Question 1

The margin of safety percentage is computed as:

Accepted Answer

A)  Break-even sales ÷ Total sales. 
B)  Total sales - Break-even sales. 
C)  (Total sales - Break-even sales)÷ Break-even sales. 
D)  (Total sales - Break-even sales)÷ Total sales. 
A)  Break-even sales ÷ Total sales. 
B)  Total sales - Break-even sales. 
C)  (Total sales - Break-even sales)÷ Break-even sales. 
D)  (Total sales - Break-even sales)÷ Total sales.

Question 2

The Beach Party packages horseradish and mustards in a factory that can operate one,two,or three shifts.The product sells for $10 a case and has variable costs of $4 per case.Fixed costs are related to the number of shifts that are operated,with the estimated costs as follows:
$$\begin{array} { | l | r | r | } 
\hline & \text { Daly volume } & \text { Ficed Costs } \
\hline 1 \text { shift } & 0 - 2,000 & \$ 3,000 \
\hline \text { 2 shifts } & 2,001 - 4,000 & \$ 5,700 \
\hline \text { 3 shifts } & 4,001 - 6,000 & \$ 8,200 \
\hline
\end{array}$$ 
Required:
(a)Determine the break-even point(s).(b)If Beach Party can sell all it can produce,how many shifts should be operated?

Accepted Answer

@#IMG-DLM& 1 shift = $3,000/($10 - 4)= 500 cases:

Question 3

Given the following data: 
$$\begin{array} { | l | r | r | } 
\hline&\text { Per Unit } & \text { Total }\
\hline \text { Sales } & \$ 15 & \$ 45,000   \
\hline \text { Less variable expenses } & \underline{ 9 }&  \underline{27,000} \
\hline \text { Contribution margin } &6 & 18,000\
\hline \text { Less fixed expenses } & & \underline{12,000 } \
\hline \text { Operating profit } & &\$6,000\
\hline
\end{array}$$If sales decrease by 500 units,by what percent would fixed costs have to be reduced by to maintain current net income?

Accepted Answer

A)  50.0%. 
B)  33.3%. 
C)  25.0%. 
D)  16.7%. 
A)  50.0%. 
B)  33.3%. 
C)  25.0%. 
D)  16.7%.

Question 4

If the fixed costs are $2,400,targeted before-tax operating profit is $1,200,tax rate is 25%,selling price per unit is $2,and contribution margin ratio is 40%,then the sales volume is 9,000 units.

Accepted Answer

A) True 
 B)False

Question 5

The total contribution margin is the unit contribution margin multiplied by the number of units minus the fixed component of the total costs (TC).

Accepted Answer

A) True 
 B)False

Question 6

The Windsome Corporation has budgeted fixed costs of $225,000 and an estimated selling price of $24 per unit.The variable cost ratio is 40% and the company plans to sell 48,000 units in 2017.Required:
(a)Compute the break-even point in units.(b)Compute the margin of safety in units for 2017.(c)Compute the expected operating profit for 2017.

Accepted Answer

(a)BE = $225,000/($24 - .40 ×

Question 7

Which of the following would not cause the break-even point to change?

Accepted Answer

A)  Sales price increases. 
B)  Sales volume increases. 
C)  Fixed cost increases. 
D)  Variable costs per unit decreases. 
A)  Sales price increases. 
B)  Sales volume increases. 
C)  Fixed cost increases. 
D)  Variable costs per unit decreases.

Question 8

You have been provided with the following information regarding the Ralston Manufacturing Company:
$\begin{array}{c}
\begin{array}{|l|}
\hline \text {Sales price}\
\hline \text {Variable manufacturing cost }\
\text {per unit}\

\hline \text {Fixed manutacturing costs }\
\text {per unit}\

\hline \text {Variable marketing cost per}\
\text { unit}\

\hline \text {Fixed administrative costs }\
\text {per unit}\

\hline
\end{array}
\begin{array}{r|}
\hline \$50\
\hline \
24\
\hline \
12\
\hline \
6\
\hline \
3\
\hline 
\end{array}
\end{array}$
This information is based on forecasted sales of 30,000 units.
Required:
(a)What is the expected operating profit for the upcoming year?
(b)What is the break-even point in units?
(c)If $160,000 of operating profit is desired,how many units must be sold?

Accepted Answer

@#IMG-DLM& (a)[($50 - 24 - 6)× 30,000] -

Question 9

Fortune Tools produces and sells two products.Data concerning these products for the most recent month appear below:
$$\begin{array} { | l | r | r | } 
\hline & \text { Product } XY Z & \text { Product VAR } \
\hline \text { Sales } & \$ 14,000 & \$ 27,000 \
\hline \text { Variable costs } & \$ 6,720 & \$ 12,550 \
\hline
\end{array}$$
Fixed costs for the entire company were $17,570.Required:
a.Determine the overall break-even point for the company.b.If the sales mix shifts toward Product XYZ,with no change in total sales,what will happen to the break-even point for the company? Explain.

Accepted Answer

Overall CM ratio = Total contribution ma

Question 10

At a break-even point of 400 units,variable costs were $400 and fixed costs were $200.What will the 401st unit sold contribute to operating profits before income taxes?

Accepted Answer

A)  $0.50 
B)  $1.00 
C)  $1.50 
D)  $2.00 
A)  $0.50 
B)  $1.00 
C)  $1.50 
D)  $2.00

Question 11

The break-even point for an organization with a low operating leverage will be relatively higher than the break-even point for an organization with a high operating leverage.

Accepted Answer

A) True 
 B)False

Question 12

The difference between total sales in dollars and total variable costs is called:

Accepted Answer

A)  operating profit. 
B)  net profit. 
C)  the gross margin. 
D)  the contribution margin. 
A)  operating profit. 
B)  net profit. 
C)  the gross margin. 
D)  the contribution margin.

Question 13

All other things the same,which of the following would be true of the contribution margin and variable costs of a company with high fixed costs and low variable costs as compared to a company with low fixed costs and high variable costs? $$\begin{array} { | l | c l | } 
\hline & \text { Contribution Margin } & \text { Variable Costs } \
\hline \text { A. } & \text { Higher } & \text { Higher } \
\hline \text { B. } & \text { Lower } & \text { Higher } \
\hline \text { C. } & \text { Higher } & \text { Lower } \
\hline \text { D. } & \text { Lower } & \text { Lower } \
\hline
\end{array}$$

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 14

The management of Toro Corporation expects sales in August to be $130,000.The company's contribution margin ratio is 65% and its fixed monthly costs are $54,000.
Required:
Estimate the company's operating profit for August,assuming that the fixed monthly costs do not change.

Accepted Answer

The answer of The management of Toro Corporation expects sales...

Question 15

Microsoft Excel cannot be used to find break-even points.

Accepted Answer

A) True 
 B)False

Question 16

A company's break-even point will not be increased by:

Accepted Answer

A)  an increase in the number of units produced and sold. 
B)  a decrease in the selling price per unit. 
C)  an increase in the variable cost per unit. 
D)  an increase in the variable cost ratio. 
A)  an increase in the number of units produced and sold. 
B)  a decrease in the selling price per unit. 
C)  an increase in the variable cost per unit. 
D)  an increase in the variable cost ratio.

Question 17

The more important the decision,the more the manager will want to ensure that the assumptions made for CVP analysis are applicable.

Accepted Answer

A) True 
 B)False

Question 18

You have been provided with the following information: 
$$\begin{array} { | l | r | } 
\hline & \text { Total } \
\hline \text { Sales } & \$ 90,000 \
\hline \text { Less Variable expenses } & \underline{54,000} \
\hline \text { Contribution margin } & 36,000 \
\hline \text { Less fixed expenses } & \underline { 24,000 } \
\hline \text { Operating profit } & \$ 12,000 \
\hline
\end{array}$$If sales decrease by 10%,what level of fixed costs will maintain the current operating profit?

Accepted Answer

A)  $12,000. 
B)  $20,400. 
C)  $21,600. 
D)  $24,000. 
A)  $12,000. 
B)  $20,400. 
C)  $21,600. 
D)  $24,000.

Question 19

Which of the following changes to a company's contribution income statement will always lower the break-even point (either in units or in dollars)?

Accepted Answer

A)  Sales price increases by 10%. 
B)  Sales price decreases by 5%. 
C)  Variable costs increase by 10% and fixed costs decrease by 5%. 
D)  Variable costs decrease by 5% and fixed costs increase by 10%. 
A)  Sales price increases by 10%. 
B)  Sales price decreases by 5%. 
C)  Variable costs increase by 10% and fixed costs decrease by 5%. 
D)  Variable costs decrease by 5% and fixed costs increase by 10%.

Question 20

The sales manager of Springdale Enterprises is considering expanding sales by producing three different versions of its product.Each will be targeted by the marketing department to different income levels and will be produced from three different qualities of materials.After reviewing the sales forecasts,the sales department feels that 40% of units sold will be the original product,35% will be new model #1 and the remainder will be new model #2.The following information has been assembled by the sales department and the production department.
$$\begin{array} { | l | r | r | r | } 
\hline & \text { Original } & \text { Model \#1 } & \text { Model \#2 } \
\hline \text { Sales price (per unit) } & \$ 100.00 & \$ 70.00 & \$ 50.00 \
\hline \text { Material cost } & 45.00 & 30.00 & 20.00 \
\hline \text { Direct labor } & 20.00 & 15.00 & 10.00 \
\hline \text { Variable overhead } & 15.00 & 11.25 & 7.50 \
\hline
\end{array}$$ The fixed costs associated with the manufacture of these three products are $175,000 per year.Required:
Determine the number of units of each product that would be sold at the break-even point.

Accepted Answer

@#IMG-DLM& Weighted-average CM = ($100 - 80)(.4)+

The margin of safety percentage is computed as:

Given the following data: Per Unit Total Sales \ 15 \ 45,000 Less variable expenses Contribution margin 6 18,000 Less fixed expenses Operating profit \6 ,000 If sales decrease by 500 units,by what percent would fixed costs have to be reduced by to maintain current net income?

If the fixed costs are $2,400,targeted before-tax operating profit is $1,200,tax rate is 25%,selling price per unit is $2,and contribution margin ratio is 40%,then the sales volume is 9,000 units.

The total contribution margin is the unit contribution margin multiplied by the number of units minus the fixed component of the total costs (TC).

Which of the following would not cause the break-even point to change?

At a break-even point of 400 units,variable costs were $400 and fixed costs were $200.What will the 401^st unit sold contribute to operating profits before income taxes?

The break-even point for an organization with a low operating leverage will be relatively higher than the break-even point for an organization with a high operating leverage.

The difference between total sales in dollars and total variable costs is called:

The management of Toro Corporation expects sales in August to be $130,000.The company's contribution margin ratio is 65% and its fixed monthly costs are $54,000. Required: Estimate the company's operating profit for August,assuming that the fixed monthly costs do not change.

Microsoft Excel cannot be used to find break-even points.

A company's break-even point will not be increased by:

The more important the decision,the more the manager will want to ensure that the assumptions made for CVP analysis are applicable.

You have been provided with the following information: Total Sales \ 90,000 Less Variable expenses Contribution margin 36,000 Less fixed expenses Operating profit \ 12,000 If sales decrease by 10%,what level of fixed costs will maintain the current operating profit?

Which of the following changes to a company's contribution income statement will always lower the break-even point (either in units or in dollars)?

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

Exam 3: Fundamentals of Cost-Volume-Profit Analysis

The margin of safety percentage is computed as:

Given the following data: Per Unit Total Sales \ 15 \ 45,000 Less variable expenses Contribution margin 6 18,000 Less fixed expenses Operating profit \6 ,000 If sales decrease by 500 units,by what percent would fixed costs have to be reduced by to maintain current net income?

If the fixed costs are $2,400,targeted before-tax operating profit is $1,200,tax rate is 25%,selling price per unit is $2,and contribution margin ratio is 40%,then the sales volume is 9,000 units.

The total contribution margin is the unit contribution margin multiplied by the number of units minus the fixed component of the total costs (TC).

Which of the following would not cause the break-even point to change?

At a break-even point of 400 units,variable costs were $400 and fixed costs were $200.What will the 401st unit sold contribute to operating profits before income taxes?

The break-even point for an organization with a low operating leverage will be relatively higher than the break-even point for an organization with a high operating leverage.

The difference between total sales in dollars and total variable costs is called:

The management of Toro Corporation expects sales in August to be $130,000.The company's contribution margin ratio is 65% and its fixed monthly costs are $54,000. Required: Estimate the company's operating profit for August,assuming that the fixed monthly costs do not change.

Microsoft Excel cannot be used to find break-even points.

A company's break-even point will not be increased by:

The more important the decision,the more the manager will want to ensure that the assumptions made for CVP analysis are applicable.

You have been provided with the following information: Total Sales \ 90,000 Less Variable expenses Contribution margin 36,000 Less fixed expenses Operating profit \ 12,000 If sales decrease by 10%,what level of fixed costs will maintain the current operating profit?

Which of the following changes to a company's contribution income statement will always lower the break-even point (either in units or in dollars)?

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

At a break-even point of 400 units,variable costs were $400 and fixed costs were $200.What will the 401^st unit sold contribute to operating profits before income taxes?