Question 1

The breakeven point is the point at which

Accepted Answer

A)  fixed costs equal variable costs. 
B)  contribution margin equals fixed costs. 
C)  sales equal variable costs. 
D)  fixed costs equal sales. 
A)  fixed costs equal variable costs. 
B)  contribution margin equals fixed costs. 
C)  sales equal variable costs. 
D)  fixed costs equal sales. B

Question 2

Which of the following is a fixed cost?

Accepted Answer

A)  Direct materials 
B)  Personnel manager's salary 
C)  Operating supplies 
D)  Direct labor 
A)  Direct materials 
B)  Personnel manager's salary 
C)  Operating supplies 
D)  Direct labor B

Question 3

Operating income is determined by deducting all fixed costs related to production,selling,and administration from contribution margin.

Accepted Answer

A) True 
 B)False  True

Question 4

A retail organization's sales salaries consist of a base amount plus a commission of 5 percent on each sale.Which of the following would properly classify the cost of sales salaries?

Accepted Answer

A)  Fixed and product 
B)  Mixed and period 
C)  Mixed and product 
D)  Variable and product 
A)  Fixed and product 
B)  Mixed and period 
C)  Mixed and product 
D)  Variable and product

Question 5

SHARE is trying to determine how many clients must be serviced in order to cover its monthly service overhead.Using the high-low method,it has determined that the variable cost per client is $800 and that the monthly fixed overhead is $28,000. Assuming an average fee of $1,400 per client and a targeted profit of $26,000,the number of clients to be serviced is

Accepted Answer

A)  80 clients. 
B)  120 clients. 
C)  47 clients. 
D)  90 clients. 
A)  80 clients. 
B)  120 clients. 
C)  47 clients. 
D)  90 clients.

Question 6

Field Legal Services is trying to determine the variable and fixed elements of its service overhead.The following data have been collected from recent activity: 
$\begin{array} { l r r } 
&\text { Total Service Overhead}&\text { Cases Worked}\
\text { March } & 22,900 & 112 \ \text { April } & 20,800 & 98 \ \text { May } & 26,400 & 138 \end{array}$
 The formula for total service overhead costs is

Accepted Answer

A)  $5,600 + $140 per case. 
B)  $5,600 + $40 per case. 
C)  $7,823 + $134.62 per case. 
D)  $7,080 + $140 per case. 
A)  $5,600 + $140 per case. 
B)  $5,600 + $40 per case. 
C)  $7,823 + $134.62 per case. 
D)  $7,080 + $140 per case.

Question 7

If a company wishes to evaluate the likelihood of success with a new product line,the breakeven point will provide information about the average amount of profit the company will make.

Accepted Answer

A) True 
 B)False

Question 8

Loren,Inc.,sold 30,000 units of its product last year with the following results:
 $\begin{array}{lr}
\text { Sales revenue } & \$ 900,000 \
\text { Variable costs } & 630,000 \
\text { Fixed costs } &  \underline{190,000} \
 \text { Operating income } & \underline{ \$ 80,000} \
\end{array}$
 The company expects variable costs to increase by $4.00 per unit this year. 
a. Assuming the unit sale price remains constant, compute the unit contribution margin and the contribution margin ratio for this year.
b. Given the expected change in variable costs, how many units will have to be sold this year to earn the same operating income as last year?
c. Assuming the company is willing to raise the unit sales price but wants the contribution margin to be the same as last year, determine the unit sales price the company must charge to cover the expected increase in variable costs.

Accepted Answer

a.
 b.Desired unit sales = ($190,000 + $

Question 9

The following graphical breakeven analysis is for Nicronea's new line of desktop computers.Questions related to the graph should be answered in the spaces provided.   
a. Production at point J would be at a __________.
b. The area depicting profitable operations is __________.
c. The fixed costs area is within letters __________.
d. The total revenue area is within letters ___________.
e. The breakeven point for sales units is at letter __________.
f. Letter A represents __________.
g. The line H-B represents what C-V-P element? ___________.
h. Total cost of operations is reflected in line __________.

Accepted Answer

a.loss
b.B - A - C
c.D,G,H,K
d

Question 10

The high-low method allows you to differentiate between fixed and variable costs when dealing with mixed costs.

Accepted Answer

A) True 
 B)False

Question 11

When fixed costs are $18,000 and the contribution margin per unit is $4,the breakeven point is

Accepted Answer

A)  4,500 units. 
B)  2,230 units. 
C)  $22,300. 
D)  $72,000. 
A)  4,500 units. 
B)  2,230 units. 
C)  $22,300. 
D)  $72,000.

Question 12

J & C Stacy Enterprises is expecting to earn a profit of $180,000 in 20xx.The company manufactures wrought iron lamps.Each lamp requires variable costs of $13 for direct materials,$9 for direct labor,and $12 for overhead.Total variable costs are thus $34 per lamp.Fixed costs for 20xx are expected to be $630,000.Each lamp will sell for $79.
a. Determine how many lamps the company must sell to earn its targeted profit, and convert this amount to sales dollars.
b. Compute breakeven sales in dollars.
c. Explain the dollar difference between breakeven sales dollars and the sales dollars necessary to earn the targeted profit. Use the contribution margin as part of your explanation.

Accepted Answer

a.
 \[\begin{array} { l } 
\text { Unit

Question 13

Neverlate is world famous for its precision pocket watches.The company has estimated that variable manufacturing costs and variable selling costs per watch will be $72 and $43,respectively,for 20xx.Also during 20xx,the company is expecting fixed manufacturing costs to total $291,600 and fixed general and administrative expenses to amount to $253,175.The anticipated selling price of each watch is $500.Compute (a)the breakeven point in sales units and (b)the breakeven point in sales dollars.

Accepted Answer

a.
 @#IMG-DLM& b.
 \[\begin{aligned}
\te

Question 14

Excerpts from a cost-volume-profit analysis indicate fixed costs of $30,000,a variable cost per unit of $36,a selling price of $60,and a sales level of $125,000.The targeted level of profit must be

Accepted Answer

A)  $20,000. 
B)  $50,000. 
C)  $95,000. 
D)  $75,000. 
A)  $20,000. 
B)  $50,000. 
C)  $95,000. 
D)  $75,000.

Question 15

If direct materials costs are decreased,the breakeven point will decrease.

Accepted Answer

A) True 
 B)False

Question 16

A project breaks even when total revenue less all costs is equal to zero.

Accepted Answer

A) True 
 B)False

Question 17

a.Provide two different ways of computing breakeven units: one with the contribution margin in the computation and one without the contribution margin.
b.Compare and contrast the two different methods of computing breakeven units.Does the use of the contribution margin alter the resulting number of breakeven units? Why or why not?
c.Comment on how the contribution margin affects the computation of breakeven units.Would an increase in the contribution margin increase or decrease the number of breakeven units required?

Accepted Answer

a.Breakeven analysis with the contributi

Question 18

Any cost can be classified as either a variable cost or a fixed cost.

Accepted Answer

A) True 
 B)False

Question 19

Manix Company has gathered the following data: $$\begin{array} {  l r r r | } 
& \text { Unit Sales Price } & \text { Unit Variable Costs } & \text { Unit Sales } \
\text { Product 1 } & \$ 18.00 & \$ 10.00 & 24,500 \
\text { Product 2 } & 27.00 & 17.00 & 17,500 \
\text { Product 3 } & 35.00 & 28.00 & 28,000 \

\end{array}$$
 Fixed costs are $233,280.The weighted-average breakeven point is

Accepted Answer

A)  34,500 units. 
B)  28,800 units. 
C)  25,200 units. 
D)  29,900 units. 
A)  34,500 units. 
B)  28,800 units. 
C)  25,200 units. 
D)  29,900 units.

Question 20

Lakeside has gathered the following data in order to calculate the weighted-average contribution margin: $$\begin{array} { r r r r } 
& \text { Unit Salas Price } & \text { Unit Variable Costs } & \text { Unit Sales } \
\text { Product A } & \$ 150 & \$ 100 & 8,000 \
\text { Product B } & 100 & 60 & 2,000
\end{array}$$ 
Fixed costs are $480,000.
The weighted-average breakeven point is

Accepted Answer

A)  11,429 units. 
B)  10,000 units. 
C)  5,333 units. 
D)  10,667 units. 
A)  11,429 units. 
B)  10,000 units. 
C)  5,333 units. 
D)  10,667 units.

Exam 20: Cost Behavior Analysis

The breakeven point is the point at which

Which of the following is a fixed cost?

Operating income is determined by deducting all fixed costs related to production,selling,and administration from contribution margin.

A retail organization's sales salaries consist of a base amount plus a commission of 5 percent on each sale.Which of the following would properly classify the cost of sales salaries?

Field Legal Services is trying to determine the variable and fixed elements of its service overhead.The following data have been collected from recent activity: Total Service Overhead Cases Worked March 22,900 112 April 20,800 98 May 26,400 138 The formula for total service overhead costs is

If a company wishes to evaluate the likelihood of success with a new product line,the breakeven point will provide information about the average amount of profit the company will make.

The high-low method allows you to differentiate between fixed and variable costs when dealing with mixed costs.

When fixed costs are $18,000 and the contribution margin per unit is $4,the breakeven point is

Excerpts from a cost-volume-profit analysis indicate fixed costs of $30,000,a variable cost per unit of $36,a selling price of $60,and a sales level of $125,000.The targeted level of profit must be

If direct materials costs are decreased,the breakeven point will decrease.

A project breaks even when total revenue less all costs is equal to zero.

Any cost can be classified as either a variable cost or a fixed cost.

Manix Company has gathered the following data: Unit Sales Price Unit Variable Costs Unit Sales Product 1 \ 18.00 \ 10.00 24,500 Product 2 27.00 17.00 17,500 Product 3 35.00 28.00 28,000 Fixed costs are $233,280.The weighted-average breakeven point is

Lakeside has gathered the following data in order to calculate the weighted-average contribution margin: Unit Salas Price Unit Variable Costs Unit Sales Product A \ 150 \ 100 8,000 Product B 100 60 2,000 Fixed costs are $480,000. The weighted-average breakeven point is

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Supplement - Closing Entries and the Work Sheet

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Long-Term Liabilities

Contributed Capital

Investments

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

The Changing Business Environment - a Managers Perspective

Cost Concepts and Cost Allocation

Costing Systems- Job Order Costing

Costing Systems- Process Costing

Value-Based Systems- Abm and Lean

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

Pricing Decisions,incltarget Costing and Transfer Pricing

Quality Management and Measurement

Financial Analysis of Performance

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