Deck 4: Cost-Volume-Profit Analysis

Question 1

Total fixed costs are $24,000. The selling price per unit is $10, while variable costs per unit are $6. Break even in units is

A)1,500.
B)4,000.
C)6,000.
D)8,000.

Answer 1

6,000.

Question 2

To break even is to generate enough in sales revenue to cover

A) fixed costs only.
B) variable costs only.
C) fixed and variable costs with no profit.
D) fixed and variable costs with a small profit left over.

Answer 2

fixed and variable costs with no profit.

Question 3

Atoll Fish Market has fixed costs of $60,000. Variable cost per fish sold is $5, while the selling price per fish is $15. What is operating income (loss) if 7,100 fish are sold?

A) ($49,000)
B) ($41,000)
C) $11,000
D) $46,500

Answer 3

$11,000

Question 4

In calculating the contribution margin, variable selling and administrative costs are

A) ignored in the calculation, as they are period costs.
B) included in the variable costs.
C) included in the fixed costs.
D) included in the variable costs, but only if they are directly related to the product.

Question 5

Natalia is excited, as she has just reached her break-even point. The selling price per unit of the rubber exercise ball she developed is $28. At this sales volume, her variable cost is $7, while her fixed cost is $12 per unit. When Natalia sells one more unit, she will generate additional income of

A) $7.
B) $16.
C) $21.
D) $28.

Question 6

Fred's break-even point for his "Fred's Fantastic" (FF) sport drink is 19,000 bottles per year. Fred thinks the market for his FF drink is closer to 15,000 bottles per year. Therefore, Fred would like to reduce his break-even point. Fred should

A) decrease his variable costs.
B) increase his fixed costs.
C) decrease his selling price.
D) increase his variable costs.

Question 7

Terabyte Visions charges $7,500 for each new website that it develops. Its total fixed costs per year are $324,000, while its variable costs are $1,500 per website. What is Terabyte Visions' break-even point?

A) 43 websites
B) 54 websites
C) 100 websites
D) 216 websites

Question 8

Which of the following is an example of a variable cost?

A) Insurance expense
B) Property taxes
C) Depreciation expense
D) Material used to make the product

Question 9

Delfynn Dynamics Inc. reports the following financial information for the month: Revenues of $2.5 million, total variable costs of $1.25 million, total fixed costs of $1.0 million, 5,000 units sold, and a variable cost per unit of $250. Which of the following is correct?

A) Gross margin equals $250,000.
B) Break-even point equals 4,000 units.
C) Contribution margin equals $1.5 million.
D) Contribution margin equals $1.75 million.

Question 10

Discount Electronics, a new company in the area, has reported break-even sales for its first month of operation. This means which of the following?

A) Revenues were equal to fixed costs.
B) Revenues were equal to variable costs.
C) Variable costs were equal to fixed costs.
D) Contribution margin was equal to fixed costs.

Question 11

When a company has a contribution margin equaling total fixed costs, it is operating at

A) zero gross margin.
B) break-even point.
C) zero contribution margin.
D) positive pretax income.

Question 12

Riker Video Ltd. sold 450 Blu-ray units last month at a selling price of $600 each. Riker incurred unit variable costs of $250, and the company has total monthly fixed costs of $157,500. Which of the following statements is correct?

A) Riker operated at a loss for the month.
B) Riker was at break-even for the month.
C) Riker operated at a profit for the month.
D) Riker had a gross margin for the month of $112,500.

Question 13

Licard Wineries Inc. sold 700 bottles of vintage burgundy in April at a price of $120 each. Licard incurs $45 in variable costs for each bottle of vintage burgundy and has total monthly fixed costs of $50,000. Which of the following statements is correct?

A) Licard operated at a loss of $2,500 for the month.
B) Licard operated at a profit of $2,500 for the month.
C) Licard operated at its break-even point for the month.
D) Licard operated at a level at which contribution margin was less than fixed costs.

Question 14

Which of the following statements regarding break-even analysis is accurate?

A) Break-even analysis will help a company to determine profit at various levels of sales and costs.
B) Break-even analysis will help determine the sales volume point after which a company will begin to earn a profit.
C) Break-even analysis is often used in identifying areas where costs can be reduced or eliminated to help increase profit.
D) Once break-even in units is determined, the break-even dollars can be calculated by multiplying the break-even in units by the variable costs per unit.

Question 15

Wow Wireless produces and distributes two mobile devices. One is of extremely high quality, and the other is mid-range and more affordable. Information on these two items follows:
High-quality: Total fixed costs are $90,000, variable costs are $500 per unit, and unit selling price is $800.
Mid-range: Total fixed costs are $88,000, variable costs are $130 per unit, and unit selling price is $350. What is the break-even point in units for each device?

A) Break-even is 450 units for both items.
B) Break-even is 800 units for both items.
C) Break-even is 400 units for the high-quality device and 300 units for the mid-range device.
D) Break-even is 300 units for the high-quality device and 400 units for the mid-range device.

Question 16

Which of the following statements regarding break-even analysis is correct?

A) Break-even analysis is required for all businesses and is used to forecast profitability.
B) Break-even analysis is simply a starting point in identifying the feasibility of any one business idea.
C) Break-even analysis is used to determine the point at which contribution margin equals variable costs.
D) Break-even analysis is used to determine the point at which contribution margin equals targeted income.

Question 17

Which statement regarding break-even analysis is true?

A) Break-even in sales dollars is reached when sales revenues equal fixed expenses.
B) Break-even in sales dollars is the point at which sales dollars equal total variable costs.
C) Once break-even in units is determined, the degree of operating leverage is established.
D) Once break-even in units is determined, the break-even dollars can be determined by simply multiplying the break-even in units by the unit selling price.

Question 18

The calculation of break-even in units is determined by dividing

A) fixed costs by contribution margin per unit.
B) variable costs by contribution margin per unit.
C) total costs and expenses by sales price per unit.
D) sales revenues by total operating income per unit.

Question 19

Gerry's Gyros had the following results last month: Sales revenues equal $4,000, direct costs of labor and food ingredients were $2,100, other cost of goods sold were $200, and fixed period expenses equal $700 per month. Which of the following statements is correct?

A) Gerry's gross margin is equal to $1,900.
B) Gerry's gross margin is equal to $1,700.
C) Gerry's operating income is equal to $1,700.
D) Gerry's degree of operating leverage is 4.25.

Question 20

Bethany's Bakery sells freshly baked pies at a price of $12 each, has variable costs of $6 per pie produced, and has total fixed costs for the year of $14,400. The monthly break-even point for Bethany's Bakery is which of the following?

A) 300 pies
B) 200 pies
C) 500 pies
D) 420 pies

Question 21

When a company experiences an increase in its variable per unit product costs, and no other changes occur, which of the following will happen?

A) Fixed costs will decrease by an amount proportional to the increase in variable costs.
B) Contribution margin will decline, profit will decline, and the break-even point will rise.
C) Contribution margin will remain the same despite changes in the variable cost structure
D) Contribution margin will increase, profit will decline, and the break-even point will drop.

Question 22

Which of the following is an important difference between a gross margin income statement and a contribution margin income statement?

A) The gross margin income statement shows details of fixed and variable costs, while a contribution margin income statement does not.
B) The contribution margin shows direct production costs, while a gross margin income statement does not.
C) A contribution margin income statement is more likely to be presented in a set of a company's external financial statements than a gross margin income statement.
D) The contribution margin income statement shows details of fixed and variable costs, while a gross margin income statement does not.

Question 23

Which of the following statements regarding gross margin and contribution margin is correct?

A) If there are no variable period operating expenses to consider, the contribution margin is always greater or equal to the gross margin.
B) The contribution margin includes all costs of goods sold, both fixed and variable, while the gross margin does not.
C) The gross margin includes all variable product costs, while the contribution margin does not.
D) The gross margin is never represented as a line item on the income statement, while the contribution margin is.

Question 24

Which of the following statements regarding gross margin and contribution margin is true?

A) The contribution margin is always less than the gross margin.
B) The contribution margin includes all fixed costs, while the gross margin does not.
C) The gross margin includes all cost of goods sold, while the contribution margin does not.
D) The contribution margin is often represented as a line item on the income statement, while the gross margin is not.

Question 25

Corner Cupcakes Co. is selling cupcakes for $10 for a box of one dozen. Corner has fixed costs equaling $108,000 per year, and its accountant has calculated the contribution margin ratio on each box of donuts to be 60% of the selling price. Based on this information, which of the following statements is correct?

A) The monthly break-even point is 1,800 boxes sold.
B) The monthly break-even point is 1,600 boxes sold.
C) The monthly break-even point is 1,500 boxes sold.
D) The monthly break-even point is 1,400 boxes sold.

Question 26

Uptown Upholstering Inc. has the following results for the month: Revenues equal $3,500, variable manufacturing costs equal $800, and fixed manufacturing overhead costs equal $900. Which of the following statements is correct?

A) Monthly gross margin is equal to $900.
B) Monthly gross margin is equal to $1,800.
C) Monthly contribution margin is equal to $1,800.
D) Operating income for the month is equal to $2,700.

Question 27

As a result of cost increases imposed by its primary supplier, Fast-Fly Fishing Supplies Inc. has experienced an increase in its direct or variable costs per unit that will result in a decrease of 2% in the contribution margin ratio. Operating income last month, before the cost increase, was $2,500 based on sales revenues of $32,000 and fixed costs of $15,500. If sales revenues increase next month by 5%, and the new variable costs come into effect, what can Fast-Fly anticipate in terms of operating profit?

A) $3,288
B) $2,728
C) $4,108
D) $3,109

Question 28

Which of the following is an accurate statement regarding gross margin and contribution margin?

A) All variable costs are subtracted from sales to arrive at both the contribution margin and the gross margin.
B) All fixed and variable costs are subtracted from sales to arrive at both the gross margin and the contribution margin.
C) Contribution margin and gross margin represent the same concept and therefore the terms may be used interchangeably.
D) Gross margin is reached by subtracting both variable and fixed manufacturing costs from sales, while contribution margin is reached by subtracting all variable costs from sales.

Question 29

Corner Cupcakes Co. is selling cupcakes for $8 for a box of one dozen. Corner has fixed costs equaling $60,000 per year, and its accountant has calculated the monthly break-even at 1,000 boxes sold. Which of the following statements is correct based on this information?

A) Variable costs equal $3 per box, and contribution margin is $5 per box.
B) Variable costs equal $5 per box, and contribution margin is $3 per box.
C) Variable costs equal $4 per box, and contribution margin is $4 per box.
D) Variable costs equal $4.50 per box, and contribution margin is $3.50 per box.

Question 30

The contribution margin income statement will show which of the following calculations?

A) Sales revenues minus operating income
B) Sales revenues minus manufacturing costs
C) Sales revenues minus fixed costs
D) Sales revenues minus variable costs

Question 31

What is the contribution margin (CM) ratio?

A) The difference between a company's sales revenues and variable costs, expressed as a percentage of sales revenues
B) The measurement of a company's direct operating leverage, expressed as a percentage of sales revenues
C) The difference between a company's sales revenues and production costs or cost of goods sold, expressed as a percentage of sales revenues
D) The difference between a company's sales revenues and net income after taxes, expressed as a percentage of sales revenues

Question 32

Corner Cupcakes Co. is selling cupcakes for $8 for a box of four. Corner has fixed costs equaling $105,600 per year, and its accountant has calculated the contribution margin ratio on each box of donuts to be 55%. Based on this information, which of the following statements is correct?

A) The monthly break-even point is 2,100 boxes sold.
B) The monthly break-even point is 1,900 boxes sold.
C) Operating profit will be $880 if 2,200 boxes are sold next month.
D) Operating profit will be $1,280 if 2,200 boxes are sold next month.

Question 33

Corner Cupcakes Co. is selling cupcakes for $8 for a box of four. Corner has fixed costs equaling $8,800 per month, and its accountant has calculated the contribution margin ratio on each box of donuts to be 55%. Based on this information, which of the following statements is correct?

A) If fixed costs increase by $1,760 per month, the break-even sales point will increase by 400 boxes.
B) If fixed costs increase by $2,500 per month, the break-even sales point will increase by 150 boxes.
C) If fixed costs increase by $1,760 per month, the break-even sales point will increase by 200 boxes.
D) If fixed costs increase by $1,500 per month, the break-even sales point will increase by 500 boxes.

Question 34

Corner Cupcakes Co. is selling cupcakes for $8 for a box of four. Corner has fixed costs equaling $8,800 per month, and its accounting firm has determined the contribution margin ratio on each box of donuts to be 55%. Corner is currently averaging monthly sales of 2,600 boxes of donuts and the company has a tax rate of 40%. Based on this information, Corner Cupcakes has been averaging monthly net income after taxes of

A) $1,404.
B) $1,584.
C) $1,464.
D) $1,554.

Question 35

Hopalong Hot Dog Stand has had the following average results for the past several months: Its selling price per hot dog is $3. Total monthly sales revenues have been $6,000, direct costs of labor and food ingredients have been $2,500 per month, variable indirect costs have been $500 per month, and fixed costs have been $1,500 per month. If Hopalong experiences a $150 per month increase in insurance costs, what will this increase do to its break-even point?

A) Break-even point will increase by 150 hot dogs per month.
B) Break-even point will increase by 200 hot dogs per month.
C) Break-even point will increase by 100 hot dogs per month.
D) Break-even point will increase by 225 hot dogs per month.

Question 36

Sammy's Snow Cone Stand has been selling an average of 850 snow cones per week over the first five months of this year. Sammy's sells each cone for $2. Each snow cone incurs variable costs of $0.75, and Sammy's weekly fixed costs are $900. What is the stand's weekly margin of safety in units?

A) 95 cones
B) 80 cones
C) 130 cones
D) There is no margin of safety since Sammy's is not breaking even.

Question 37

Which of the following statements regarding margin of safety is correct?

A) If fixed expenses increase, a company's margin of safety will increase.
B) If the break-even point for sales drops, then a company's margin of safety will increase.
C) The margin of safety represents the point at which contribution margin exceeds variable costs.
D) The margin of safety can be measured only in sales dollars and is the point at which a company begins to earn a profit.

Question 38

The margin of safety is equal to the amount that current or budgeted sales levels exceed which one of the following?

A) Operating profit
B) Break-even sales
C) Fixed costs
D) Net income

Question 39

Iggy's Ice Cream Shop has been selling an average of 500 banana splits per week for the past several months. If Iggy's price per banana split is $4, each split's variable costs are $1, and weekly fixed costs are $1,200, what is Iggy's current margin of safety on banana splits?

A) 200 banana splits
B) 100 banana splits
C) 400 banana splits
D) There is no margin of safety since Iggy's is not breaking even.

Question 40

Which of the following statements regarding margin of safety is correct?

A) The margin of safety can be measured in sales dollars or in units and is the difference between actual or projected sales and break-even sales.
B) The margin of safety can be measured in sales dollars or in units and represents the point at which a company begins to earn income from operations.
C) The margin of safety can be measured in sales dollars or in units and represents the point at which contribution margin exceeds variable costs and expenses.
D) The margin of safety can only be measured in sales dollars and represents the point at which the gross profit margin exceeds targeted levels of fixed costs and expenses.

Question 41

Which of the following statements regarding margin of safety is not correct?

A) If break-even point for sales increases, then a company's margin of safety will increase.
B) If the break-even point for sales drops, then a company's margin of safety will increase.
C) The margin of safety in sales dollars represents the difference between total sales dollars and break-even point in sales dollars
D) The margin of safety can be measured in both sales dollars and units.

Question 42

The margin of safety is important information because it can help a company's management determine which of the following?

A) Where to cut fixed costs in order to ensure profitability
B) How much the company is exceeding break-even sales revenue levels
C) How much the company needs in sales revenues to meet company's profit targets and objectives
D) How to forecast profit and expenses and what operating income can be expected based on different sales levels

Question 43

Corner Cupcakes Co. is selling cupcakes for $8 for a box of four. Corner has fixed costs equaling $8,800 per month, and its accounting firm has determined the contribution margin ratio on each box of donuts to be 55%. Corner is currently averaging monthly sales of 2,600 boxes of donuts, and the company has a tax rate of 40%. Based on this information, which of the following statements is correct?

A) Corner Cupcakes currently has a margin of safety of 450 boxes of donuts.
B) Corner Cupcakes currently has a margin of safety of $3,000 in monthly sales revenues.
C) Corner Cupcakes currently has a margin of safety of 400 boxes of donuts.
D) Corner Cupcakes currently has a margin of safety of $4,800 in monthly sales revenues.

Question 44

The relationship between a company's revenues, costs, volume of sales, and consequently profit, is called

A) sensitivity analysis.
B) cost-volume-profit (CVP) analysis.
C) data analysis.
D) margin of safety analysis.

Question 45

A company's relevant range

A) is unlimited with regards to production capacity.
B) has a lower limit depending on how much capacity the company has and how much the market demands the product.
C) is a band of activity with a specific relationship between activity levels and the cost being measured, where fixed cost remain fixed and variable costs per unit are constant.
D) is a band of activity with a specific relationship between activity levels and the cost being measured, where fixed cost can vary and variable costs are fixed.

Question 46

Given the following CVP Graph, what does the point labeled A indicate for this company?

A) Net income
B) Net loss
C) Break-even point
D) Total Revenues = Total variable costs

Question 47

Given the following CVP Graph, what does the Line labeled F represent for this company?

A) Total sales revenue
B) Total costs
C) Total fixed costs
D) Total variable costs

Question 48

Given the following CVP Graph, where would a company experience a profit?

A) Between points A and B
B) At point B
C) At point A
D) Any point above point A

Question 49

Armand has opted to sell his famous funnel cakes at the local farmer's market instead of opening his own store. After his first month, he summarized the following financial data: unit variable cost per funnel cake was $2 and the monthly rental fee for the space at the market which includes electricity is $700. Armand initially decided to set the selling price per unit for each funnel cake at $4. If the sales for the first month were 500 funnel cakes, what was Armand's margin of safety in units?

A) 150 units
B) 350 units
C) 500 units
D) 650 units

Question 50

Hopalong Hot Dog Stand had the following results last month: Sales revenues were $6,000, variable costs were $3,000, and fixed costs were $1,500 per month. If Hopalong wants to achieve a targeted operating income goal of $3,000 next month, how much in total sales revenue will be required?

A) $5,000
B) $5,500
C) $9,000
D) $7,500

Question 51

Petros's Greek Food Stand had the following results last month: Sales revenues were $4,000, variable costs of were $2,000, and the fixed costs for Petros's stand were $1,000 per month. If Petros's cost structure remains the same and Petros wishes to achieve his targeted operating income goal of $2,000 next month, how much in total sales revenue will Petros require?

A) $5,000
B) $5,500
C) $6,000
D) $7,500

Question 52

Carrot Jewelry is considering two mutually exclusive product lines, either an emerald ring or a ruby bracelet, which will be introduced next year. The board of directors of the company has established a target net income of $30,000 for the new product line but wishes to maximize profit in any case. For the emerald ring line, Carrot expects to sell 200 rings during the year at a selling price per ring of $1,500. Estimated variable costs are $800 per ring, and fixed costs will amount to $90,000 for the year. For the ruby bracelet line, the company anticipates sales of 500 units at a selling price of $1,100 per bracelet. Fixed costs will amount to $110,000 for the year, and the variable costs will also be $800 each. Carrot Jewelry will have a tax rate of 30% next year. Which one of the following statements is correct?

A) Carrot should produce and sell rings even though this will result in a $5,000 shortfall in targeted net income.
B) Carrot should produce and sell bracelets, since the income from bracelets will exceed the income from rings and exceed the targeted net income by $20,000.
C) Carrot should produce and sell bracelets, since the bracelets will generate more net income than the rings and exceed targeted net income by $5,000.
D) Carrot should produce and sell rings, since rings will generate more net income than bracelets and will exceed targeted net income by $5,000.

Question 53

Carrot Jewelry is considering two mutually exclusive product lines, based on either an emerald ring or a ruby bracelet, to introduce next year. The board of directors of the company has established a target net income of $30,000 for the new product line but wishes to maximize profit in any case. For the emerald ring line, Carrot expects to sell 200 rings during the year at a selling price per ring of $1,500. Estimated variable costs are $800 per ring, and fixed costs will amount to $90,000 for the year. For the ruby bracelet line, the company anticipates sales of 500 units at a selling price of $1,100 per bracelet. Fixed costs will come to $110,000 for the year, and the variable costs will also be $800 each. Carrot Jewelry will have a tax rate of 30% next year. How much more or less will Carrot have to spend in fixed costs on the proposed bracelet line in order for it to have the same net income as the ring product line?

A) Carrot will need to reduce fixed costs on the bracelet line by $10,000.
B) Carrot will need to reduce fixed costs on the bracelet line by $12,000.
C) Carrot will need to spend $12,000 more in fixed costs on the bracelet line.
D) Carrot will need to spend $15,000 more in fixed costs on the bracelet line.

Question 54

In order to determine the sales revenue level needed to reach a specific target income goal, it is necessary to add the targeted income amount to what other element before dividing the sum by contribution margin?

A) Variable costs
B) Overhead costs
C) Fixed costs
D) Contribution margin

Question 55

Target profit is added to what other financial statement line item, or element, to determine the numerator in the overall target contribution margin (CM) calculation in break-even analysis?

A) Fixed costs
B) Variable costs
C) Operating profit
D) Net income after taxes

Question 56

Corner Cupcakes Co. is selling cupcakes for $10 for a box of one dozen. Corner has fixed costs equaling $120,000 per year, and its accounting firm has determined the contribution margin ratio on each box of donuts to be 50%. Corner is currently averaging monthly sales of 2,500 boxes of donuts, and the company has a tax rate of 25%. Based on this information, Corner Cupcakes has been averaging monthly net income of

A) $1,975
B) $1,875
C) $1,625
D) $1,825

Question 57

Jinx Company wishes to sell enough products to earn a profit of $200,000. If the unit selling price is $20, unit variable cost is $11, and total fixed costs are $700,000, how many units must be sold to earn target net income of $200,000?

A) 45,000 units
B) 85,909 units
C) 100,000 units
D) 900,000 units

Question 58

Indigo Industries has fixed costs of $180,000 and contribution margin is 40% of sales. How much will Indigo report as sales when its net income equals $60,000?

A) $150,000
B) $300,000
C) $450,000
D) $600,000

Question 59

Retro Records wants to sell enough records to earn a profit of $150,000. If the unit selling price is $20, unit variable cost is $8, and total fixed costs are $180,000, how many records must Retro Records sell to earn the desired net income of $150,000?

A) 16,500 units
B) 27,500 units
C) 41,250 units
D) 50,200 units

Question 60

Ginseng Corporation reported the following results from the sale of 10,000 units in July: sales $600,000, variable costs $360,000, fixed costs $80,000, and net income $41,500. Assume that Ginseng expects to increase the selling price by 5% on August 1. How many units will have to be sold by Ginseng in July to maintain the same level of net income?

A) 4,200
B) 4,500
C) 4,750
D) 5,000

Question 61

Aspire Appliances desires to earn a target net income of $500,000 for next year. If it has fixed costs of $2,000,000 and variable costs are 60% of sales, what are the required sales?

A) $3,750,000
B) $4,166,667
C) $5,000,000
D) $6,250,000

Question 62

Vespa, Inc. requires sales of $4,000,000 to cover its fixed costs of $520,000 and to earn net income of $1,000,000. What is Vespa's contribution margin ratio?

A) 25%
B) 32%
C) 38%
D) 62%

Question 63

When working with multiple products and a sales mix, information required to determine overall break-even point includes which of the following?

A) Target net income
B) Target operating profit
C) Selling and administrative expenses
D) Weighted average contribution margin

Question 64

Crusher Machinery Inc. sells three heavy-duty construction machines. Information on these machines is as follows: Based on this information, what is the weighted-average contribution margin per unit (WACM)?

A) $43.00
B) $44.50
C) $46.50
D) $47.50

Question 65

Crusher Machinery Inc. sells three heavy-duty construction machines. Information on these machines is as follows: Total fixed costs for the year are $890,000. Based on this information, what would be the expected break-even point for Crusher for the year?

A) 19,000 units
B) 19,778 units
C) 20,000 units
D) 21,000 units

Question 66

The weighted average contribution margin (WACM) is most useful when working with which of the following?

A) Products with low variable costs
B) Products with high contribution margins
C) Multiple products or product lines with a known sales mix
D) Multiple products that are profitable even with high break-even points

Question 67

Which of the following statements regarding sales mix is accurate?

A) Sales mix is a necessary piece of information when calculating fixed costs.
B) Sales mix is an important concept for a company that specializes in only one product.
C) In order to use sales mix in a break-even analysis, the percentages of sales of the individual products, when added together, must total 100%.
D) When calculating break-even for a company with multiple products, the sales mix and the weighted average contribution margin (WACM) do not need to be known.

Question 68

Calloway Computers sells three types of computers. Information on these is as follows: If the sales mix information and individual contribution margins given above remain the same, and fixed costs over the final three months of the year are $50,500, what is the expected break-even point for Calloway for this period?

A) 1,800 units
B) 1,980 units
C) 2,000 units
D) 2,020 units

Question 69

The concept of sales mix is best used when a company

A) is selling multiple products.
B) has a high degree of operating leverage.
C) has experienced a large increase in fixed costs.
D) has experienced a large increase in variable costs.

Question 70

A weighted average contribution margin is a very useful statistic for a company that has which of the following?

A) A dwindling contribution margin
B) An increasing proportion of fixed costs in its cost structure.
C) Insufficient sales to reach break-even
D) Multiple product lines with a sales mix

Question 71

Crest Computing. Inc. sells three types of computing devices. Information on these is as follows: Based on this information, what is the weighted average contribution margin (WACM)?

A) $43.50
B) $44.50
C) $42.25
D) $43.75

Question 72

Crest Computing. Inc. sells three types of computing devices. Information on these is as follows: If the fixed costs over the last three months of the year are $219,700, what is the expected break-even point for this same period?

A) 4,200 units
B) 4,882 units
C) 5,200 units
D) 5,493 units

Question 73

In order to calculate the weighted-average contribution margin (WACM) for a group of different products, which of the following pieces of information is needed?

A) Fixed costs per unit of product sold
B) The degree of operating leverage
C) Overhead costs for each different product
D) The sales mix for the different products

Question 74

What is the weighted average contribution margin (WACM) per unit?

A) The difference between a company's fixed costs and variable costs, expressed as a per unit amount based on units sole.
B) The measurement of a company's direct operating leverage, expressed as a per unit amount based on units sold.
C) The sum of the unit contribution margin for each product multiplied by its respective sales mix percentage.
D) The difference between a company's net sales revenues and net income, divided by total sales units.

Question 75

Last month, Everest Environmental Services had revenues amounting to $50,000, while direct labor and other variable costs were $25,000 and fixed costs were $20,000. Everest has an income tax rate of 42%. Based on this information, which statement is correct about last month's results?

A) Everest had a gross margin of $30,000 and operating income of $25,000.
B) Everest had a contribution margin of $5,000 and net income after tax of $3,360.
C) Everest operated last month with a margin of safety of $10,000 in sales revenues.
D) Everest operated last month with a margin of safety of $15,000 in sales revenues.

Question 76

Genesis Corporation sells three types of snowboards with the following information: What is the weighted-average contribution margin for Genesis Corporation?

A) $42
B) $46
C) $56
D) $62

Question 77

Genesis Corporation sells three types of snowboards with the following information: What is the break-even point for Genesis Corporation if total fixed costs are $883,200?

A) 14,245 units
B) 15,771 units
C) 19,200 units
D) 21,029 units

Question 78

Which statement regarding degree of operating leverage (DOL) is correct?

A) DOL is calculated as contribution margin divided by operating income.
B) DOL is calculated as gross margin divided by net income after taxes.
C) DOL is calculated as pretax income before interest and tax divided by sales revenues.
D) DOL is calculated as net income divided by total fixed manufacturing costs.

Question 79

Emanuel's Electronics Co. has the following results for the month: Revenues equal $6,500, contribution margin equals $3,900, and operating income equals $600. Revenues are expected to grow by 10% next month. Using the principle of degree of operating leverage (DOL) and based on the projected revenue increase, what can Emanuel's Electronics expect in operating income next month?

A) $900
B) $990
C) $1,500
D) $2,200

Question 80

The accounting staff of LaForge Enterprises has computed a degree of operating leverage (DOL) of 3.5 for last month's results based on revenues of $5,500 and variable costs of $2,000. What were total fixed costs?

A) $950
B) $1,000
C) $2,300
D) $2,500