Question 1

Which of the following are underlying assumptions of cost-volume-profit analysis?

Accepted Answer

A) Fixed costs will not change over a wide range of activity and variable costs are strictly variable. 
B) All costs can be classified either as a fixed or variable cost and behave linearly. 
C) Sales prices do not change in the relevant range and the sales mix must remain constant. 
D) All of the answers are correct. 
A) Fixed costs will not change over a wide range of activity and variable costs are strictly variable. 
B) All costs can be classified either as a fixed or variable cost and behave linearly. 
C) Sales prices do not change in the relevant range and the sales mix must remain constant. 
D) All of the answers are correct.

Question 2

Calculate break-even when a company's selling price per unit is $15,variable costs per unit are $8,fixed costs for the year are $70,000.

Accepted Answer

A) 8,750 units 
B) 4,667 units 
C) 7,000 units 
D) 10,000 units 
A) 8,750 units 
B) 4,667 units 
C) 7,000 units 
D) 10,000 units

Question 3

What effect would an increase in fixed costs have on the break-even point and the contribution margin?
Break-even Point Contribution Margin

Accepted Answer

A) Increase Increase 
B) Increase Decrease 
C) Decrease Increase 
D) Decrease Decrease 
A) Increase Increase 
B) Increase Decrease 
C) Decrease Increase 
D) Decrease Decrease

Question 4

What is the formula for the Target Profit in Units?

Accepted Answer

A) Total Fixed Costs / Unit Contribution Margin. 
B) (Total Fixed Costs + Target Profit)/ Unit Contribution Margin. 
C) Sales Units - Break-Even Sales Units. 
D) None of the answers is correct. 
A) Total Fixed Costs / Unit Contribution Margin. 
B) (Total Fixed Costs + Target Profit)/ Unit Contribution Margin. 
C) Sales Units - Break-Even Sales Units. 
D) None of the answers is correct.

Question 5

Which of the following are benefits of financial models to users?

Accepted Answer

A) Users can use the model for business purposes without becoming overwhelmed by the related number crunching. 
B) Models allow an organization to study the impact of a possible business action by reviewing the potential results before taking action. 
C) Models help managers identify a bad project or decision ahead of time,before it negatively impacts the company involved. 
D) All of the answers are correct. 
A) Users can use the model for business purposes without becoming overwhelmed by the related number crunching. 
B) Models allow an organization to study the impact of a possible business action by reviewing the potential results before taking action. 
C) Models help managers identify a bad project or decision ahead of time,before it negatively impacts the company involved. 
D) All of the answers are correct.

Question 6

Cost-volume-profit analysis.Patton Company produces one type of sunglasses with the following costs and revenues for the year:
   
Required:
a.What is the selling price per unit?
b.What is the variable cost per unit?
c.What is the contribution margin per unit?
d.What is the break-even point in units?
e.Assume an income-tax rate of 40 percent.Assuming a relevant range,what quantity of units is required for Patton Company to make an after-tax operating profit of $6,000,000 for the year?
(Patton Company;cost-volume-profit analysis. )

Accepted Answer

a.$6,000,000 F1F1F1S1F1F1F10 100,000 Un

Question 7

Multiple products make using financial models more complex.To deal with this,managers can do which of the following?

Accepted Answer

A) assume that all products have the same contribution margin. 
B) use contribution margin as a measure of volume. 
C) assume a weighted-average sales volume. 
D) All of the answers are correct. 
A) assume that all products have the same contribution margin. 
B) use contribution margin as a measure of volume. 
C) assume a weighted-average sales volume. 
D) All of the answers are correct.

Question 8

Shenandoah Company
Shenandoah Company is considering the introduction of a new product with the following price and cost characteristics
 
The company expects to sell 2,000 units for the year.
Refer to Shenandoah Company.Calculate the break-even point in units if variable costs per unit increased by $10.00 and fixed costs increased to $140,000.

Accepted Answer

A) 2,000 
B) 934 
C) 1,750 
D) 1,500 
A) 2,000 
B) 934 
C) 1,750 
D) 1,500

Question 9

Sun Devil,Inc.
Sun Devil,Inc.is considering the introduction of a new product with the following price and cost characteristics
 
It expects to sell 70,000 units for the year.
Refer to Sun Devil,Inc;what would be the break-even point in units if fixed costs were increased by $50,000?

Accepted Answer

A) 7,000 
B) 4,667 
C) 14,000 
D) 3,500 
A) 7,000 
B) 4,667 
C) 14,000 
D) 3,500

Question 10

How can a company increase their break-even point?

Accepted Answer

A) Decrease fixed costs. 
B) Increase the contribution margin ratio. 
C) Increase variable costs. 
D) Decrease in variable costs. 
A) Decrease fixed costs. 
B) Increase the contribution margin ratio. 
C) Increase variable costs. 
D) Decrease in variable costs.

Question 11

CVP analysis with step costs.Techniques Company has one product: customized thumb drives with logos for various businesses.The sales price of $18 remains constant per unit regardless of volume,as does the variable cost of $10 per unit.The company is considering operating at one of the following three monthly levels of operations:
   
Required:
a.Calculate the break-even point(s)in units.
b.If the company can sell everything it makes,should it operate at level 1,level 2,or level 3? Support your answer.

Accepted Answer

(Techniques Company;CVP analysis with st

Question 12

How might a company with a negative contribution margin reach the break-even point?

Accepted Answer

A) Increase sales volume. 
B) Decrease sales volume. 
C) Decrease fixed costs. 
D) Decrease variable costs. 
A) Increase sales volume. 
B) Decrease sales volume. 
C) Decrease fixed costs. 
D) Decrease variable costs.

Question 13

Explain what is meant by the margin of safety and how it is used by managers.

Accepted Answer

The margin of safety is the excess of ac

Question 14

Sun Devil,Inc.
Sun Devil,Inc.is considering the introduction of a new product with the following price and cost characteristics
 
It expects to sell 70,000 units for the year.
Refer to Sun Devil,Inc;how many units must be sold to break even?

Accepted Answer

A) 4,000 
B) 6,000 
C) 12,000 
D) 3,000 
A) 4,000 
B) 6,000 
C) 12,000 
D) 3,000

Question 15

When will the contribution margin ratio increase?

Accepted Answer

A) when the break-even point increases. 
B) when the break-even point decreases. 
C) when the variable expenses as a percentage of sales decrease. 
D) when the variable expenses as a percentage of sales increase. 
A) when the break-even point increases. 
B) when the break-even point decreases. 
C) when the variable expenses as a percentage of sales decrease. 
D) when the variable expenses as a percentage of sales increase.

Question 16

Susan Shumaker assisted in developing break-even points for various products within her company.She was hired by another company to determine selling prices of their products.Susan feels it is unacceptable to use the information she gathered for her previous employer,but is being pressured by her new supervisor to divulge this information.What should Susan do?

Accepted Answer

Management accountants have a responsibi

Question 17

Describe the use of spreadsheets in financial modeling.

Accepted Answer

Spreadsheets can be used to conduct "wha

Question 18

What is the formula for Break-Even Point in Sales Dollars?

Accepted Answer

A) Total Fixed Costs / Unit Contribution Margin. 
B) (Total Fixed Costs + Target Profit)/ Unit Contribution Margin. 
C) Sales Units - Break-Even Sales Units. 
D) Total Fixed Costs / Contribution Margin Ratio. 
A) Total Fixed Costs / Unit Contribution Margin. 
B) (Total Fixed Costs + Target Profit)/ Unit Contribution Margin. 
C) Sales Units - Break-Even Sales Units. 
D) Total Fixed Costs / Contribution Margin Ratio.

Question 19

What does sensitivity analysis refers to?

Accepted Answer

A) control. 
B) what-if situations. 
C) variable costs only. 
D) fixed costs only. 
A) control. 
B) what-if situations. 
C) variable costs only. 
D) fixed costs only.

Question 20

CVP-sensitivity analysis.Joan's Beauty College is considering introducing a new nail design seminar to run on an annual basis with the following price and cost characteristics:
   
Required:
a.What enrollment enables Joan's Beauty College to break even?
b.How many students will enable Joan's Beauty College to make an operating profit of $30,000 for the year?
c.Assume that the projected enrollment for the year is 600 students for each of the following situations:
(1)What will be the operating profit for 600 students?
(2)What would be the operating profit if the tuition per student (that is,sales price)decreased by 10 percent? Increased by 20 percent?
(3)What would be the operating profit if variable costs per student increased by 10 percent? Decreased by 20 percent?
(4)Suppose that fixed costs for the year are 10 percent lower than projected,whereas variable costs per student are 20 percent higher than projected.What would be the operating profit for the year?

Accepted Answer

a.Break-Even Point in Units = Fixed Cost

Which of the following are underlying assumptions of cost-volume-profit analysis?

Calculate break-even when a company's selling price per unit is $15,variable costs per unit are $8,fixed costs for the year are $70,000.

What effect would an increase in fixed costs have on the break-even point and the contribution margin? Break-even Point Contribution Margin

What is the formula for the Target Profit in Units?

Which of the following are benefits of financial models to users?

Multiple products make using financial models more complex.To deal with this,managers can do which of the following?

Sun Devil,Inc. Sun Devil,Inc.is considering the introduction of a new product with the following price and cost characteristics It expects to sell 70,000 units for the year. Refer to Sun Devil,Inc;what would be the break-even point in units if fixed costs were increased by $50,000?

How can a company increase their break-even point?

How might a company with a negative contribution margin reach the break-even point?

Explain what is meant by the margin of safety and how it is used by managers.

Sun Devil,Inc. Sun Devil,Inc.is considering the introduction of a new product with the following price and cost characteristics It expects to sell 70,000 units for the year. Refer to Sun Devil,Inc;how many units must be sold to break even?

When will the contribution margin ratio increase?

Describe the use of spreadsheets in financial modeling.

What is the formula for Break-Even Point in Sales Dollars?

What does sensitivity analysis refers to?

Fundamental Concepts

Measuring Product Costs

Activity-Based Management

Strategic Management of Costs,quality,and Time

Cost Drivers and Cost Behavior

Differential Cost Analysis for Operating Decisions

Capital Expenditure Decisions

Profit Planning and Budgeting

Profit and Cost Center Performance Evaluation

Investment Center Performance Evaluation

Incentive Issues

Allocating Costs to Responsibility Centers

Filters

Exam 6: Financial Modeling for Short-Term Decision Making

Which of the following are underlying assumptions of cost-volume-profit analysis?

Calculate break-even when a company's selling price per unit is $15,variable costs per unit are $8,fixed costs for the year are $70,000.

What effect would an increase in fixed costs have on the break-even point and the contribution margin? Break-even Point Contribution Margin

What is the formula for the Target Profit in Units?

Which of the following are benefits of financial models to users?

Multiple products make using financial models more complex.To deal with this,managers can do which of the following?

Sun Devil,Inc. Sun Devil,Inc.is considering the introduction of a new product with the following price and cost characteristics It expects to sell 70,000 units for the year. Refer to Sun Devil,Inc;what would be the break-even point in units if fixed costs were increased by $50,000?

How can a company increase their break-even point?

How might a company with a negative contribution margin reach the break-even point?

Explain what is meant by the margin of safety and how it is used by managers.

Sun Devil,Inc. Sun Devil,Inc.is considering the introduction of a new product with the following price and cost characteristics It expects to sell 70,000 units for the year. Refer to Sun Devil,Inc;how many units must be sold to break even?

When will the contribution margin ratio increase?

Describe the use of spreadsheets in financial modeling.

What is the formula for Break-Even Point in Sales Dollars?

What does sensitivity analysis refers to?

Fundamental Concepts

Measuring Product Costs

Activity-Based Management

Strategic Management of Costs,quality,and Time

Cost Drivers and Cost Behavior

Differential Cost Analysis for Operating Decisions

Capital Expenditure Decisions

Profit Planning and Budgeting

Profit and Cost Center Performance Evaluation

Investment Center Performance Evaluation

Incentive Issues

Allocating Costs to Responsibility Centers

Filters