Question 1

The following diagram is a cost-volume-profit graph for a manufacturing company:   The formula to determine the Y-axis value ($) at point D on the graph is

Accepted Answer

A)  Fixed costs + (Variable costs per unit ´ Number of units). 
B)  SXY - bSX. 
C)  Fixed costs/Unit contribution margin. 
D)  Fixed costs/Contribution margin ratio. 
A)  Fixed costs + (Variable costs per unit ´ Number of units). 
B)  SXY - bSX. 
C)  Fixed costs/Unit contribution margin. 
D)  Fixed costs/Contribution margin ratio. D

Question 2

Which of the following assumptions does NOT pertain to cost-volume-profit analysis?

Accepted Answer

A)  The units produced will equal the units sold. 
B)  Inventories are constant. 
C)  All costs are classified as fixed or variable. 
D)  Sales mix may vary during the related period. 
A)  The units produced will equal the units sold. 
B)  Inventories are constant. 
C)  All costs are classified as fixed or variable. 
D)  Sales mix may vary during the related period. D

Question 3

Tiramisu Company projected the following information for next year:   How many units must be sold to obtain an after-tax profit of $40,000?

Accepted Answer

A)  3,750 units 
B)  5,625 units 
C)  5,000 units 
D)  5,167 units 
A)  3,750 units 
B)  5,625 units 
C)  5,000 units 
D)  5,167 units C

Question 4

Using cost-volume-profit analysis, we can conclude that a 20 percent reduction in variable costs will

Accepted Answer

A)  reduce the break-even sales volume by 20 percent. 
B)  reduce total costs by 20 percent. 
C)  reduce the slope of the total cost line by 20 percent. 
D)  not affect the break-even sales volume if there is an offsetting 20 percent increase in fixed costs. 
A)  reduce the break-even sales volume by 20 percent. 
B)  reduce total costs by 20 percent. 
C)  reduce the slope of the total cost line by 20 percent. 
D)  not affect the break-even sales volume if there is an offsetting 20 percent increase in fixed costs.

Question 5

The variable cost ratio

Accepted Answer

A)  expresses variable costs as a percentage of total costs. 
B)  expresses the proportion between fixed costs and variable costs. 
C)  expresses variable cost in terms of sales dollars. 
D)  expresses the proportion of sales dollars available to cover fixed costs and provide for a profit. 
A)  expresses variable costs as a percentage of total costs. 
B)  expresses the proportion between fixed costs and variable costs. 
C)  expresses variable cost in terms of sales dollars. 
D)  expresses the proportion of sales dollars available to cover fixed costs and provide for a profit.

Question 6

CVP analysis is a short-run decision-making tool since some costs are fixed.

Accepted Answer

A) True 
 B)False

Question 7

Summersville Production Company had the following projected information for 2014:   What is the contribution margin ratio?

Accepted Answer

A)  0.400 
B)  1.667 
C)  2.500 
D)  0.600 
A)  0.400 
B)  1.667 
C)  2.500 
D)  0.600

Question 8

The margin of safety is

Accepted Answer

A)  the number of units that need to be sold to achieve a profit target. 
B)  the amount of units expected to be sold above the break-even level. 
C)  the sales dollars needed to cover fixed costs. 
D)  the use of fixed costs to extract higher percentage changes in profits as sales volume changes. 
A)  the number of units that need to be sold to achieve a profit target. 
B)  the amount of units expected to be sold above the break-even level. 
C)  the sales dollars needed to cover fixed costs. 
D)  the use of fixed costs to extract higher percentage changes in profits as sales volume changes.

Question 9

The income statement for Symbiosis Manufacturing Company for 2014 is as follows:   If sales increase by $60,000, what will happen to profit?

Accepted Answer

A)  increase by $60,000 
B)  increase by $36,000 
C)  increase by $6,000 
D)  increase by $24,000 
A)  increase by $60,000 
B)  increase by $36,000 
C)  increase by $6,000 
D)  increase by $24,000

Question 10

The Barrister Mug Company manufactures plastic mugs that sell to wholesalers for $4.60 each. Variable and fixed costs are as follows:
   Barrister Mug produced and sold 11,500 cups during April 2014. There were no beginning or ending inventories.
Required:

Accepted Answer

The answer of The Barrister Mug Company manufactures plastic mugs...

Question 11

Which of the following is a TRUE statement about sales mix?

Accepted Answer

A)  Profits may decline with an increase in total dollars of sales if the sales mix shifts to sell more of the high contribution margin product. 
B)  Profits may decline with an increase in total dollars of sales if the sales mix shifts to sell more of the lower contribution margin product. 
C)  Profits will remain constant with an increase in total dollars of sales if the total sales in units remains constant. 
D)  Profits will remain constant with a decrease in total dollars of sales if the sales mix also remains constant. 
A)  Profits may decline with an increase in total dollars of sales if the sales mix shifts to sell more of the high contribution margin product. 
B)  Profits may decline with an increase in total dollars of sales if the sales mix shifts to sell more of the lower contribution margin product. 
C)  Profits will remain constant with an increase in total dollars of sales if the total sales in units remains constant. 
D)  Profits will remain constant with a decrease in total dollars of sales if the sales mix also remains constant.

Question 12

To earn a target profit, total costs plus the amount of target profit must equal total sales revenue.

Accepted Answer

A) True 
 B)False

Question 13

Figure 16 - 1 The Cumberland Company provides the following information:
  Refer to Figure 16-1. What is the contribution margin per unit for Cumberland?

Accepted Answer

A)  $1.25 
B)  $0.85 
C)  $2.50 
D)  $1.65 
A)  $1.25 
B)  $0.85 
C)  $2.50 
D)  $1.65

Question 14

The term net income is used to mean operating income before income taxes.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following items would NOT be considered in cost-volume-profit analysis?

Accepted Answer

A)  units of production 
B)  fixed costs 
C)  product mix 
D)  gross profit margin 
A)  units of production 
B)  fixed costs 
C)  product mix 
D)  gross profit margin

Question 16

On a profit-volume graph, the intersection of the profit line with the vertical axis provides a

Accepted Answer

A)  profit of $1,000. 
B)  profit equal to zero. 
C)  profit equal to fixed costs. 
D)  loss equal to fixed costs. 
A)  profit of $1,000. 
B)  profit equal to zero. 
C)  profit equal to fixed costs. 
D)  loss equal to fixed costs.

Question 17

The cost-volume-profit graph portrays the relationship between profits and sales volume.

Accepted Answer

A) True 
 B)False

Question 18

The break-even point is the point where total costs equal sales revenues.

Accepted Answer

A) True 
 B)False

Question 19

Figure 16 - 1 The Cumberland Company provides the following information:
  Refer to Figure 16-1. What is the total contribution margin for Cumberland?

Accepted Answer

A)  $312,500 
B)  $250,000 
C)  $625,000 
D)  $50,000 
A)  $312,500 
B)  $250,000 
C)  $625,000 
D)  $50,000

Question 20

Fantasmas Incorporated had the following information:   How many units need to be sold to produce a before-tax profit of $80,000 using ABC?

Accepted Answer

A)  8,350 units 
B)  12,800 units 
C)  15,580 units 
D)  14,750 units 
A)  8,350 units 
B)  12,800 units 
C)  15,580 units 
D)  14,750 units

The following diagram is a cost-volume-profit graph for a manufacturing company: The formula to determine the Y-axis value ($) at point D on the graph is

Which of the following assumptions does NOT pertain to cost-volume-profit analysis?

Tiramisu Company projected the following information for next year: How many units must be sold to obtain an after-tax profit of $40,000?

Using cost-volume-profit analysis, we can conclude that a 20 percent reduction in variable costs will

The variable cost ratio

CVP analysis is a short-run decision-making tool since some costs are fixed.

Summersville Production Company had the following projected information for 2014: What is the contribution margin ratio?

The margin of safety is

The income statement for Symbiosis Manufacturing Company for 2014 is as follows: If sales increase by $60,000, what will happen to profit?

The Barrister Mug Company manufactures plastic mugs that sell to wholesalers for $4.60 each. Variable and fixed costs are as follows: Barrister Mug produced and sold 11,500 cups during April 2014. There were no beginning or ending inventories. Required:

Which of the following is a TRUE statement about sales mix?

To earn a target profit, total costs plus the amount of target profit must equal total sales revenue.

Figure 16 - 1 The Cumberland Company provides the following information: Refer to Figure 16-1. What is the contribution margin per unit for Cumberland?

The term net income is used to mean operating income before income taxes.

Which of the following items would NOT be considered in cost-volume-profit analysis?

On a profit-volume graph, the intersection of the profit line with the vertical axis provides a

The cost-volume-profit graph portrays the relationship between profits and sales volume.

The break-even point is the point where total costs equal sales revenues.

Figure 16 - 1 The Cumberland Company provides the following information: Refer to Figure 16-1. What is the total contribution margin for Cumberland?

Fantasmas Incorporated had the following information: How many units need to be sold to produce a before-tax profit of $80,000 using ABC?

Introduction to Cost Management

Basic Cost Management Concepts

Cost Behavior

Activity-Based Costing

Product and Service Costing: Job-Order System

Process Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control Key

Standard Costing: a Functional-Based Control Approach

Decentralization: Responsibility Accounting, Performance Evaluation, and Transfer Pricing

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Activity Resource Usage Model and Tactical Decision Making

Pricing and Profitability Analysis

Capital Investment

Inventory Management: Economic Order Quantity, Jit, and the Theory of Constraints

Filters

Exam 16: Cost-Volume-Profit Analysis

The following diagram is a cost-volume-profit graph for a manufacturing company: The formula to determine the Y-axis value ($) at point D on the graph is

Which of the following assumptions does NOT pertain to cost-volume-profit analysis?

Tiramisu Company projected the following information for next year: How many units must be sold to obtain an after-tax profit of $40,000?

Using cost-volume-profit analysis, we can conclude that a 20 percent reduction in variable costs will

The variable cost ratio

CVP analysis is a short-run decision-making tool since some costs are fixed.

Summersville Production Company had the following projected information for 2014: What is the contribution margin ratio?

The margin of safety is

The income statement for Symbiosis Manufacturing Company for 2014 is as follows: If sales increase by $60,000, what will happen to profit?

The Barrister Mug Company manufactures plastic mugs that sell to wholesalers for $4.60 each. Variable and fixed costs are as follows: Barrister Mug produced and sold 11,500 cups during April 2014. There were no beginning or ending inventories. Required:

Which of the following is a TRUE statement about sales mix?

To earn a target profit, total costs plus the amount of target profit must equal total sales revenue.

Figure 16 - 1 The Cumberland Company provides the following information: Refer to Figure 16-1. What is the contribution margin per unit for Cumberland?

The term net income is used to mean operating income before income taxes.

Which of the following items would NOT be considered in cost-volume-profit analysis?

On a profit-volume graph, the intersection of the profit line with the vertical axis provides a

The cost-volume-profit graph portrays the relationship between profits and sales volume.

The break-even point is the point where total costs equal sales revenues.

Figure 16 - 1 The Cumberland Company provides the following information: Refer to Figure 16-1. What is the total contribution margin for Cumberland?

Fantasmas Incorporated had the following information: How many units need to be sold to produce a before-tax profit of $80,000 using ABC?

Introduction to Cost Management

Basic Cost Management Concepts

Cost Behavior

Activity-Based Costing

Product and Service Costing: Job-Order System

Process Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control Key

Standard Costing: a Functional-Based Control Approach

Decentralization: Responsibility Accounting, Performance Evaluation, and Transfer Pricing

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Activity Resource Usage Model and Tactical Decision Making

Pricing and Profitability Analysis

Capital Investment

Inventory Management: Economic Order Quantity, Jit, and the Theory of Constraints

Filters