrect statement regarding cost-volume-profit relationships for multiple products.

Accepted Answer

A)  For a company that sells many different products,the level of the break-even point is affected by the company's sales mix. 
B)  An increase in sales volume accompanied by a change in sales mix could cause a company's profits to decrease. 
C)  For a multi-product company,cost-volume-profit analysis can be done using the contribution margin ratio of the most profitable product. 
D)  None of these answers is correct. 
A)  For a company that sells many different products,the level of the break-even point is affected by the company's sales mix. 
B)  An increase in sales volume accompanied by a change in sales mix could cause a company's profits to decrease. 
C)  For a multi-product company,cost-volume-profit analysis can be done using the contribution margin ratio of the most profitable product. 
D)  None of these answers is correct.

Question 15

Which of the following statements regarding cost-volume-profit analysis is incorrect?

Accepted Answer

A)  Cost-volume-profit analysis assumes that fixed cost per unit is constant. 
B)  Cost-volume-profit analysis assumes that the selling price cost per unit is constant. 
C)  An increase in inventory during a period will affect cost-volume-profit relationships. 
D)  Although cost-volume-profit analysis is based on assumptions that seldom will be perfectly achieved,the technique is still useful to managers. 
A)  Cost-volume-profit analysis assumes that fixed cost per unit is constant. 
B)  Cost-volume-profit analysis assumes that the selling price cost per unit is constant. 
C)  An increase in inventory during a period will affect cost-volume-profit relationships. 
D)  Although cost-volume-profit analysis is based on assumptions that seldom will be perfectly achieved,the technique is still useful to managers.

Question 16

How does the cost-volume-profit model accommodate non-linear costs and revenues?

Accepted Answer

A)  Non-linear costs and revenues are ignored by the model. 
B)  Inventory levels are segregated into distinct ranges within which a linear relationship is expected to approximate the actual cost or revenue behavior. 
C)  It is not a problem since non-linear costs and revenues do not exist in practice. 
D)  None of these is correct. 
A)  Non-linear costs and revenues are ignored by the model. 
B)  Inventory levels are segregated into distinct ranges within which a linear relationship is expected to approximate the actual cost or revenue behavior. 
C)  It is not a problem since non-linear costs and revenues do not exist in practice. 
D)  None of these is correct.

Question 17

What are the assumptions on which cost-volume-profit analysis is based? Are there any additional assumptions for a multiproduct company?

Accepted Answer

Answers will vary
The underlying assumpt

Question 18

Chester Company plans to introduce a new product.A market research specialist claims that 20,000 units can be sold at a $100 selling price.Assuming the company desires a profit margin of 22% of sales,what is the target cost per unit?

Accepted Answer

A)  $128.21 
B)  $78 
C)  $80 
D)  $20 
A)  $128.21 
B)  $78 
C)  $80 
D)  $20

Question 19

The Victor Company sells two products.The following information is provided: $$\begin{array} { | l | r| r | r r | } 
\hline & { \text { Product A } } & { \text { Product B } } \
\hline \text { Unit selling price } & \$  100 & \$ 150 \
\hline \text { Unit variable cost } & \$  30 & \$  70 \
\hline \begin{array} { l } 
\text { Number of units produced and } \
\text { sold }
\end{array} &  20,000 &  60,000 \
\hline
\end{array}$$ What is the weighted average contribution margin per unit?

Accepted Answer

A)  $77.50 
B)  $80.00 
C)  $75.00 
D)  $72.50 
A)  $77.50 
B)  $80.00 
C)  $75.00 
D)  $72.50

Question 20

Anton Company produces and sells bicycles for $500.The variable costs per unit are $300 plus a sales commission of 15% of the selling price.Total fixed costs consist of $16,000 in fixed overhead and $9,000 in fixed selling and administrative costs.
Required:
1)Compute the contribution margin per unit.
2)Compute the break-even point in units and dollars.
3)How many units must be sold to earn a profit of $20,000?
4)What would be the break-even point in units if the sales commission is reduced to $20 per unit sold?

Accepted Answer

1)Contribution margin per unit = $500 -

If you were drawing a cost-volume-profit graph for a company,what lines would you plot on the graph?

On a cost-volume-profit graph,the total revenue line begins at the break-even point and slopes upward to the right.

An increase in total fixed costs increases the break-even point.

Sharon Company has variable costs of $80 per unit,total fixed costs of $200,000,and a break-even point of 5,000 units.If the sales price per unit is increased by $10,how many units must Sharon Company sell to break-even?

Assuming a company uses a markup equal to 25% of cost,the cost of a product that sells for $100 is $75.

Consider the following cost-volume-profit graph: The line designated by the letter (B)represents which of the following?

One of the advantages of target costing is that it specifically considers the probable market price for the product.

On a cost-volume-profit graph,the total revenue line lies below the total cost line to the left of the break-even point.

When computing the break-even point in units,a company should round to the next whole unit because partial units ordinarily are not sold.

Write an equation for each item provided: Contribution margin per unit $=$ _______ Contribution margin ratio $=$ Break-even in units $=$ _ Break-even in dollars $=$ __ Units required to achieve desired profit = Dollars required to achieve desired profit =_ Margin of safety ratio $=$ _______

How would a company use target pricing to identify the desired cost for a product or service?

Select the incorrect statement regarding cost-volume-profit relationships for multiple products.

Which of the following statements regarding cost-volume-profit analysis is incorrect?

How does the cost-volume-profit model accommodate non-linear costs and revenues?

What are the assumptions on which cost-volume-profit analysis is based? Are there any additional assumptions for a multiproduct company?

Chester Company plans to introduce a new product.A market research specialist claims that 20,000 units can be sold at a $100 selling price.Assuming the company desires a profit margin of 22% of sales,what is the target cost per unit?

The Victor Company sells two products.The following information is provided: Product A Product B Unit selling price \ 100 \ 150 Unit variable cost \ 30 \ 70 Number of units produced and sold 20,000 60,000 What is the weighted average contribution margin per unit?

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

If you were drawing a cost-volume-profit graph for a company,what lines would you plot on the graph?

On a cost-volume-profit graph,the total revenue line begins at the break-even point and slopes upward to the right.

An increase in total fixed costs increases the break-even point.

Sharon Company has variable costs of $80 per unit,total fixed costs of $200,000,and a break-even point of 5,000 units.If the sales price per unit is increased by $10,how many units must Sharon Company sell to break-even?

Assuming a company uses a markup equal to 25% of cost,the cost of a product that sells for $100 is $75.

Consider the following cost-volume-profit graph: The line designated by the letter (B)represents which of the following?

One of the advantages of target costing is that it specifically considers the probable market price for the product.

On a cost-volume-profit graph,the total revenue line lies below the total cost line to the left of the break-even point.

When computing the break-even point in units,a company should round to the next whole unit because partial units ordinarily are not sold.

How would a company use target pricing to identify the desired cost for a product or service?

Select the incorrect statement regarding cost-volume-profit relationships for multiple products.

Which of the following statements regarding cost-volume-profit analysis is incorrect?

How does the cost-volume-profit model accommodate non-linear costs and revenues?

What are the assumptions on which cost-volume-profit analysis is based? Are there any additional assumptions for a multiproduct company?

Chester Company plans to introduce a new product.A market research specialist claims that 20,000 units can be sold at a $100 selling price.Assuming the company desires a profit margin of 22% of sales,what is the target cost per unit?

The Victor Company sells two products.The following information is provided: Product A Product B Unit selling price \ 100 \ 150 Unit variable cost \ 30 \ 70 Number of units produced and sold 20,000 60,000 What is the weighted average contribution margin per unit?

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