Question 1

All else being equal,a reduction in selling price will ________.

Accepted Answer

A) increase contribution margin 
B) reduce fixed costs 
C) increase variable costs 
D) reduce operating income 
A) increase contribution margin 
B) reduce fixed costs 
C) increase variable costs 
D) reduce operating income D

Question 2

Stella Company sells only two products,Product A and Product B.
$$\begin{array} { | l | c | c | c | } 
\hline & \text { Product A } & \text { Product B } & \text { Total } \
\hline \text { Selling price } & \$ 50 & \$ 30 & \
\hline \text { Variable cost per unit } & \$ 20 & \$ 10 & \
\hline \text { Total fixed costs } & & & \$ 2,110,000 \
\hline
\end{array}$$
Stella sells two units of Product A for each unit it sells of Product B.Stella faces a tax rate of 40%.Stella desires a net after-tax income of $54,000.The breakeven point in units would be ________.

Accepted Answer

A) 25,250 units of Product A and 50,500 units of Product B 
B) 27,500 units of Product A and 55,000 units of product B 
C) 50,500 units of Product A and 25,250 units of Product B 
D) 55,000 units of Product A and 27,500 units of Product B 
A) 25,250 units of Product A and 50,500 units of Product B 
B) 27,500 units of Product A and 55,000 units of product B 
C) 50,500 units of Product A and 25,250 units of Product B 
D) 55,000 units of Product A and 27,500 units of Product B D

Question 3

Katrina's Bridal Shoppe sells wedding dresses.The average selling price of each dress is $1,100,variable costs are $500,and fixed costs are $100,000.How many dresses are sold when operating income is zero?

Accepted Answer

A) 200 dresses 
B) 167 dresses 
C) 310 dresses 
D) 91 dresses 
A) 200 dresses 
B) 167 dresses 
C) 310 dresses 
D) 91 dresses B

Question 4

Sparkle Jewelry sells 500 units resulting in $10,000 of sales revenue,$4,000 of variable costs,and $1,500 of fixed costs.Calculate the variable cost per unit.(Round the final answer to the nearest cent. )

Accepted Answer

A) $12.00 
B) $6.00 
C) $2.00 
D) $8.00 
A) $12.00 
B) $6.00 
C) $2.00 
D) $8.00

Question 5

While-You-Train is a not-for-profit organization that aids the unemployed by supplementing their incomes by $7,000 annually,while they seek new employment skills.The organization has fixed costs of $200,000 and the budgeted appropriation for the year totals $750,000.How many individuals can receive financial assistance this year?

Accepted Answer

A) 29 people 
B) 108 people 
C) 79 people 
D) 136 people 
A) 29 people 
B) 108 people 
C) 79 people 
D) 136 people

Question 6

Which of the following is the mathematical expression of contribution margin ratio?

Accepted Answer

A) Contribution margin ratio = Contribution margin percentage × Revenues (in dollars) 
B) Contribution margin ratio = Contribution margin percentage × Fixed costs (in dollars) 
C) Contribution margin ratio = Contribution margin percentage × Variable costs (in dollars) 
D) Contribution margin ratio = Contribution margin percentage × Operating leverage 
A) Contribution margin ratio = Contribution margin percentage × Revenues (in dollars) 
B) Contribution margin ratio = Contribution margin percentage × Fixed costs (in dollars) 
C) Contribution margin ratio = Contribution margin percentage × Variable costs (in dollars) 
D) Contribution margin ratio = Contribution margin percentage × Operating leverage

Question 7

A revenue driver is defined as ________.

Accepted Answer

A) any factor that affects costs and revenues 
B) any factor that affects revenues 
C) the only factor that can influence a change in selling price 
D) the only factor that can influence a change in demand 
A) any factor that affects costs and revenues 
B) any factor that affects revenues 
C) the only factor that can influence a change in selling price 
D) the only factor that can influence a change in demand

Question 8

SaleCo sells 8,400 units resulting in $120,000 of sales revenue,$35,000 of variable costs,and $45,000 of fixed costs.The contribution margin percentage is ________.

Accepted Answer

A) 62.5% 
B) 70.83% 
C) 33.33% 
D) 29.17% 
A) 62.5% 
B) 70.83% 
C) 33.33% 
D) 29.17%

Question 9

Which option should Patrick choose to maximize income assuming there is a 40% probability that 70 units will be sold and a 60% probability that 40 units will be sold?

Accepted Answer

A) Option 1 
B) Option 2 
C) Option 3 
D) All options maximize income equally. 
A) Option 1 
B) Option 2 
C) Option 3 
D) All options maximize income equally.

Question 10

The breakeven point is .

Accepted Answer

A) where selling one more unit will not increase income 
B) where contribution margin equals fixed costs 
C) where total revenues equal contribution margin 
D) fixed costs divided by revenues equals zero 
A) where selling one more unit will not increase income 
B) where contribution margin equals fixed costs 
C) where total revenues equal contribution margin 
D) fixed costs divided by revenues equals zero

Question 11

Dr.Charles Hunter,MD,performs a certain outpatient procedure for $1,300.His fixed costs are $24,000 per month and his variable costs are $500 per procedure.Dr.Hunter currently plans to perform 400 procedures this month.What is the breakeven point for the month assuming that Dr.Hunter plans to perform the procedure 400 times?

Accepted Answer

A) 30 times 
B) 19 times 
C) 28 times 
D) 10 times 
A) 30 times 
B) 19 times 
C) 28 times 
D) 10 times

Question 12

A company with a higher degree of operating leverage is at greater risk during economic downturns because of its higher fixed costs.

Accepted Answer

A) True 
 B)False

Question 13

What would be the expected monetary value for Avalia Corp using the probability method?
$\begin{array}{ll}\text { Probability }&\text { Cash Inflows }\
0.20 & \$ 260,000 \
0.30 & \$ 200,000 \
0.15 & \$ 160,000 \
0.35 & \$ 60,000
\end{array}$

Accepted Answer

A) $680,000 
B) $170,000 
C) $157,000 
D) $52,000 
A) $680,000 
B) $170,000 
C) $157,000 
D) $52,000

Question 14

If the contribution margin ratio is 0.60,targeted operating income is $95,000,and targeted sales volume in dollars is $530,000,then the degree of operating leverage is ________.

Accepted Answer

A) 0)30 times 
B) 0)67 times 
C) 3)35 times 
D) 2)23 times 
A) 0)30 times 
B) 0)67 times 
C) 3)35 times 
D) 2)23 times

Question 15

Black Pearl,Inc. ,sells a single product.The company's most recent income statement is given below.
   
Required:

d.If sales increase by $50,000,operating income will increase
   
e.To achieve a $40,000 after tax income,given a tax rate of

Accepted Answer

a.Contribution margin ratio is $20,000 /

Question 16

To apply CVP analysis in a not-for profit organization ________.

Accepted Answer

A) managers need to focus on the customer base rather than the cost drivers 
B) managers need to focus on measuring their output,which is the same as tangible units sold by manufacturing and merchandising companies 
C) managers need to focus on measuring their input,which is different from the tangible units consumed by manufacturing and merchandising companies 
D) managers need to focus on measuring their output,which is different from the tangible units sold by manufacturing and merchandising companies 
A) managers need to focus on the customer base rather than the cost drivers 
B) managers need to focus on measuring their output,which is the same as tangible units sold by manufacturing and merchandising companies 
C) managers need to focus on measuring their input,which is different from the tangible units consumed by manufacturing and merchandising companies 
D) managers need to focus on measuring their output,which is different from the tangible units sold by manufacturing and merchandising companies

Question 17

Fine Suiting Company sells shirts for men and boys.The average selling price and variable cost for each product are as follows:

Required:
a.What is the breakeven point in units for each type of shirt,assuming the sales mix is 1:1?
b.What is the operating leverage,assuming the sales mix is 2:1 in favor of men's shirts,and sales total 5,000 shirts?

Accepted Answer

a.N = breakeven in boys' shirts N = brea

Question 18

Sparkle Jewelry sells 800 units resulting in $85,000 of sales revenue,$32,000 of variable costs,and $26,000 of fixed costs.
The number of units that must be sold to achieve $41,000 of operating income is ________.

Accepted Answer

A) 909 units 
B) 393 units 
C) 1,012 units 
D) 619 units 
A) 909 units 
B) 393 units 
C) 1,012 units 
D) 619 units

Question 19

Auto Tires has been in the tire business for four years.It rents a building but owns all of its equipment.All employees are paid a fixed salary except for the busy season (April-June),when temporary help is hired by the hour.Utilities and other operating charges remain fairly constant during each month except those in the busy season.
Selling prices per tire average $75 except during the busy season.Because a large number of customers buy tires prior to winter,discounts run above average during the busy season.A 15% discount is given when two tires are purchased at one time.During the busy months,selling prices per tire average $60.
The president of Auto Tires is somewhat displeased with the company's management accounting system because the cost behavior patterns displayed by the monthly breakeven charts are inconsistent;the busy months' charts are different from the other months of the year.The president is never sure if the company has a satisfactory margin of safety or if it is just above the breakeven point.
Required:
a.Why might it be difficult to use CVP in this situation?
b.How can the information be presented in a better format for the president?

Accepted Answer

a.The accounting system includes some as

Question 20

Contribution margin per unit equals contribution margin divided by number of units sold.

Accepted Answer

A) True 
 B)False

All else being equal,a reduction in selling price will ________.

Katrina's Bridal Shoppe sells wedding dresses.The average selling price of each dress is $1,100,variable costs are $500,and fixed costs are $100,000.How many dresses are sold when operating income is zero?

Sparkle Jewelry sells 500 units resulting in $10,000 of sales revenue,$4,000 of variable costs,and $1,500 of fixed costs.Calculate the variable cost per unit.(Round the final answer to the nearest cent. )

Which of the following is the mathematical expression of contribution margin ratio?

A revenue driver is defined as ________.

SaleCo sells 8,400 units resulting in $120,000 of sales revenue,$35,000 of variable costs,and $45,000 of fixed costs.The contribution margin percentage is ________.

Which option should Patrick choose to maximize income assuming there is a 40% probability that 70 units will be sold and a 60% probability that 40 units will be sold?

The breakeven point is .

A company with a higher degree of operating leverage is at greater risk during economic downturns because of its higher fixed costs.

What would be the expected monetary value for Avalia Corp using the probability method? Probability Cash Inflows 0.20 \ 260,000 0.30 \ 200,000 0.15 \ 160,000 0.35 \ 60,000

If the contribution margin ratio is 0.60,targeted operating income is $95,000,and targeted sales volume in dollars is $530,000,then the degree of operating leverage is ________.

Black Pearl,Inc. ,sells a single product.The company's most recent income statement is given below. Required: d.If sales increase by $50,000,operating income will increase e.To achieve a $40,000 after tax income,given a tax rate of

To apply CVP analysis in a not-for profit organization ________.

Sparkle Jewelry sells 800 units resulting in $85,000 of sales revenue,$32,000 of variable costs,and $26,000 of fixed costs. The number of units that must be sold to achieve $41,000 of operating income is ________.

Contribution margin per unit equals contribution margin divided by number of units sold.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets,direct-Cost Variances,and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy,balanced Scorecard,and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters

Exam 3: Cost-Volume-Profit Analysis

All else being equal,a reduction in selling price will ________.

Katrina's Bridal Shoppe sells wedding dresses.The average selling price of each dress is $1,100,variable costs are $500,and fixed costs are $100,000.How many dresses are sold when operating income is zero?

Sparkle Jewelry sells 500 units resulting in $10,000 of sales revenue,$4,000 of variable costs,and $1,500 of fixed costs.Calculate the variable cost per unit.(Round the final answer to the nearest cent. )

Which of the following is the mathematical expression of contribution margin ratio?

A revenue driver is defined as ________.

SaleCo sells 8,400 units resulting in $120,000 of sales revenue,$35,000 of variable costs,and $45,000 of fixed costs.The contribution margin percentage is ________.

Which option should Patrick choose to maximize income assuming there is a 40% probability that 70 units will be sold and a 60% probability that 40 units will be sold?

The breakeven point is .

A company with a higher degree of operating leverage is at greater risk during economic downturns because of its higher fixed costs.

What would be the expected monetary value for Avalia Corp using the probability method? Probability Cash Inflows 0.20 \ 260,000 0.30 \ 200,000 0.15 \ 160,000 0.35 \ 60,000

If the contribution margin ratio is 0.60,targeted operating income is $95,000,and targeted sales volume in dollars is $530,000,then the degree of operating leverage is ________.

Black Pearl,Inc. ,sells a single product.The company's most recent income statement is given below. Required: d.If sales increase by $50,000,operating income will increase e.To achieve a $40,000 after tax income,given a tax rate of

To apply CVP analysis in a not-for profit organization ________.

Sparkle Jewelry sells 800 units resulting in $85,000 of sales revenue,$32,000 of variable costs,and $26,000 of fixed costs. The number of units that must be sold to achieve $41,000 of operating income is ________.

Contribution margin per unit equals contribution margin divided by number of units sold.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets,direct-Cost Variances,and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy,balanced Scorecard,and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters