Question 1

Which of the following companies would most likely have a high operating leverage?

Accepted Answer

A) A landscaping company. 
B) An accounting company. 
C) A plumbing company. 
D) A company manufacturing microprocessors. 
E) None of these have high operating leverage. 
A) A landscaping company. 
B) An accounting company. 
C) A plumbing company. 
D) A company manufacturing microprocessors. 
E) None of these have high operating leverage. D

Question 2

Exhibit 6-2
Victor Company makes a single product.The company has monthly fixed costs totaling $200,000 and variable costs of $20 per unit.Each unit of product is sold for $35.Brevard expects to sell 25,000 units each month.
-Refer to Exhibit 6-2.What is the monthly operating profit?

Accepted Answer

A) $275,000 
B) $375,000 
C) $175,000 
D) $675,000 
E) None of the answer choices is correct. 
A) $275,000 
B) $375,000 
C) $175,000 
D) $675,000 
E) None of the answer choices is correct. C

Question 3

Although absorption costing meets the requirements of generally accepted accounting principles,variable costing is typically more useful for internal decision making purposes.

Accepted Answer

A) True 
 B)False  True

Question 4

Exhibit 6-4
Sanchez Company produces two different remote control products with the following monthly data for the most recent month:
  
-Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales.
How many units in total must be sold to earn a monthly profit of $504,000?

Accepted Answer

A) 43,273 
B) 19,040 
C) 38,080 
D) 34,000 
E) None of the answer choices is correct. 
A) 43,273 
B) 19,040 
C) 38,080 
D) 34,000 
E) None of the answer choices is correct.

Question 5

All of the following are assumptions required to perform break-even and target profit calculations except:

Accepted Answer

A) Costs can be separated into fixed and variable components. 
B) Contribution margin ratio remains constant for each product,segment,or department. 
C) Break-even points can only be calculated for single product companies. 
D) Sales mix remains constant with changes in sales volume. 
E) None of the answer choices is correct. 
A) Costs can be separated into fixed and variable components. 
B) Contribution margin ratio remains constant for each product,segment,or department. 
C) Break-even points can only be calculated for single product companies. 
D) Sales mix remains constant with changes in sales volume. 
E) None of the answer choices is correct.

Question 6

Exhibit 6-4
Sanchez Company produces two different remote control products with the following monthly data for the most recent month:
  
-Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales.
How many units of each product must be sold to earn a monthly profit of $504,000?

Accepted Answer

A) Plane 34,618 units;Boat 8,655 units 
B) Plane 15,232 units;Boat 3,808 units 
C) Plane 30,464 units;Boat 7,616 units 
D) Plane 27,200 units;Boat 6,800 units 
E) None of the answer choices is correct. 
A) Plane 34,618 units;Boat 8,655 units 
B) Plane 15,232 units;Boat 3,808 units 
C) Plane 30,464 units;Boat 7,616 units 
D) Plane 27,200 units;Boat 6,800 units 
E) None of the answer choices is correct.

Question 7

The only difference between absorption costing and variable costing is the treatment of fixed manufacturing overhead costs.

Accepted Answer

A) True 
 B)False

Question 8

A change in the sales mix will always decrease the break-even point.

Accepted Answer

A) True 
 B)False

Question 9

Firms with low operating leverage tend to make more from increasing sales than similar firms with high operating leverage.

Accepted Answer

A) True 
 B)False

Question 10

Capri Incorporated has annual fixed costs totaling $3,000,000 and variable costs of $450 per unit.Each unit of product is sold for $850.Assume a tax rate of 30 percent.How many sales dollars are required to earn an annual profit of $210,000 after taxes?

Accepted Answer

A) $3,898,100 
B) $7,012,500 
C) $7,862,500 
D) $6,821,250 
E) None of the answer choices is correct. 
A) $3,898,100 
B) $7,012,500 
C) $7,862,500 
D) $6,821,250 
E) None of the answer choices is correct.

Question 11

Exhibit 6-6
Sauer Company sells folding chairs for $40.00 per unit.Variable cost is $15.00 per unit.Each chair requires 4 direct labor hours and 2 machine hours to produce.
-Refer to Exhibit 6-6.Which of the following is the correct contribution margin per machine hour?

Accepted Answer

A) $12.50 
B) $6.25 
C) $0.08 
D) $0.10 
E) None of the answer choices is correct. 
A) $12.50 
B) $6.25 
C) $0.08 
D) $0.10 
E) None of the answer choices is correct.

Question 12

The margin of safety cannot be calculated for multiple product and service organizations.

Accepted Answer

A) True 
 B)False

Question 13

Exhibit 6-2
Victor Company makes a single product.The company has monthly fixed costs totaling $200,000 and variable costs of $20 per unit.Each unit of product is sold for $35.Brevard expects to sell 25,000 units each month.
-Refer to Exhibit 6-2.What would be the operating profit if the unit sales price increases 10 percent?

Accepted Answer

A) $312,500 
B) $212,500 
C) $362,500 
D) $262,500 
E) None of the answer choices is correct. 
A) $312,500 
B) $212,500 
C) $362,500 
D) $262,500 
E) None of the answer choices is correct.

Question 14

Assume that Snowmobile Company produces two products: Racer and Cruiser.Below are the data for each:
   
In the past,Snowmobiles had difficulty finding skilled workers.However,the company recently hired additional labor,thereby eliminating this resource constraint.The company now is faced with limited available machine-hours.It has a total of 4,000 machine-hours available each month.The Racer requires 50 machine-hours per unit and the Cruiser requires 15 machine-hours per unit.
(1)What is the contribution margin provided by each product?
(2)Calculate the contribution margin per unit of constrained resource for each model.
(3)Which model would the company prefer to sell to maximize overall company profit?

Accepted Answer

The answer of Assume that Snowmobile Company produces two products:...

Question 15

Management of Raley Company would like to achieve a target profit after taxes of $80,000.The company's income tax rate is 20 percent.What target profit before taxes is required to earn $80,000 in after tax profit?

Accepted Answer

A) $100,000 
B) $64,000 
C) $160,000 
D) $400,000 
E) None of the answer choices is correct. 
A) $100,000 
B) $64,000 
C) $160,000 
D) $400,000 
E) None of the answer choices is correct.

Question 16

Paco's Bikes sells 120 bicycles each month for $400 per unit.Variable cost per unit is $160 and fixed costs total $4,800 per month.What is the contribution margin per unit?

Accepted Answer

A) $160 
B) $280 
C) $200 
D) $240 
E) None of the answer choices is correct. 
A) $160 
B) $280 
C) $200 
D) $240 
E) None of the answer choices is correct.

Question 17

Exhibit 6-2
Victor Company makes a single product.The company has monthly fixed costs totaling $200,000 and variable costs of $20 per unit.Each unit of product is sold for $35.Brevard expects to sell 25,000 units each month.
-Refer to Exhibit 6-2.What would be the operating profit if total fixed costs decreases 20 percent?

Accepted Answer

A) $302,500 
B) $135,000 
C) $215,000 
D) $315,000 
E) None of the answer choices is correct. 
A) $302,500 
B) $135,000 
C) $215,000 
D) $315,000 
E) None of the answer choices is correct.

Question 18

Firms with high operating leverage tend to make more from increasing sales than similar firms with low operating leverage.

Accepted Answer

A) True 
 B)False

Question 19

Exhibit 6-4
Sanchez Company produces two different remote control products with the following monthly data for the most recent month:
  
-Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales.
What is the weighted average contribution margin per unit?

Accepted Answer

A) $44 
B) $56 
C) $100 
D) $50 
E) None of the answer choices is correct. 
A) $44 
B) $56 
C) $100 
D) $50 
E) None of the answer choices is correct.

Question 20

Which of the following is the correct profit equation?

Accepted Answer

A) Total sales - total variable costs 
B) Total sales - total fixed costs 
C) Total sales - total variable costs - total fixed costs 
D) Total sales - total variable costs + total fixed costs 
E) None of the answer choices is correct. 
A) Total sales - total variable costs 
B) Total sales - total fixed costs 
C) Total sales - total variable costs - total fixed costs 
D) Total sales - total variable costs + total fixed costs 
E) None of the answer choices is correct.

Which of the following companies would most likely have a high operating leverage?

Exhibit 6-2 Victor Company makes a single product.The company has monthly fixed costs totaling $200,000 and variable costs of $20 per unit.Each unit of product is sold for $35.Brevard expects to sell 25,000 units each month. -Refer to Exhibit 6-2.What is the monthly operating profit?

Although absorption costing meets the requirements of generally accepted accounting principles,variable costing is typically more useful for internal decision making purposes.

Exhibit 6-4 Sanchez Company produces two different remote control products with the following monthly data for the most recent month: -Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales. How many units in total must be sold to earn a monthly profit of $504,000?

All of the following are assumptions required to perform break-even and target profit calculations except:

Exhibit 6-4 Sanchez Company produces two different remote control products with the following monthly data for the most recent month: -Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales. How many units of each product must be sold to earn a monthly profit of $504,000?

The only difference between absorption costing and variable costing is the treatment of fixed manufacturing overhead costs.

A change in the sales mix will always decrease the break-even point.

Firms with low operating leverage tend to make more from increasing sales than similar firms with high operating leverage.

Capri Incorporated has annual fixed costs totaling $3,000,000 and variable costs of $450 per unit.Each unit of product is sold for $850.Assume a tax rate of 30 percent.How many sales dollars are required to earn an annual profit of $210,000 after taxes?

Exhibit 6-6 Sauer Company sells folding chairs for $40.00 per unit.Variable cost is $15.00 per unit.Each chair requires 4 direct labor hours and 2 machine hours to produce. -Refer to Exhibit 6-6.Which of the following is the correct contribution margin per machine hour?

The margin of safety cannot be calculated for multiple product and service organizations.

Management of Raley Company would like to achieve a target profit after taxes of $80,000.The company's income tax rate is 20 percent.What target profit before taxes is required to earn $80,000 in after tax profit?

Paco's Bikes sells 120 bicycles each month for $400 per unit.Variable cost per unit is $160 and fixed costs total $4,800 per month.What is the contribution margin per unit?

Firms with high operating leverage tend to make more from increasing sales than similar firms with low operating leverage.

Exhibit 6-4 Sanchez Company produces two different remote control products with the following monthly data for the most recent month: -Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales. What is the weighted average contribution margin per unit?

Which of the following is the correct profit equation?

What Is Managerial Accounting

How Is Job Costing Used to Track Production Costs

How Does an Organization Use Activity-Based Costing to Allocate Overhead Costs

How Is Process Costing Used to Track Production Costs

How Do Organizations Identify Cost Behavior Patterns

How Are Relevant Revenues and Costs Used to Make Decisions

How Is Capital Budgeting Used to Make Decisions

How Are Operating Budgets Created

How Do Managers Evaluate Performance Using Cost Variance Analysis

How Do Managers Evaluate Performance in Decentralized Organizations

How Is the Statement of Cash Flows Prepared and Used

How Do Managers Use Financial and Nonfinancial Performance Measures

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Exam 6: How Is Cost-Volume-Profit Analysis Used for Decision Making

Which of the following companies would most likely have a high operating leverage?

Exhibit 6-2 Victor Company makes a single product.The company has monthly fixed costs totaling $200,000 and variable costs of $20 per unit.Each unit of product is sold for $35.Brevard expects to sell 25,000 units each month. -Refer to Exhibit 6-2.What is the monthly operating profit?

Although absorption costing meets the requirements of generally accepted accounting principles,variable costing is typically more useful for internal decision making purposes.

Exhibit 6-4 Sanchez Company produces two different remote control products with the following monthly data for the most recent month: -Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales. How many units in total must be sold to earn a monthly profit of $504,000?

All of the following are assumptions required to perform break-even and target profit calculations except:

Exhibit 6-4 Sanchez Company produces two different remote control products with the following monthly data for the most recent month: -Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales. How many units of each product must be sold to earn a monthly profit of $504,000?

The only difference between absorption costing and variable costing is the treatment of fixed manufacturing overhead costs.

A change in the sales mix will always decrease the break-even point.

Firms with low operating leverage tend to make more from increasing sales than similar firms with high operating leverage.

Capri Incorporated has annual fixed costs totaling $3,000,000 and variable costs of $450 per unit.Each unit of product is sold for $850.Assume a tax rate of 30 percent.How many sales dollars are required to earn an annual profit of $210,000 after taxes?

Exhibit 6-6 Sauer Company sells folding chairs for $40.00 per unit.Variable cost is $15.00 per unit.Each chair requires 4 direct labor hours and 2 machine hours to produce. -Refer to Exhibit 6-6.Which of the following is the correct contribution margin per machine hour?

The margin of safety cannot be calculated for multiple product and service organizations.

Management of Raley Company would like to achieve a target profit after taxes of $80,000.The company's income tax rate is 20 percent.What target profit before taxes is required to earn $80,000 in after tax profit?

Paco's Bikes sells 120 bicycles each month for $400 per unit.Variable cost per unit is $160 and fixed costs total $4,800 per month.What is the contribution margin per unit?

Firms with high operating leverage tend to make more from increasing sales than similar firms with low operating leverage.

Exhibit 6-4 Sanchez Company produces two different remote control products with the following monthly data for the most recent month: -Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales. What is the weighted average contribution margin per unit?

Which of the following is the correct profit equation?

What Is Managerial Accounting

How Is Job Costing Used to Track Production Costs

How Does an Organization Use Activity-Based Costing to Allocate Overhead Costs

How Is Process Costing Used to Track Production Costs

How Do Organizations Identify Cost Behavior Patterns

How Are Relevant Revenues and Costs Used to Make Decisions

How Is Capital Budgeting Used to Make Decisions

How Are Operating Budgets Created

How Do Managers Evaluate Performance Using Cost Variance Analysis

How Do Managers Evaluate Performance in Decentralized Organizations

How Is the Statement of Cash Flows Prepared and Used

How Do Managers Use Financial and Nonfinancial Performance Measures

Filters