Question 1

What happens to break-even point when the sales price per unit decreases?

Accepted Answer

A) Break-even point increases. 
B) Break-even point decreases. 
C) Break-even point stays the same. 
D) None of these answers is correct. 
A) Break-even point increases. 
B) Break-even point decreases. 
C) Break-even point stays the same. 
D) None of these answers is correct.

Question 2

Pierce Company's break-even point is 12,000 units. Its product sells for $25 and has a $10 variable cost per unit. What is the company's total fixed cost amount?

Accepted Answer

A) $250,000 
B) $180,000 
C) $120,000 
D) Fixed costs cannot be computed with the information provided. 
A) $250,000 
B) $180,000 
C) $120,000 
D) Fixed costs cannot be computed with the information provided.

Question 3

Database software is especially useful for performing cost-volume-profit sensitivity analysis.

Accepted Answer

A) True 
 B)False

Question 4

A product has a contribution margin of $2.50 per unit and a selling price of $25 per unit. Fixed costs are $20,000. Assuming new technology increases the unit contribution margin by 50 percent but increases total fixed costs by $13,750, what is the new breakeven point in units?

Accepted Answer

A) 3,667 units 
B) 3,333 units 
C) 13,500 units 
D) 9,000 units 
A) 3,667 units 
B) 3,333 units 
C) 13,500 units 
D) 9,000 units

Question 5

If a company is operating beyond its break-even point, sale of one more unit of product increases the company's profit by the amount of the unit contribution margin.

Accepted Answer

A) True 
 B)False

Question 6

Contribution margin ratio will remain the same at various levels of sales even if total fixed costs are altered.

Accepted Answer

A) True 
 B)False

Question 7

Camden Company sets the selling price for its product by adding a markup to the product's variable manufacturing costs. This approach to pricing is referred to as:

Accepted Answer

A) cost-plus pricing 
B) target pricing 
C) target costing 
D) contribution margin-based pricing 
A) cost-plus pricing 
B) target pricing 
C) target costing 
D) contribution margin-based pricing

Question 8

Which of the following is not one of the assumptions underlying cost-volume-profit analysis?

Accepted Answer

A) Costs are linear. 
B) Production equals sales. 
C) All costs can be segregated into fixed and variable components. 
D) The selling price increases or decreases with changes in sales volume. 
A) Costs are linear. 
B) Production equals sales. 
C) All costs can be segregated into fixed and variable components. 
D) The selling price increases or decreases with changes in sales volume.

Question 9

Jensen Company has a contribution margin ratio of 45%. This means that its variable costs are 55% of sales.

Accepted Answer

A) True 
 B)False

Question 10

Canton Company produces and sells toasters. The following unit cost information assumes a production and sales volume of 15,000 units:
Required:
1) Compute the budgeted selling price per unit assuming Canton uses a cost-plus pricing strategy and a markup equal to 75% of production cost.2) Compute the firm's total fixed costs.3) Compute the firm's contribution margin per unit given the budgeted selling price you computed in Requirement 1.4) Compute the firm's breakeven point in units and dollars, using the selling price you calculated in part 1.5) Using the unit contribution margin, compute the firm's estimated profit if 15,000 units are sold. $$\begin{array} { | l | r | } 
\hline \text { Direct materials } & \$ 9 \
\hline \text { Direct labor } & 6 \
\hline \text { Variable overhead } & 2 \
\hline \text { Fixed overhead } & 3 \
\hline \text { Variable selling and administrative costs } & 1 \
\hline \text { Fixed selling and administrative costs } & 4 \
\hline
\end{array}$$

Accepted Answer

1) Budgeted selling price = ($9 + $6 + $

Question 11

Select the correct statement regarding break-even point analysis.

Accepted Answer

A) The break-even point in sales dollars equals total fixed costs divided by contribution margin per unit. 
B) An increase in fixed costs causes the break-even point to increase. 
C) An increase in contribution margin per unit causes the break-even point in units to increase. 
D) A decrease in the variable cost per unit causes the break-even point in units to increase. 
A) The break-even point in sales dollars equals total fixed costs divided by contribution margin per unit. 
B) An increase in fixed costs causes the break-even point to increase. 
C) An increase in contribution margin per unit causes the break-even point in units to increase. 
D) A decrease in the variable cost per unit causes the break-even point in units to increase.

Question 12

The margin of safety ratio can be defined as the:

Accepted Answer

A) Excess of budgeted sales over break-even sales divided by break-even sales. 
B) Excess of budgeted sales over break-even sales divided by budgeted sales. 
C) Excess of budgeted sales over fixed costs divided by budgeted sales. 
D) Excess of budgeted sales over variable costs divided by budgeted sales. 
A) Excess of budgeted sales over break-even sales divided by break-even sales. 
B) Excess of budgeted sales over break-even sales divided by budgeted sales. 
C) Excess of budgeted sales over fixed costs divided by budgeted sales. 
D) Excess of budgeted sales over variable costs divided by budgeted sales.

Question 13

A margin of safety of 30% means that every dollar in revenue generates thirty cents in profit.

Accepted Answer

A) True 
 B)False

Question 14

During the current year, Goldblum Co. sold 160,000 units of its product at a selling price of $40. The variable cost per unit was $30, and Goldblum reported net income for the year of $220,000. What was the amount of Goldblum's fixed costs for the year?

Accepted Answer

Answers will vary
Contribution margin pe

Question 15

Contribution margin cannot be calculated for a service-type business, and cost-volume-profit analysis is not applicable for a company that provides services rather than selling goods.

Accepted Answer

A) True 
 B)False

Question 16

Bleeker Street Company produces and sells two lines of business suits, the Contemporary and the Traditionalist. The following monthly data are provided:
Budgeted net income is $45,000 per month.Required:
1) Calculate the monthly break-even sales in units and dollars based on the budgeted sales mix.2) Calculate the firm's overall margin of safety in dollars.3) Compute the firm's profit assuming 1,500 units are sold in a 1:1 sales mix.4) Explain any difference between the firm's budgeted net income of $35,000 and your answer to Requirement 3. $\begin{array}{|l|ll|lr|}
\hline & \text { Contemporary } & & \text { Traditionalist } \
\hline \text { Estimated unit sales per month } & 500 & & 1,000 \
\hline \text { Selling price } & \$ & 200 & \$ & 175 \
\hline \text { Variable manufacturing costs } & 110 & & 100 \\hline \text { Variable selling and }  \
\text { administrative costs } & 10 && 10 \
\hline
\end{array}$

Accepted Answer

Answers will vary
1) Total fixed costs =

Question 17

Martin Company currently produces and sells 40,000 units of product at a selling price of $12. The product has variable costs of $6 per unit and fixed costs of $150,000. The company currently earns a total contribution margin of:

Accepted Answer

A) $280,000 
B) $200,000 
C) $240,000 
D) $90,000 
A) $280,000 
B) $200,000 
C) $240,000 
D) $90,000

Question 18

To get a feel for the impact on profits of various changes in costs and volume levels management should perform:

Accepted Answer

A) cost benefit analysis 
B) sensitivity analysis 
C) cost analysis 
D) profitability analysis 
A) cost benefit analysis 
B) sensitivity analysis 
C) cost analysis 
D) profitability analysis

Question 19

Company A makes and sells a single product, unless otherwise indicated. What happens to break-even point when the variable cost per unit and selling price both decrease by the same amount?

Accepted Answer

Answers will vary
The break-ev

Question 20

Wayans Company has a contribution margin ratio of 60%. This means that its variable costs are 60% of sales.

Accepted Answer

A) True 
 B)False

What happens to break-even point when the sales price per unit decreases?

Pierce Company's break-even point is 12,000 units. Its product sells for $25 and has a $10 variable cost per unit. What is the company's total fixed cost amount?

Database software is especially useful for performing cost-volume-profit sensitivity analysis.

A product has a contribution margin of $2.50 per unit and a selling price of $25 per unit. Fixed costs are $20,000. Assuming new technology increases the unit contribution margin by 50 percent but increases total fixed costs by $13,750, what is the new breakeven point in units?

If a company is operating beyond its break-even point, sale of one more unit of product increases the company's profit by the amount of the unit contribution margin.

Contribution margin ratio will remain the same at various levels of sales even if total fixed costs are altered.

Camden Company sets the selling price for its product by adding a markup to the product's variable manufacturing costs. This approach to pricing is referred to as:

Which of the following is not one of the assumptions underlying cost-volume-profit analysis?

Jensen Company has a contribution margin ratio of 45%. This means that its variable costs are 55% of sales.

Select the correct statement regarding break-even point analysis.

The margin of safety ratio can be defined as the:

A margin of safety of 30% means that every dollar in revenue generates thirty cents in profit.

During the current year, Goldblum Co. sold 160,000 units of its product at a selling price of $40. The variable cost per unit was $30, and Goldblum reported net income for the year of $220,000. What was the amount of Goldblum's fixed costs for the year?

Contribution margin cannot be calculated for a service-type business, and cost-volume-profit analysis is not applicable for a company that provides services rather than selling goods.

Martin Company currently produces and sells 40,000 units of product at a selling price of $12. The product has variable costs of $6 per unit and fixed costs of $150,000. The company currently earns a total contribution margin of:

To get a feel for the impact on profits of various changes in costs and volume levels management should perform:

Company A makes and sells a single product, unless otherwise indicated. What happens to break-even point when the variable cost per unit and selling price both decrease by the same amount?

Wayans Company has a contribution margin ratio of 60%. This means that its variable costs are 60% of sales.

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Cost Management in an Automated Business Environment: Abc, Abm, and Tqm

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters

Exam 3: Analysis of Cost, Volume, and Pricing to Increase Profitability

What happens to break-even point when the sales price per unit decreases?

Pierce Company's break-even point is 12,000 units. Its product sells for $25 and has a $10 variable cost per unit. What is the company's total fixed cost amount?

Database software is especially useful for performing cost-volume-profit sensitivity analysis.

A product has a contribution margin of $2.50 per unit and a selling price of $25 per unit. Fixed costs are $20,000. Assuming new technology increases the unit contribution margin by 50 percent but increases total fixed costs by $13,750, what is the new breakeven point in units?

If a company is operating beyond its break-even point, sale of one more unit of product increases the company's profit by the amount of the unit contribution margin.

Contribution margin ratio will remain the same at various levels of sales even if total fixed costs are altered.

Camden Company sets the selling price for its product by adding a markup to the product's variable manufacturing costs. This approach to pricing is referred to as:

Which of the following is not one of the assumptions underlying cost-volume-profit analysis?

Jensen Company has a contribution margin ratio of 45%. This means that its variable costs are 55% of sales.

Select the correct statement regarding break-even point analysis.

The margin of safety ratio can be defined as the:

A margin of safety of 30% means that every dollar in revenue generates thirty cents in profit.

During the current year, Goldblum Co. sold 160,000 units of its product at a selling price of $40. The variable cost per unit was $30, and Goldblum reported net income for the year of $220,000. What was the amount of Goldblum's fixed costs for the year?

Contribution margin cannot be calculated for a service-type business, and cost-volume-profit analysis is not applicable for a company that provides services rather than selling goods.

Martin Company currently produces and sells 40,000 units of product at a selling price of $12. The product has variable costs of $6 per unit and fixed costs of $150,000. The company currently earns a total contribution margin of:

To get a feel for the impact on profits of various changes in costs and volume levels management should perform:

Company A makes and sells a single product, unless otherwise indicated. What happens to break-even point when the variable cost per unit and selling price both decrease by the same amount?

Wayans Company has a contribution margin ratio of 60%. This means that its variable costs are 60% of sales.

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Cost Management in an Automated Business Environment: Abc, Abm, and Tqm

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters