Question 1

Why is the time period so important for the definition of fixed costs?

Accepted Answer

Over a short time period,fixed

Question 2

Which of the following formulas is used to calculate the contribution margin ratio?

Accepted Answer

A)  (Sales - Fixed costs)÷ Sales. 
B)  (Sales - Cost of goods sold)÷ Sales. 
C)  (Sales - Variable costs)÷ Sales. 
D)  (Sales - Total costs)÷ Sales. 
A)  (Sales - Fixed costs)÷ Sales. 
B)  (Sales - Cost of goods sold)÷ Sales. 
C)  (Sales - Variable costs)÷ Sales. 
D)  (Sales - Total costs)÷ Sales.

Question 3

You have been provided with the following information regarding the Closure Manufacturing Company:
$$\begin{array} { | l | r | } 
\hline \text { Sales Price } & \$ 50 \
\hline \text { Variable manufacturing cost per unit } & 24 \
\hline \text { Fixed manufacturing costs per unit } & 12 \
\hline \text { Variable marketing cost per unit } & 6 \
\hline \text { Fixed administrative costs per unit } & 3 \
\hline
\end{array}$$ 
This information is based on forecasted sales of 33,000 units.
(a)What is the expected operating profit for the upcoming year?
(b)What is the break-even point in dollars?
(c)How much in sales dollars is required to generate an operating profit of $275,000?

Accepted Answer

@#IMG-DLM& (a)[($50 - 24 - 6)× 33,000] -

Question 4

Present the profit equation and define all of the terms.

Accepted Answer

Profits = Total revenues - tot

Question 5

Folsom Inc. ,which produces and sells a single product,has provided the following contribution format income statement for August:

$$\begin{array} { | l | r | } 
\hline \text { Sales } ( 4,600 \text { units) } & \$ 105,800 \
\hline \text { Variable costs } & 41,400 \
\hline \text { Contribution margin } & 64,400 \
\hline \text { Fixed costs } &\underline{ 46,000 }\
\hline \text { Operating protit } & \$ 18,400 \
\hline
\end{array}$$ 
Required:
Redo the company's contribution format income statement assuming that the company sells 4,500 units.

Accepted Answer

The answer of Folsom Inc. ,which produces and sells a...

Question 6

An increase in an organization's tax rate will cause an increase in its break-even point.

Accepted Answer

A) True 
 B)False

Question 7

The Teri Aki Diner is a new buffet-style restaurant offering stir-fry and Thai dishes.The buffet has a fixed price of $8.50 per person.The estimated food costs are $2.00 per person,regardless of volume.Fixed costs are related to the number of buffet lines that are maintained,with the estimated costs as follows:
$$\begin{array} { | l | r | r | } 
\hline & \text { Monthy wolume } & \text { Fired Costs } \
\hline 1 \text { line } & 0 - 4,000 & \$ 30,000 \
\hline 2 \text { lines } & 4,001 - 6,000 & \$ 37,000 \
\hline 3 \text { lines } & 6,001 - 7,500 & \$ 40,000 \
\hline
\end{array}$$
Required:
Determine the break-even point(s).

Accepted Answer

@#IMG-DLM& 1 line = $30,000/($8.50 - 2)= 4,615 cus

Question 8

Raines Company's sales are $750,000 with operating profits of $130,000.If the contribution margin ratio is 40%,what did the fixed costs amount to?

Accepted Answer

A)  $370,000. 
B)  $300,000. 
C)  $270,000. 
D)  $170,000. 
A)  $370,000. 
B)  $300,000. 
C)  $270,000. 
D)  $170,000.

Question 9

Honeysuckle Manufacturing has the following data: 
$$\begin{array} { | l | r | l | } 
\hline \text { Selling Price } & \$ 60 & \
\text { Variable manufacturing cost } & \$ 33 & \
\hline \text { Fixed manufacturing cost } & \$ 250,000 & \begin{array} { l } 
\text { per } \
\text { month }
\end{array} \
\hline \begin{array} { l } 
\text { Variable selling \& administrative } \
\text { costs }
\end{array} & \$ 9 & \
\hline \text { Fixed selling \& administrative costs } & \$ 120,000 & \begin{array} { l } 
\text { per } \
\text { month }
\end{array} \
\hline
\end{array}$$
What dollar sales volume does Honeysuckle need to break even?

Accepted Answer

A)  $822,222. 
B)  $833,333. 
C)  $900,000. 
D)  $1,233,333. 
A)  $822,222. 
B)  $833,333. 
C)  $900,000. 
D)  $1,233,333.

Question 10

Lamar has the following data:
$\begin{array}{c}
\begin{array}{|l|}
\hline \text {Selling Price}\
\text {Variable manufacturing cost}\
\hline\
 \text {Fixed manutacturing cost.}\
\hline \text {Variable selling \& administrative}\
\text {costs}\
\hline \
\text {Fixed selling \& administrative costs}\
\hline
\end{array}
\begin{array}{l|}
\hline\$ 40 \
\$ 22 \
\hline \
\$ 150,000 \
\hline\
 \$ 6 \
\hline\
 \$ 120,000 \
\hline
\end{array}
\begin{array}{l|}
\hline\
\
\hline \text {per}\
\text {month}\
\hline\
\
\hline \text {per}\
\text {month}\
\hline 
\end{array}
\end{array}$
 How many units must Lamar produce and sell in order to achieve a profit of $30,000 per month?

Accepted Answer

A)  10,000 units. 
B)  8,824 units. 
C)  25,000 units. 
D)  15,000 units. 
A)  10,000 units. 
B)  8,824 units. 
C)  25,000 units. 
D)  15,000 units.

Question 11

Corey Company has a margin of safety percentage of 20%.The break-even point is $200,000 and the variable costs are 45% of sales.Given this information,the operating profit is:

Accepted Answer

A)  $27,500 
B)  $18,000 
C)  $22,500 
D)  $22,000 
A)  $27,500 
B)  $18,000 
C)  $22,500 
D)  $22,000

Question 12

The contribution margin ratio is the contribution margin per unit divided by the selling price per unit.

Accepted Answer

A) True 
 B)False

Question 13

Gardner Corporation manufactures skateboards and is in the process of preparing next year's budget.The pro forma income statement for the current year is presented below.$$\begin{array} { | l | r | r | } 
\hline \text { Sales } & & \$ 1,500,000 \
\hline \text { Cost of sales: } & & \
\hline \text { Direct Material } & \$ 250,000 & \
\hline \text { Direct labor } & 150,000 & \
\hline \text { Variable Overhead } & 75,000 & \
\hline \text { Fiked Overhead } &\underline{ 100,000} & \underline{575,000} \
\hline \text { Gross Profit } & & \$ 925,000 \
\hline \text { Selling and General \& Admin. Exp. } & & \
\hline \text { Variable } & 200,000 & \
\hline \text { Fiked } & 250,000 & 450,000 \
\hline \text { Operating Income } & & \underline{ \$ 475,000} \
\hline
\end{array}$$
For the coming year,the management of Gardner Corporation anticipates a 10 percent increase in sales,a 12 percent increase in variable costs,and a $45,000 increase in fixed costs.
The break-even point for next year would be:

Accepted Answer

A)  $729,027. 
B)  $862,103. 
C)  $214,018. 
D)  $474,000. 
A)  $729,027. 
B)  $862,103. 
C)  $214,018. 
D)  $474,000.

Question 14

Eastwick produces and sells three products.Last month's results are as follows: 
$$\begin{array} { | l | r | r | r | } 
\hline & \text { P1 } & \text { P2 } & \text { P3 } \
\hline \text { Revenues } & \$ 100,000 & \$ 200,000 & \$ 200,000 \
\hline \text { Variable costs } & 40,000 & 140,000 & 80,000 \
\hline
\end{array}$$
Fixed costs total $200,000.What is Eastwick's margin of safety? (Assume the current product mix. )

Accepted Answer

A)  $83,333. 
B)  $40,000. 
C)  $460,000. 
D)  $115,385. 
A)  $83,333. 
B)  $40,000. 
C)  $460,000. 
D)  $115,385.

Question 15

An increase in an organization's fixed costs will result in a lower margin of safety,assuming all other costs and sales remain unchanged.

Accepted Answer

A) True 
 B)False

Question 16

Explain the difference between total contribution margin and gross margin.

Accepted Answer

Total contribution margin recognizes the

Question 17

You have been provided with the following information: 
$$\begin{array} { | l | r | r | } 
\hline&\text { Per Unit } & \text { Total }\
\hline \text { Sales } & \$ 15 & \$ 45,000   \
\hline \text { Less variable expenses } & \underline{ 9 }&  \underline{27,000} \
\hline \text { Contribution margin } &6 & 18,000\
\hline \text { Less fixed expenses } & & \underline{12,000 } \
\hline \text { Operating profit } & &\$6,000\
\hline
\end{array}$$
If unit sales decrease by 10%,how much will fixed costs have to be reduced by to maintain the current operating profit?

Accepted Answer

A)  $12,000. 
B)  $4,500. 
C)  $6,000. 
D)  $1,800. 
A)  $12,000. 
B)  $4,500. 
C)  $6,000. 
D)  $1,800.

Question 18

Razor Inc.manufactures industrial components.One of its products used as a subcomponent in auto manufacturing is Fluoro2211.The selling price and cost per unit data for 9,000 units of Fluoro2211 are as follows.
 $$\begin{array} { | l | r | } 
\hline & \text { Per Unit Data } \
\hline \text { Selling Price } & \$ 150 \
\hline \text { Direct Materials } & 20 \
\hline \text { Direct Labor } & 15 \
\hline \text { Variable Manufacturing Overhead } & 12 \
\hline \text { Fixed Manufacturing Overhead } & 30 \
\hline \text { Variable Selling } & 3 \
\hline \text { Fixed Selling and Administrative } & 10 \
\hline \text { Total Costs } & 90 \
\hline \text { Operating Margin } & \$ 60 \
\hline
\end{array}$$
During the next year,sales of Fluoro2211 are expected to be 10,000 units.All costs will remain the same except for fixed manufacturing overhead,which will increase by 20%,and material,which will increase by 10%.The selling price per unit for next year will be $160.Based on these data,Razor Inc.'s total contribution margin for next year will be: (CMA adapted)

Accepted Answer

A)  $882,000. 
B)  $980,000. 
C)  $972,000. 
D)  $1,080,000. 
A)  $882,000. 
B)  $980,000. 
C)  $972,000. 
D)  $1,080,000.

Question 19

On January 1,2016,Randolph Co.increased its direct labor wage rates.All other budgeted costs and revenues were unchanged.How did this increase affect Randolph's budgeted break-even point and budgeted margin of safety? (CPA adapted) $$\begin{array} { | c | c | c | } 
\hline & \text { Buogeted Break-oren } & \text { Budgeted Margin of } \
\text { Point } & \text { Safety } \
\text { A. } & \text { Increase } & \text { Increase } \
\hline \text { B. } & \text { Increase } & \text { Decrease } \
\hline \text { C. } & \text { Decrease } & \text { Decrease } \
\hline \text { D. } & \text { Decrease } & \text { Increase } \
\hline
\end{array}$$

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 20

If the average selling price is $.60 per unit,the average variable cost is $.36 per unit,and the total fixed costs are $1,500,then sales of 15,000 units will result in operating profits of $3,600.

Accepted Answer

A) True 
 B)False

Why is the time period so important for the definition of fixed costs?

Which of the following formulas is used to calculate the contribution margin ratio?

Present the profit equation and define all of the terms.

An increase in an organization's tax rate will cause an increase in its break-even point.

Raines Company's sales are $750,000 with operating profits of $130,000.If the contribution margin ratio is 40%,what did the fixed costs amount to?

Corey Company has a margin of safety percentage of 20%.The break-even point is $200,000 and the variable costs are 45% of sales.Given this information,the operating profit is:

The contribution margin ratio is the contribution margin per unit divided by the selling price per unit.

Eastwick produces and sells three products.Last month's results are as follows: P1 P2 P3 Revenues \ 100,000 \ 200,000 \ 200,000 Variable costs 40,000 140,000 80,000 Fixed costs total $200,000.What is Eastwick's margin of safety? (Assume the current product mix. )

An increase in an organization's fixed costs will result in a lower margin of safety,assuming all other costs and sales remain unchanged.

Explain the difference between total contribution margin and gross margin.

If the average selling price is $.60 per unit,the average variable cost is $.36 per unit,and the total fixed costs are $1,500,then sales of 15,000 units will result in operating profits of $3,600.

Cost Accounting: Information for Decision Making

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

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Exam 3: Fundamentals of Cost-Volume-Profit Analysis

Why is the time period so important for the definition of fixed costs?

Which of the following formulas is used to calculate the contribution margin ratio?

Present the profit equation and define all of the terms.

An increase in an organization's tax rate will cause an increase in its break-even point.

Raines Company's sales are $750,000 with operating profits of $130,000.If the contribution margin ratio is 40%,what did the fixed costs amount to?

Corey Company has a margin of safety percentage of 20%.The break-even point is $200,000 and the variable costs are 45% of sales.Given this information,the operating profit is:

The contribution margin ratio is the contribution margin per unit divided by the selling price per unit.

Eastwick produces and sells three products.Last month's results are as follows: P1 P2 P3 Revenues \ 100,000 \ 200,000 \ 200,000 Variable costs 40,000 140,000 80,000 Fixed costs total $200,000.What is Eastwick's margin of safety? (Assume the current product mix. )

An increase in an organization's fixed costs will result in a lower margin of safety,assuming all other costs and sales remain unchanged.

Explain the difference between total contribution margin and gross margin.

If the average selling price is $.60 per unit,the average variable cost is $.36 per unit,and the total fixed costs are $1,500,then sales of 15,000 units will result in operating profits of $3,600.

Cost Accounting: Information for Decision Making

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

Filters