Question 1

Which of the following is not an underlying assumption of cost-volume-profit analysis?

Accepted Answer

A) 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. 
D) Sales mix changes within the relevant range of production. 
A) 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. 
D) Sales mix changes within the relevant range of production.

Question 2

Potomac Corporation wishes to earn a 20% return on its $100,000 investment in equipment used to produce product M.Based on estimated sales of 10,000 units of product M,the cost per unit would be as follows:
   
At how much per unit should Product M be priced for sale?

Accepted Answer

The answer of Potomac Corporation wishes to earn a 20%...

Question 3

Spreadsheets are used in financial modeling.Once you have set up the basic formula it is easy to determine the effect of changing price,costs,volume amounts,or any other variable deemed important to the analysis.This analysis is called which of the following?

Accepted Answer

A) "single substitution" analysis 
B) "variable substitution" analysis 
C) "multiple substitution" analysis 
D) "what-if" analysis. 
A) "single substitution" analysis 
B) "variable substitution" analysis 
C) "multiple substitution" analysis 
D) "what-if" analysis.

Question 4

If a company has variable costs of $40 per unit,fixed costs of $3,000 per month and sells its product for $50,how many units must it sell to break-even?

Accepted Answer

A) 300 
B) 250 
C) 100 
D) 50 
A) 300 
B) 250 
C) 100 
D) 50

Question 5

A basic financial model that summarizes the effects of volume changes on an organization's costs,revenue,and income is the

Accepted Answer

A) total revenue-total cost model. 
B) break-even model. 
C) cost-volume-profit model. 
D) program,planning,and profit model. 
A) total revenue-total cost model. 
B) break-even model. 
C) cost-volume-profit model. 
D) program,planning,and profit model.

Question 6

A company's selling price is $18 per unit,variable cost is $6 per unit,and fixed costs are $36,000.If fixed costs increased by $6,000,how many additional units must be sold to break even?

Accepted Answer

A) 5,000 
B) 1,000 
C) 500 
D) 250 
A) 5,000 
B) 1,000 
C) 500 
D) 250

Question 7

Which of the following is a typical cost structure for home builders?

Accepted Answer

A) high fixed costs relative to variable costs. 
B) high variable costs relative to fixed costs. 
C) high profits relative to total costs. 
D) None of the answers is correct. 
A) high fixed costs relative to variable costs. 
B) high variable costs relative to fixed costs. 
C) high profits relative to total costs. 
D) None of the answers is 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 the sales price decreased by 20%.

Accepted Answer

A) 1,500 
B) 2,250 
C) 2,000 
D) 1,000 
A) 1,500 
B) 2,250 
C) 2,000 
D) 1,000

Question 9

The formula used in performing cost-volume-profit (CVP)analysis for the Target Profit in Sales Dollars,where t is the tax rate,is

Accepted Answer

A) (Total Fixed Costs + Before-Tax Target Profit)/ Unit Contribution Margin. 
B) (Total Fixed Costs + Before-Tax Target Profit)/ Contribution Margin Ratio. 
C) (Total Fixed Costs ´ t)/ Unit Contribution Margin. 
D) (Total Fixed Costs + (Target Profit ´ t))/ Unit Contribution Margin. 
A) (Total Fixed Costs + Before-Tax Target Profit)/ Unit Contribution Margin. 
B) (Total Fixed Costs + Before-Tax Target Profit)/ Contribution Margin Ratio. 
C) (Total Fixed Costs ´ t)/ Unit Contribution Margin. 
D) (Total Fixed Costs + (Target Profit ´ t))/ Unit Contribution Margin.

Question 10

The cost structure of an organization is the proportion of which of the following?

Accepted Answer

A) opportunity and variable costs to total costs. 
B) fixed and opportunity costs to total costs. 
C) variable and opportunity costs to total costs. 
D) fixed and variable costs to total costs. 
A) opportunity and variable costs to total costs. 
B) fixed and opportunity costs to total costs. 
C) variable and opportunity costs to total costs. 
D) fixed and variable costs to total costs.

Question 11

An activity-based costing system

Accepted Answer

A) can provide a much more complete picture of cost-volume-profit relationships. 
B) is not compatible with cost-volume-profit relationships because not all costs are based on volumes. 
C) is too expensive to combine with a cost-volume-profit model. 
D) cannot utilize cost-volume-profit relationships. 
A) can provide a much more complete picture of cost-volume-profit relationships. 
B) is not compatible with cost-volume-profit relationships because not all costs are based on volumes. 
C) is too expensive to combine with a cost-volume-profit model. 
D) cannot utilize cost-volume-profit relationships.

Question 12

Identify the effects of cost structure and operating leverage on the sensitivity of profit to changes in volume.Use a nuclear power plant and an ice cream store as examples.

Accepted Answer

The cost structure of an organization is

Question 13

The relative proportion of various products sold by a company is called the

Accepted Answer

A) marketing mix. 
B) product mix. 
C) operating mix. 
D) output mix. 
A) marketing mix. 
B) product mix. 
C) operating mix. 
D) output mix.

Question 14

CVP analysis with step costs.Sparkle Company has one product: printing t-shirts with logos for various businesses.The sales price of $20 remains constant per unit regardless of volume,as does the variable cost of $12 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

(Sparkle Company;CVP analysis with step

Question 15

Discuss the meaning of the term "break-even".Why would a manager be concerned with the break-even point? Does a break-even calculation provide absolute accuracy? Why or why not? Discuss the impact of multiple products on the calculation of break-even.

Accepted Answer

Break-even is the point at which contrib

Question 16

The formula used in performing cost-volume-profit (CVP)analysis for the Target Profit in Units,where t is the tax rate,is

Accepted Answer

A) (Total Fixed Costs + Before-Tax Target Profit)/ Unit Contribution Margin. 
B) (Total Fixed Costs + Before-Tax Target Profit)/ Contribution Margin Ratio. 
C) (Total Fixed Costs ´ t)/ Unit Contribution Margin. 
D) (Total Fixed Costs + (Target Profit ´ t))/ Unit Contribution Margin. 
A) (Total Fixed Costs + Before-Tax Target Profit)/ Unit Contribution Margin. 
B) (Total Fixed Costs + Before-Tax Target Profit)/ Contribution Margin Ratio. 
C) (Total Fixed Costs ´ t)/ Unit Contribution Margin. 
D) (Total Fixed Costs + (Target Profit ´ t))/ Unit Contribution Margin.

Question 17

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 make an operating profit of $15,000?

Accepted Answer

A) 4,200 
B) 12,600 
C) 6,300 
D) 3,150 
A) 4,200 
B) 12,600 
C) 6,300 
D) 3,150

Question 18

Which of the following is activity for which cost-volume-profit analysis would not provide useful data?

Accepted Answer

A) product pricing. 
B) market research for product distribution. 
C) reporting on income tax returns. 
D) assessing the level of labor needed in the production process. 
A) product pricing. 
B) market research for product distribution. 
C) reporting on income tax returns. 
D) assessing the level of labor needed in the production process.

Question 19

Calculate margin of safety using the following assumptions:

Accepted Answer

A) 2,000 units 
B) 10,000 units 
C) 7,500 units 
D) 8,000 units 
A) 2,000 units 
B) 10,000 units 
C) 7,500 units 
D) 8,000 units

Question 20

The profit-volume graph shows one line that represents which of the following?

Accepted Answer

A) operating profits of the company for a given sales volume. 
B) operating revenues of the company for a given sales volume. 
C) total costs of the company for a given sales volume. 
D) total profits of the company for a given sales volume. 
A) operating profits of the company for a given sales volume. 
B) operating revenues of the company for a given sales volume. 
C) total costs of the company for a given sales volume. 
D) total profits of the company for a given sales volume.

Which of the following is not an underlying assumption of cost-volume-profit analysis?

Potomac Corporation wishes to earn a 20% return on its $100,000 investment in equipment used to produce product M.Based on estimated sales of 10,000 units of product M,the cost per unit would be as follows: At how much per unit should Product M be priced for sale?

Spreadsheets are used in financial modeling.Once you have set up the basic formula it is easy to determine the effect of changing price,costs,volume amounts,or any other variable deemed important to the analysis.This analysis is called which of the following?

If a company has variable costs of $40 per unit,fixed costs of $3,000 per month and sells its product for $50,how many units must it sell to break-even?

A basic financial model that summarizes the effects of volume changes on an organization's costs,revenue,and income is the

A company's selling price is $18 per unit,variable cost is $6 per unit,and fixed costs are $36,000.If fixed costs increased by $6,000,how many additional units must be sold to break even?

Which of the following is a typical cost structure for home builders?

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 the sales price decreased by 20%.

The formula used in performing cost-volume-profit (CVP)analysis for the Target Profit in Sales Dollars,where t is the tax rate,is

The cost structure of an organization is the proportion of which of the following?

An activity-based costing system

Identify the effects of cost structure and operating leverage on the sensitivity of profit to changes in volume.Use a nuclear power plant and an ice cream store as examples.

The relative proportion of various products sold by a company is called the

Discuss the meaning of the term "break-even".Why would a manager be concerned with the break-even point? Does a break-even calculation provide absolute accuracy? Why or why not? Discuss the impact of multiple products on the calculation of break-even.

The formula used in performing cost-volume-profit (CVP)analysis for the Target Profit in Units,where t is the tax rate,is

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 make an operating profit of $15,000?

Which of the following is activity for which cost-volume-profit analysis would not provide useful data?

Calculate margin of safety using the following assumptions:

The profit-volume graph shows one line that represents which of the following?

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 is not an underlying assumption of cost-volume-profit analysis?

Potomac Corporation wishes to earn a 20% return on its $100,000 investment in equipment used to produce product M.Based on estimated sales of 10,000 units of product M,the cost per unit would be as follows: At how much per unit should Product M be priced for sale?

Spreadsheets are used in financial modeling.Once you have set up the basic formula it is easy to determine the effect of changing price,costs,volume amounts,or any other variable deemed important to the analysis.This analysis is called which of the following?

If a company has variable costs of $40 per unit,fixed costs of $3,000 per month and sells its product for $50,how many units must it sell to break-even?

A basic financial model that summarizes the effects of volume changes on an organization's costs,revenue,and income is the

A company's selling price is $18 per unit,variable cost is $6 per unit,and fixed costs are $36,000.If fixed costs increased by $6,000,how many additional units must be sold to break even?

Which of the following is a typical cost structure for home builders?

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 the sales price decreased by 20%.

The formula used in performing cost-volume-profit (CVP)analysis for the Target Profit in Sales Dollars,where t is the tax rate,is

The cost structure of an organization is the proportion of which of the following?

An activity-based costing system

Identify the effects of cost structure and operating leverage on the sensitivity of profit to changes in volume.Use a nuclear power plant and an ice cream store as examples.

The relative proportion of various products sold by a company is called the

Discuss the meaning of the term "break-even".Why would a manager be concerned with the break-even point? Does a break-even calculation provide absolute accuracy? Why or why not? Discuss the impact of multiple products on the calculation of break-even.

The formula used in performing cost-volume-profit (CVP)analysis for the Target Profit in Units,where t is the tax rate,is

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 make an operating profit of $15,000?

Which of the following is activity for which cost-volume-profit analysis would not provide useful data?

Calculate margin of safety using the following assumptions:

The profit-volume graph shows one line that represents which of the following?

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