Question 1

How can financial modeling be used with multiple cost drivers?

Accepted Answer

A financial model can be developed with

Question 2

When sales dollars are used as the measure of volume in the cost-volume-profit equation,the focus is on solving for total revenue required to break even or a target profit rather than total units.The contribution margin ratio is defined as which of the following?

Accepted Answer

A) total contribution margin divided by total sales. 
B) unit contribution margin divided by unit sales price. 
C) total contribution margin divided by total sales and unit contribution margin divided by unit sales price. 
D) the sum of fixed costs plus target profits divided by unit sales price. 
A) total contribution margin divided by total sales. 
B) unit contribution margin divided by unit sales price. 
C) total contribution margin divided by total sales and unit contribution margin divided by unit sales price. 
D) the sum of fixed costs plus target profits divided by unit sales price.

Question 3

Which of the following statements is true?

Accepted Answer

A) The higher the firm's leverage,the higher the degree of sensitivity of profits to cost changes. 
B) The higher the firm's leverage,the lower the degree of sensitivity of profits to cost changes. 
C) The higher the firm's leverage,the higher the degree of sensitivity of profits to volume changes. 
D) The higher the firm's leverage,the lower the degree of sensitivity of profits to volume changes. 
A) The higher the firm's leverage,the higher the degree of sensitivity of profits to cost changes. 
B) The higher the firm's leverage,the lower the degree of sensitivity of profits to cost changes. 
C) The higher the firm's leverage,the higher the degree of sensitivity of profits to volume changes. 
D) The higher the firm's leverage,the lower the degree of sensitivity of profits to volume changes.

Question 4

A company produces two products,A and B.A sells for $16 and has variable costs of $10.B sells for $12 and has variable costs of $8.Fixed Costs for the period are $35,000.Normally four units of A are sold for every two units of B units.How many units of B must be sold if the company expects profits of $50,000?

Accepted Answer

A) 15,947 
B) 10,637 
C) 5,313 
D) Cannot be determined 
A) 15,947 
B) 10,637 
C) 5,313 
D) Cannot be determined

Question 5

When sales dollars are used as the measure of volume in the cost-volume-profit equation,the focus is on solving for total revenue required to break even or a target profit rather than total units.The contribution margin ratio is defined as which of the following?

Accepted Answer

A) total contribution margin divided by total sales. 
B) unit contribution margin divided by unit sales price. 
C) total contribution margin divided by total sales and unit contribution margin divided by unit sales price. 
D) the sum of fixed costs plus target profits divided by unit sales price. 
A) total contribution margin divided by total sales. 
B) unit contribution margin divided by unit sales price. 
C) total contribution margin divided by total sales and unit contribution margin divided by unit sales price. 
D) the sum of fixed costs plus target profits divided by unit sales price.

Question 6

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

Accepted Answer

A) Increase Increase 
B) Increase Decrease 
C) Increase No effect 
D) Decrease Decrease 
A) Increase Increase 
B) Increase Decrease 
C) Increase No effect 
D) Decrease Decrease

Question 7

When sales dollars are used as the measure of volume in the cost-volume-profit equation,the focus is on solving for which of the following?

Accepted Answer

A) total revenue required to break even rather than total units. 
B) a target profit rather than total units. 
C) total revenue required to break even rather than total units and a target profit rather than total units. 
D) One cannot utilize cost-volume-profit relationships to solve for sales dollars. 
A) total revenue required to break even rather than total units. 
B) a target profit rather than total units. 
C) total revenue required to break even rather than total units and a target profit rather than total units. 
D) One cannot utilize cost-volume-profit relationships to solve for sales dollars.

Question 8

Financial modeling can be used by managers for which of the following purposes?

Accepted Answer

A) staff rotation planning purposes. 
B) analyzing financial relationships that are useful for decision making. 
C) forecasting political unrest. 
D) employee cross-training purposes. 
A) staff rotation planning purposes. 
B) analyzing financial relationships that are useful for decision making. 
C) forecasting political unrest. 
D) employee cross-training purposes.

Question 9

Cost-volume-profit;volume defined in sales dollars.An excerpt from the income statement of the Dawson Company follows.Fixed costs in Year 1 are $660,000.
Dawson Company
Income Statement
Year ended December 31,year 1
   
Required:
a.What percentage of sales revenue is variable cost?
b.What is the break-even point in sales dollars for Dawson Company?
c.If sales revenue falls to $2,500,000,what will be the estimated amount of profit?
d.What amount of sales dollars produces a profit of $1,000,000?
(Dawson Company;cost-volume-profit;volume defined in sales dollars. )

Accepted Answer

a.$2,100,000 - $660,000 = $1,440,000
$1,

Question 10

SunDevil Co.plans to sell 200,000 special Rose Bowl footballs with fixed costs of $400,000 and variable expenses at 60% of sales.To have a net income of $100,000 SunDevil management must set the sales price at

Accepted Answer

A) $3.75 
B) $4.17 
C) $5.00 
D) $6.25 
A) $3.75 
B) $4.17 
C) $5.00 
D) $6.25

Question 11

A financial model is only as good as

Accepted Answer

A) the rate of growth in the economy. 
B) the company's operating leverage. 
C) the assumptions it uses and the data it uses. 
D) None of the answers are correct. 
A) the rate of growth in the economy. 
B) the company's operating leverage. 
C) the assumptions it uses and the data it uses. 
D) None of the answers are correct.

Question 12

Calculate margin of safety using the following assumptions:

Accepted Answer

A) 1,000 units 
B) $500,000 
C) 1,750 units 
D) 750 units 
A) 1,000 units 
B) $500,000 
C) 1,750 units 
D) 750 units

Question 13

TopSail Company
TopSail Company produces one type of machine with the following costs and revenues for the year
 
Refer to the TopSail Company.Calculate the break-even point in units.

Accepted Answer

A) 700,000 
B) 2,100,000 
C) 1,400,000 
D) 450,000 
A) 700,000 
B) 2,100,000 
C) 1,400,000 
D) 450,000

Question 14

Which of the following is not a major assumption underlying CVP analysis?

Accepted Answer

A) All costs incurred by a firm can be separated into their fixed and variable components. 
B) The product selling price per unit is constant at all volume levels. 
C) Operating efficiency and employees productivity are constant at all volume levels. 
D) For multiproduct situations,the sales mix can vary at all volume levels. 
A) All costs incurred by a firm can be separated into their fixed and variable components. 
B) The product selling price per unit is constant at all volume levels. 
C) Operating efficiency and employees productivity are constant at all volume levels. 
D) For multiproduct situations,the sales mix can vary at all volume levels.

Question 15

Break-even and target profits;volume defined in sales dollars.The manager of Hsu's Carryout Express estimates operating costs for the year will total $230,000 for fixed costs.
Required:
a.Find the break-even point in sales dollars with a contribution margin ratio of 40 percent.
b.Find the break-even point in sales dollars with a contribution margin ratio of 20 percent.
c.Find the sales dollars required with a contribution margin ratio of 50 percent to generate a profit of $150,000.
(Hsu's Carryout Express;break-even and target profits;volume defined in sales dollars. )

Accepted Answer

a.Sales = $230,000/.40 = $575,

Question 16

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

Question 17

How does cost-volume-profit analysis allows management to determine the relative profitability of a product?

Accepted Answer

A) By highlighting potential bottlenecks in the production process. 
B) By keeping fixed costs to an absolute minimum. 
C) By determining the contribution margin and projected profits at various levels of production. 
D) By assigning costs to a product in a manner that maximizes the contribution margin. 
A) By highlighting potential bottlenecks in the production process. 
B) By keeping fixed costs to an absolute minimum. 
C) By determining the contribution margin and projected profits at various levels of production. 
D) By assigning costs to a product in a manner that maximizes the contribution margin.

Question 18

What effect would an increase in the selling price of the product 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 19

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) assume that a particular product mix does not change. 
C) treat each product line as a separate entity. 
D) All of the answers are correct. 
A) assume that all products have the same contribution margin. 
B) assume that a particular product mix does not change. 
C) treat each product line as a separate entity. 
D) All of the answers are correct.

Question 20

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 the sales price decreased by 20%?

Accepted Answer

A) 5,000 
B) 7,500 
C) 20,000 
D) 8,571 
A) 5,000 
B) 7,500 
C) 20,000 
D) 8,571

How can financial modeling be used with multiple cost drivers?

When sales dollars are used as the measure of volume in the cost-volume-profit equation,the focus is on solving for total revenue required to break even or a target profit rather than total units.The contribution margin ratio is defined as which of the following?

Which of the following statements is true?

When sales dollars are used as the measure of volume in the cost-volume-profit equation,the focus is on solving for total revenue required to break even or a target profit rather than total units.The contribution margin ratio is defined as which of the following?

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

When sales dollars are used as the measure of volume in the cost-volume-profit equation,the focus is on solving for which of the following?

Financial modeling can be used by managers for which of the following purposes?

SunDevil Co.plans to sell 200,000 special Rose Bowl footballs with fixed costs of $400,000 and variable expenses at 60% of sales.To have a net income of $100,000 SunDevil management must set the sales price at

A financial model is only as good as

Calculate margin of safety using the following assumptions:

TopSail Company TopSail Company produces one type of machine with the following costs and revenues for the year Refer to the TopSail Company.Calculate the break-even point in units.

Which of the following is not a major assumption underlying CVP analysis?

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

How does cost-volume-profit analysis allows management to determine the relative profitability of a product?

What effect would an increase in the selling price of the product have on the break-even point and the contribution margin? Break-even Point Contribution Margin

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 the sales price decreased by 20%?

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

How can financial modeling be used with multiple cost drivers?

When sales dollars are used as the measure of volume in the cost-volume-profit equation,the focus is on solving for total revenue required to break even or a target profit rather than total units.The contribution margin ratio is defined as which of the following?

Which of the following statements is true?

When sales dollars are used as the measure of volume in the cost-volume-profit equation,the focus is on solving for total revenue required to break even or a target profit rather than total units.The contribution margin ratio is defined as which of the following?

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

When sales dollars are used as the measure of volume in the cost-volume-profit equation,the focus is on solving for which of the following?

Financial modeling can be used by managers for which of the following purposes?

SunDevil Co.plans to sell 200,000 special Rose Bowl footballs with fixed costs of $400,000 and variable expenses at 60% of sales.To have a net income of $100,000 SunDevil management must set the sales price at

A financial model is only as good as

Calculate margin of safety using the following assumptions:

TopSail Company TopSail Company produces one type of machine with the following costs and revenues for the year Refer to the TopSail Company.Calculate the break-even point in units.

Which of the following is not a major assumption underlying CVP analysis?

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

How does cost-volume-profit analysis allows management to determine the relative profitability of a product?

What effect would an increase in the selling price of the product have on the break-even point and the contribution margin? Break-even Point Contribution Margin

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 the sales price decreased by 20%?

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