Question 1

While the total amount of variable cost changes with the level of production, variable cost per unit remains constant as volume changes.

Accepted Answer

A) True 
 B)False

Question 2

Use the following information to determine the contribution margin ratio:

Accepted Answer

A)  6.9%. 
B)  48.3%. 
C)  24.5%. 
D)  51.7%. 
E)  34.1%. 
A)  6.9%. 
B)  48.3%. 
C)  24.5%. 
D)  51.7%. 
E)  34.1%.

Question 3

Wang Co. manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000. Compute the break-even point in units.

Accepted Answer

A)  5,500. 
B)  1,933. 
C)  4,444. 
D)  2,900. 
E)  1,160. 
A)  5,500. 
B)  1,933. 
C)  4,444. 
D)  2,900. 
E)  1,160.

Question 4

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the contribution margin per composite unit.

Accepted Answer

A)  $310. 
B)  $200. 
C)  $300. 
D)  $330. 
E)  $285. 
A)  $310. 
B)  $200. 
C)  $300. 
D)  $330. 
E)  $285.

Question 5

Kent Co. manufactures a product that sells for $50.00 and has variable costs of $24.00 per unit. Fixed costs are $260,000. Kent can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. Compute the contribution margin per unit if the machine is purchased.

Accepted Answer

A)  $22.50. 
B)  $26.00. 
C)  $29.50. 
D)  $28.50. 
E)  $27.50. 
A)  $22.50. 
B)  $26.00. 
C)  $29.50. 
D)  $28.50. 
E)  $27.50.

Question 6

There are only two methods to derive an estimated line of cost behavior; the high-low method and the scatter diagram.

Accepted Answer

A) True 
 B)False

Question 7

The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. Compute the number of units that must be sold in order to achieve a target pretax income of $130,000.

Accepted Answer

A)  53,165. 
B)  81,250. 
C)  36,207. 
D)  50,000. 
E)  58,621. 
A)  53,165. 
B)  81,250. 
C)  36,207. 
D)  50,000. 
E)  58,621.

Question 8

Magnolia Company is considering the production and sale of a new product with the following sales and cost data: unit sales price, $350; unit variable costs, $180; total fixed costs, $399,500; and projected sales, $910,000. Round your answers to the nearest whole unit or dollar.
(a) Calculate break-even in units.
(b) Calculate break-even in dollars (use four decimal places when calculating the contribution margin ratio).
(c) Calculate number of units that would need to be sold to generate an after-tax profit of $420,000 assuming a 30% tax rate.
(d) Calculate dollar sales that would be needed to generate the same profit as above.
(e) Calculate the margin of safety stated as a percentage using the $910,000 projected sales level.
Be sure to label each calculation and show all calculations.

Accepted Answer

(a) $399,500/($350 - 180) = 2,350 units

Question 9

Bing Company's contribution margin income statement is presented below. Sales for the current period consisted of 7,500 units. Compute the company's break-even point in (a) units, and (b) dollars. Compute the margin of safety in (c) dollars and (d) percent.

Accepted Answer

Per unit costs:
Sales price = $225,000/7

Question 10

Match between columns
                        Premises: A cost that changes as volume changes, but at a nonconstant rate.
A company's normal operating range of production volume; excludes extremely high and low operating levels that are unlikely to recur.
A cost that includes both fixed and variable cost components.
A line drawn on a graph to reflect the relation between cost and unit volume.
The amount that the sale of one unit contributes toward covering fixed costs and generating profit.
A business planning tool that helps managers predict how changes in costs and sales levels affect profit.
A cost that remains unchanged in total amount despite variations in the volume of activity within a relevant range.
A cost that remains constant over limited ranges of volumes of activity but shifts to another level when volume changes significantly.
A cost that changes in total in proportion to changes in volume of activity.
A statistical method for identifying cost behavior that is more precise than the high-low method and a scatter diagram.

Accepted Answer

The Answer of Estimated line of cost behavior and Least-squares is...

Question 11

A ________ cost is one that remains unchanged despite variations in the volume of activity within a relevant range. A ________ cost is one that changes in proportion to changes in volume of activity.

Accepted Answer

fixed; var

Question 12

The sales level at which a company neither earns a profit nor incurs a loss is the:

Accepted Answer

A)  Relevant range. 
B)  Margin of safety. 
C)  Step-wise variable level. 
D)  Break-even point. 
E)  Contribution margin. 
A)  Relevant range. 
B)  Margin of safety. 
C)  Step-wise variable level. 
D)  Break-even point. 
E)  Contribution margin.

Question 13

The following information is available for Alba Company's maintenance cost over the last four months.
   Use the high-low method to estimate both the fixed and variable component of its maintenance cost.

Accepted Answer

Variable cost per unit = Change in cost/

Question 14

Wolowitz Company's product has a contribution margin per unit of $62.50 and a contribution margin ratio of 25%. What is the per unit selling price of the product?

Accepted Answer

The answer of Wolowitz Company's product has a contribution margin...

Question 15

Whiting Company sells a mix of three related products. Total fixed costs are $144,000. The following additional information is available for Whiting Company.
   Determine the company's break-even point in composite units.

Accepted Answer

Selling price of a composite unit
4 unit

Question 16

Ludington Corporation provides the following data from a recent period for its manufacture of shoes: direct material costs, $24,000; direct labor costs, $12,000; and total fixed costs, $40,000. Sales were $60,000 based on 12,000 units sold during the period. Calculate the contribution margin and the contribution margin ratio.

Accepted Answer

The answer of Ludington Corporation provides the following data from...

Question 17

Proctor Company has fixed costs of $315,000 and a contribution margin ratio of 24%. If sales are expected to be $1,500,000, what is the margin of safety, in percent?

Accepted Answer

Break-even point in dollars sa

Question 18

Target income refers to:

Accepted Answer

A)  Income at the break-even point. 
B)  Income from the most recent period. 
C)  Income planned for a future period. 
D)  Income only in a multiproduct environment. 
E)  Income at the minimum contribution margin. 
A)  Income at the break-even point. 
B)  Income from the most recent period. 
C)  Income planned for a future period. 
D)  Income only in a multiproduct environment. 
E)  Income at the minimum contribution margin.

Question 19

A graphic presentation of cost-volume-profit data is known as a ________ graph (or chart); this presentation is also sometimes called a ________ chart.

Accepted Answer

CVP (cost-volume-pro

Question 20

Examining strategies that impact several estimates in the CVP analysis is known as ________.

Accepted Answer

sensitivit

While the total amount of variable cost changes with the level of production, variable cost per unit remains constant as volume changes.

Use the following information to determine the contribution margin ratio:

Wang Co. manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000. Compute the break-even point in units.

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the contribution margin per composite unit.

There are only two methods to derive an estimated line of cost behavior; the high-low method and the scatter diagram.

The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. Compute the number of units that must be sold in order to achieve a target pretax income of $130,000.

Bing Company's contribution margin income statement is presented below. Sales for the current period consisted of 7,500 units. Compute the company's break-even point in (a) units, and (b) dollars. Compute the margin of safety in (c) dollars and (d) percent.

A cost is one that remains unchanged despite variations in the volume of activity within a relevant range. A cost is one that changes in proportion to changes in volume of activity.

The sales level at which a company neither earns a profit nor incurs a loss is the:

The following information is available for Alba Company's maintenance cost over the last four months. Use the high-low method to estimate both the fixed and variable component of its maintenance cost.

Wolowitz Company's product has a contribution margin per unit of $62.50 and a contribution margin ratio of 25%. What is the per unit selling price of the product?

Whiting Company sells a mix of three related products. Total fixed costs are $144,000. The following additional information is available for Whiting Company. Determine the company's break-even point in composite units.

Proctor Company has fixed costs of $315,000 and a contribution margin ratio of 24%. If sales are expected to be $1,500,000, what is the margin of safety, in percent?

Target income refers to:

A graphic presentation of cost-volume-profit data is known as a graph (or chart); this presentation is also sometimes called a chart.

Examining strategies that impact several estimates in the CVP analysis is known as ________.

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Lean Principles and Accounting

Accounting for Business Transactions

Filters

Exam 5: Cost Behavior and Cost-Volume-Profit Analysis

While the total amount of variable cost changes with the level of production, variable cost per unit remains constant as volume changes.

Use the following information to determine the contribution margin ratio:

Wang Co. manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000. Compute the break-even point in units.

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the contribution margin per composite unit.

There are only two methods to derive an estimated line of cost behavior; the high-low method and the scatter diagram.

The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. Compute the number of units that must be sold in order to achieve a target pretax income of $130,000.

Bing Company's contribution margin income statement is presented below. Sales for the current period consisted of 7,500 units. Compute the company's break-even point in (a) units, and (b) dollars. Compute the margin of safety in (c) dollars and (d) percent.

A ________ cost is one that remains unchanged despite variations in the volume of activity within a relevant range. A ________ cost is one that changes in proportion to changes in volume of activity.

The sales level at which a company neither earns a profit nor incurs a loss is the:

The following information is available for Alba Company's maintenance cost over the last four months. Use the high-low method to estimate both the fixed and variable component of its maintenance cost.

Wolowitz Company's product has a contribution margin per unit of $62.50 and a contribution margin ratio of 25%. What is the per unit selling price of the product?

Whiting Company sells a mix of three related products. Total fixed costs are $144,000. The following additional information is available for Whiting Company. Determine the company's break-even point in composite units.

Proctor Company has fixed costs of $315,000 and a contribution margin ratio of 24%. If sales are expected to be $1,500,000, what is the margin of safety, in percent?

Target income refers to:

A graphic presentation of cost-volume-profit data is known as a ________ graph (or chart); this presentation is also sometimes called a ________ chart.

Examining strategies that impact several estimates in the CVP analysis is known as ________.

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Lean Principles and Accounting

Accounting for Business Transactions

Filters

A cost is one that remains unchanged despite variations in the volume of activity within a relevant range. A cost is one that changes in proportion to changes in volume of activity.

A graphic presentation of cost-volume-profit data is known as a graph (or chart); this presentation is also sometimes called a chart.