Question 1

Gross margin is the same as contribution margin.

Accepted Answer

A) True 
 B)False

Question 2

The Newman Company produces two models of garage door openers, Standard and Deluxe.
The company expects to sell 900 units of the Standard model and 300 units of the Deluxe model (a sales mix of 3:1).
A projected income statement for the firm as a whole for 2006 follows:   a. Determine the break-even point in sales for 2006.
b. Determine sales revenue necessary to generate a before-tax profit of $150,000.
c. Determine sales revenue necessary to generate an after-tax profit of $210,000 if the tax rate is 30 percent.

Accepted Answer

a. Contribution margin ratio =

Question 3

Hampton Company, a producer of computer disks, has the following information:
  
-What is the contribution-margin ratio?

Accepted Answer

A)  40 percent 
B)  60 percent 
C)  100 percent 
D)  None of the above. 
A)  40 percent 
B)  60 percent 
C)  100 percent 
D)  None of the above.

Question 4

Hampton Company, a producer of computer disks, has the following information:
  
-The limiting assumptions of CVP analysis include all of the following EXCEPT

Accepted Answer

A)  a nonlinear revenue function and a nonlinear cost function. 
B)  that the inventory levels at the beginning of the period are close to the inventory levels at the end of a period. 
C)  selling prices and costs are known with certainty. 
D)  costs can be separated into fixed and variable components. 
A)  a nonlinear revenue function and a nonlinear cost function. 
B)  that the inventory levels at the beginning of the period are close to the inventory levels at the end of a period. 
C)  selling prices and costs are known with certainty. 
D)  costs can be separated into fixed and variable components.

Question 5

Hampton Company, a producer of computer disks, has the following information:
  
-What is the break-even point in dollars?

Accepted Answer

A)  $54,000 
B)  $36,000 
C)  $90,000 
D)  $60,000 
A)  $54,000 
B)  $36,000 
C)  $90,000 
D)  $60,000

Question 6

Reese, Inc. produces pliers. Each pair of pliers sells for $8.00. Variable costs per unit total $5.60 of which $2.50 is for direct materials and $2.10 is for direct labour.
-If targeted after-tax net income is $27,000 with a 40 percent tax rate, contribution margin per unit is $0.80, and total fixed costs are $148,000, how many units must be sold to break even?

Accepted Answer

A)  218,750 
B)  241,250 
C)  185,000 
D)  167,250 
A)  218,750 
B)  241,250 
C)  185,000 
D)  167,250

Question 7

Hampton Company, a producer of computer disks, has the following information:
  
-The cost-volume-profit graph does NOT show

Accepted Answer

A)  the break-even point. 
B)  the profit or loss at any rate of activity. 
C)  the fixed cost per unit. 
D)  sales volume. 
A)  the break-even point. 
B)  the profit or loss at any rate of activity. 
C)  the fixed cost per unit. 
D)  sales volume.

Question 8

Hampton Company, a producer of computer disks, has the following information:
  
-If fixed expenses were doubled and contribution margin per unit was cut in half, then the break-even point would

Accepted Answer

A)  be cut in half. 
B)  double. 
C)  triple. 
D)  quadruple. 
A)  be cut in half. 
B)  double. 
C)  triple. 
D)  quadruple.

Question 9

An increase in sales price would cause a decrease in the break-even point.

Accepted Answer

A) True 
 B)False

Question 10

As sales exceed the break-even point, a high contribution-margin percentage

Accepted Answer

A)  decreases profits faster than does a small contribution-margin percentage. 
B)  decreases profits at the same rate as a small contribution-margin percentage. 
C)  increases profits at the same rate as a small contribution-margin percentage. 
D)  increases profits faster than does a small contribution-margin percentage. 
A)  decreases profits faster than does a small contribution-margin percentage. 
B)  decreases profits at the same rate as a small contribution-margin percentage. 
C)  increases profits at the same rate as a small contribution-margin percentage. 
D)  increases profits faster than does a small contribution-margin percentage.

Question 11

Operating leverage is

Accepted Answer

A)  the ratio of net income to sales. 
B)  the ability of a firm to pay off its debts. 
C)  the ratio of fixed costs to variable costs. 
D)  also referred to as working capital. 
A)  the ratio of net income to sales. 
B)  the ability of a firm to pay off its debts. 
C)  the ratio of fixed costs to variable costs. 
D)  also referred to as working capital.

Question 12

As production increases within the relevant range, fixed costs per unit

Accepted Answer

A)  decrease. 
B)  increase. 
C)  stay the same. 
D)  cannot be determined with the information given. 
A)  decrease. 
B)  increase. 
C)  stay the same. 
D)  cannot be determined with the information given.

Question 13

In a highly leveraged company,

Accepted Answer

A)  fixed costs are low and variable costs are high. 
B)  large changes in sales volume result in small changes in net income. 
C)  there is a higher possibility of net income or net loss and therefore more risk than a low leveraged firm. 
D)  a variation in sales leads to only a small variability in net income. 
A)  fixed costs are low and variable costs are high. 
B)  large changes in sales volume result in small changes in net income. 
C)  there is a higher possibility of net income or net loss and therefore more risk than a low leveraged firm. 
D)  a variation in sales leads to only a small variability in net income.

Question 14

If targeted sales volume in units is 124,600, total fixed costs are $15,600, and contribution margin per unit is $0.30, then the targeted net income is

Accepted Answer

A)  $37,380. 
B)  $32,700. 
C)  $15,600. 
D)  $21,780. 
A)  $37,380. 
B)  $32,700. 
C)  $15,600. 
D)  $21,780.

Question 15

Given the following information for Baugh Company:   Required:
a. Compute the contribution margin per unit.
b. Compute the contribution-margin ratio.
c. Compute the break-even point in units.
d. Compute the break-even volume in dollars.

Accepted Answer

a. $36 - $24 = $12 per unit
b.

Question 16

The following information is for Lyceum, Ltd.:
  
-If total fixed costs increased to $156,750, then break-even volume in dollars would increase by

Accepted Answer

A)  12.3 percent. 
B)  20.0 percent. 
C)  34.3 percent. 
D)  10.0 percent. 
A)  12.3 percent. 
B)  20.0 percent. 
C)  34.3 percent. 
D)  10.0 percent.

Question 17

As the level of activity increases within the relevant range,

Accepted Answer

A)  total fixed costs increases. 
B)  fixed costs per unit decreases. 
C)  total variable costs remain unchanged. 
D)  variable costs per unit decreases. 
A)  total fixed costs increases. 
B)  fixed costs per unit decreases. 
C)  total variable costs remain unchanged. 
D)  variable costs per unit decreases.

Question 18

Hampton Company, a producer of computer disks, has the following information:
  
-How many units must be sold to obtain a targeted income before taxes of $6,000?

Accepted Answer

A)  36,000 
B)  42,000 
C)  90,000 
D)  105,000 
A)  36,000 
B)  42,000 
C)  90,000 
D)  105,000

Question 19

The break-even point is located at the intersection of the total revenue line and the total expenses line on a cost-volume-profit graph.

Accepted Answer

A) True 
 B)False

Question 20

Use the following information to answer the next question(s).
  
-Breakeven for the product (rounded to the nearest whole unit) is

Accepted Answer

A)  727 units. 
B)  888 units. 
C)  1,000 units. 
D)  1,500. 
A)  727 units. 
B)  888 units. 
C)  1,000 units. 
D)  1,500.

Gross margin is the same as contribution margin.

Hampton Company, a producer of computer disks, has the following information: -What is the contribution-margin ratio?

Hampton Company, a producer of computer disks, has the following information: -The limiting assumptions of CVP analysis include all of the following EXCEPT

Hampton Company, a producer of computer disks, has the following information: -What is the break-even point in dollars?

Hampton Company, a producer of computer disks, has the following information: -The cost-volume-profit graph does NOT show

Hampton Company, a producer of computer disks, has the following information: -If fixed expenses were doubled and contribution margin per unit was cut in half, then the break-even point would

An increase in sales price would cause a decrease in the break-even point.

As sales exceed the break-even point, a high contribution-margin percentage

Operating leverage is

As production increases within the relevant range, fixed costs per unit

In a highly leveraged company,

If targeted sales volume in units is 124,600, total fixed costs are $15,600, and contribution margin per unit is $0.30, then the targeted net income is

Given the following information for Baugh Company: Required: a. Compute the contribution margin per unit. b. Compute the contribution-margin ratio. c. Compute the break-even point in units. d. Compute the break-even volume in dollars.

The following information is for Lyceum, Ltd.: -If total fixed costs increased to $156,750, then break-even volume in dollars would increase by

As the level of activity increases within the relevant range,

Hampton Company, a producer of computer disks, has the following information: -How many units must be sold to obtain a targeted income before taxes of $6,000?

The break-even point is located at the intersection of the total revenue line and the total expenses line on a cost-volume-profit graph.

Use the following information to answer the next question(s). -Breakeven for the product (rounded to the nearest whole unit) is

Management Accounting and Management Decisions

Measurement of Cost Behaviour

Cost Management Systems

Cost Allocation and Activity-Based Costing Systems

Job-Costing Systems

Process-Costing Systems

Relevant Information and Decision Making: Marketing Decisions

Relevant Information and Decision Making: Production Decisions

Capital Budgeting Decisions

The Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems, the Balanced Scorecard, and Responsibility Accounting

Management Control in Decentralized Organizations

Filters

Exam 2: Cost Behaviour and Cost-Volume Relationships

Gross margin is the same as contribution margin.

Hampton Company, a producer of computer disks, has the following information: -What is the contribution-margin ratio?

Hampton Company, a producer of computer disks, has the following information: -The limiting assumptions of CVP analysis include all of the following EXCEPT

Hampton Company, a producer of computer disks, has the following information: -What is the break-even point in dollars?

Hampton Company, a producer of computer disks, has the following information: -The cost-volume-profit graph does NOT show

Hampton Company, a producer of computer disks, has the following information: -If fixed expenses were doubled and contribution margin per unit was cut in half, then the break-even point would

An increase in sales price would cause a decrease in the break-even point.

As sales exceed the break-even point, a high contribution-margin percentage

Operating leverage is

As production increases within the relevant range, fixed costs per unit

In a highly leveraged company,

If targeted sales volume in units is 124,600, total fixed costs are $15,600, and contribution margin per unit is $0.30, then the targeted net income is

Given the following information for Baugh Company: Required: a. Compute the contribution margin per unit. b. Compute the contribution-margin ratio. c. Compute the break-even point in units. d. Compute the break-even volume in dollars.

The following information is for Lyceum, Ltd.: -If total fixed costs increased to $156,750, then break-even volume in dollars would increase by

As the level of activity increases within the relevant range,

Hampton Company, a producer of computer disks, has the following information: -How many units must be sold to obtain a targeted income before taxes of $6,000?

The break-even point is located at the intersection of the total revenue line and the total expenses line on a cost-volume-profit graph.

Use the following information to answer the next question(s). -Breakeven for the product (rounded to the nearest whole unit) is

Management Accounting and Management Decisions

Measurement of Cost Behaviour

Cost Management Systems

Cost Allocation and Activity-Based Costing Systems

Job-Costing Systems

Process-Costing Systems

Relevant Information and Decision Making: Marketing Decisions

Relevant Information and Decision Making: Production Decisions

Capital Budgeting Decisions

The Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems, the Balanced Scorecard, and Responsibility Accounting

Management Control in Decentralized Organizations

Filters