Deck 4: Cost-Volume-Profit Analysis: a Managerial Planning Tool

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Question
In the equation to determine the number of units that must be sold to earn a target income, targeted income is subtracted from fixed expense in the numerator.
Use Space or
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Question
If fixed costs increase, the break-even point decreases.
Question
The linear equation for total cost is (Unit variable cost * Units) + Fixed cost.
Question
To find the number of units to sell to earn a targeted income, it is acceptable to simply adjust the break-even units equation by adding target income to the variable cost.
Question
If variable expenses decrease and the price increases, the break-even point decreases.
Question
Most firms would like to earn operating income equal to the break-even point.
Question
The profit-volume graph shows the relationship between profits and units sold.
Question
The contribution margin income statement provides a good check to determine if the sale of a certain number of units really results in operating income of the given amount.
Question
The break-even point in sales dollars is equal to the break-even units multiplied by cost.
Question
Variable expense per unit consists only of direct materials, direct labor, and variable overhead.
Question
The cost-volume profit graph depicts the relationships among cost, volume, and profits, by plotting the total revenue line and the total cost line on the graph.
Question
The linear equation for revenue is price multiplied by fixed cost.
Question
If one increases variable costs per unit, the break-even point will decrease.
Question
If a multi-product company simply wants to know the overall break-even point, it is easiest to use the break-even in sales revenue approach.
Question
It is possible to calculate the break-even point for individual products in a multiple product firm by separating the common and direct fixed expenses.
Question
The impact on a firm's income resulting from a change in the number of units sold can be assessed by multiplying the unit contribution margin by the change in units sold assuming that fixed costs remain the same.
Question
The contribution margin ratio can be calculated by subtracting the variable cost ratio from one.
Question
The break-even point is where total sales revenue equals total cost.
Question
To determine the number of units that must be sold to earn a target operating income, one can use the equation for operating income and replace the operating income term with the target operating income.
Question
The profit-volume graph shows the relationship between operating income and the number of units sold.
Question
Managers can use CVP analysis to handle risk and uncertainty.
Question
Match each item with the correct statement below.
a.break-even point
b.Common fixed expenses
c.Contribution margin
d.Direct fixed expenses
e.Margin of safety
f.Operating leverage
g.Degree of operating leverage
h.Sales mix
The relative combination of products (or services) being sold by an organization.
Question
Operating leverage is the use of fixed cost to extract higher percentage changes in profits as sales activity changes.
Question
If the break-even point increases, the margin of safety increases.
Question
Match each item with the correct statement below.
a.break-even point
b.Common fixed expenses
c.Contribution margin
d.Direct fixed expenses
e.Margin of safety
f.Operating leverage
g.Degree of operating leverage
h.Sales mix
Fixed expenses that cannot be directly traced to individual segments and that are unaffected by the elimination of any one segment.
Question
Match each item with the correct statement below.
a.horizontal-axis of CVP graph
b.vertical-axis of CVP graph
c.slope of revenue line
d.slope of cost line
e.point where the total revenue line and the total cost line intersect
break-even point
Question
Match each item with the correct statement below.
a.break-even point
b.Common fixed expenses
c.Contribution margin
d.Direct fixed expenses
e.Margin of safety
f.Operating leverage
g.Degree of operating leverage
h.Sales mix
A measure of the sensitivity of profit changes to changes in sales volume.
Question
Match each item with the correct statement below.
a.horizontal-axis of CVP graph
b.vertical-axis of CVP graph
c.slope of revenue line
d.slope of cost line
e.point where the total revenue line and the total cost line intersect
measured in units sold
Question
Match each item with the correct statement below.
a.break-even point
b.Common fixed expenses
c.Contribution margin
d.Direct fixed expenses
e.Margin of safety
f.Operating leverage
g.Degree of operating leverage
h.Sales mix
Fixed costs that are directly traceable to a given segment and, consequently, disappear if the segment is eliminated.
Question
Match each item with the correct statement below.
a.break-even point
b.Common fixed expenses
c.Contribution margin
d.Direct fixed expenses
e.Margin of safety
f.Operating leverage
g.Degree of operating leverage
h.Sales mix
The point where total sales revenue equals total cost.
Question
Match each item with the correct statement below.
a.horizontal-axis of CVP graph
b.vertical-axis of CVP graph
c.slope of revenue line
d.slope of cost line
e.point where the total revenue line and the total cost line intersect
measured in dollars
Question
The margin of safety measures the units sold or the revenue earned above the break-even volume.
Question
Match each item with the correct statement below.
a.break-even point
b.Common fixed expenses
c.Contribution margin
d.Direct fixed expenses
e.Margin of safety
f.Operating leverage
g.Degree of operating leverage
h.Sales mix
The use of fixed costs to extract higher percentage changes in profits as sales activity changes.
Question
Match each item with the correct statement below.
a.break-even point
b.Common fixed expenses
c.Contribution margin
d.Direct fixed expenses
e.Margin of safety
f.Operating leverage
g.Degree of operating leverage
h.Sales mix
The units sold or expected to be sold or sales revenue earned or expected to be earned above the break-even volume.
Question
Direct fixed expenses are the fixed costs that are not traceable to the segments and would remain even if one of the segments was eliminated.
Question
Match each item with the correct statement below.
a.break-even point
b.Common fixed expenses
c.Contribution margin
d.Direct fixed expenses
e.Margin of safety
f.Operating leverage
g.Degree of operating leverage
h.Sales mix
Sales revenue minus total variable cost or price minus unit variable cost.
Question
Common fixed expenses are the fixed costs that are traceable to the segments and would be avoided if the segment did not exist.
Question
Match each item with the correct statement below.
a.horizontal-axis of CVP graph
b.vertical-axis of CVP graph
c.slope of revenue line
d.slope of cost line
e.point where the total revenue line and the total cost line intersect
variable cost per unit
Question
In a multi-product firm, if the sales mix changes, the break-even points for each product will not change.
Question
Match each item with the correct statement below.
a.horizontal-axis of CVP graph
b.vertical-axis of CVP graph
c.slope of revenue line
d.slope of cost line
e.point where the total revenue line and the total cost line intersect
the selling price per unit
Question
The _________________________ is the proportion of each sales dollar available to cover fixed costs and provide for profit.
Question
A ________________________ visually portrays the relationship between profits and units sold.
Question
If the break-even volume for a company is 600 units and the company is currently selling 1,000 units than the 400 units would represent the company's ____________________.
Question
The _________________________________ can be measured for a given level of sales by taking the ratio of contribution margin to operating income.
Question
___________________________________ is the income statement format that is based on the separation of costs into fixed and variable components.
Question
______________________ are those fixed costs that can be traced to each segment and would be avoided if the segment did not exist.
Question
The _________________________ depicts the relationships among cost, volume, and profits by plotting the total revenue line and the total cost line on a graph.
Question
The quantity at which two systems produce the same operating income is referred to as the ___________________.
Question
__________ is the relative combination of products being sold by a firm.
Question
A company's mix of fixed costs relative to variable costs is referred to as its _______________.
Question
______________ gives us a way to determine how many units must be sold, or how much sales revenue must be generated to earn a particular target income.
Question
The amount of income an organization is trying to achieve during a particular period is known as the _____________.
Question
Match each item with the correct statement below.
a.break-even point
b.Common fixed expenses
c.Contribution margin
d.Direct fixed expenses
e.Margin of safety
f.Operating leverage
g.Degree of operating leverage
h.Sales mix
The difference between sales and variable expenses is called the ______________________.
Question
The ______________________ is the proportion of each sales dollar that must be used to cover variable costs.
Question
Assuming that fixed costs remain unchanged, the _____________________ can be used to find the profit impact of a change in sales revenue.
Question
Fixed costs that are not traceable to the segments and would remain even if one of the segments was eliminated are known as _____________________________.
Question
The "what-if" process of altering certain key variables to assess the effect on the original outcome is also called a __________________.
Question
_____________________ is the use of fixed costs to extract higher percentage changes in profits as sales activity changes.
Question
The _________________ is the units sold or the revenue earned above the break-even volume.
Question
The ________________________ is the point where total revenue equals total cost.
Question
The income statement for Thomas Manufacturing Company for 2011 is as follows: <strong>The income statement for Thomas Manufacturing Company for 2011 is as follows:   What is the contribution margin per unit?</strong> A) $7.20 B) $1.20 C) $4.80 D) $120,000 <div style=padding-top: 35px> What is the contribution margin per unit?

A) $7.20
B) $1.20
C) $4.80
D) $120,000
Question
If the contribution margin per unit decreases, the break-even point in units

A) will increase.
B) will decrease.
C) will remain the same.
D) cannot be determined from the information given.
Question
The ratio of fixed expenses to the contribution margin ratio is the

A) indifference point.
B) break-even point in units.
C) fixed cost ratio.
D) break-even point in sales.
E) sensitivity analysis.
Question
Clean Company sells its product for $80. In addition, it has a variable cost ratio of 60% and total fixed costs of $8,000. What is the break-even point in sales dollars for Baker Company?

A) $4,800
B) $32,000
C) $20,000
D) $8,000
Question
At the break-even point,

A) total revenue equals variable cost.
B) total fixed cost equals variable cost.
C) total contribution margin equals total fixed cost.
D) total sales equals total fixed cost.
E) total margin of safety equals variable cost.
Question
Assume the following information: <strong>Assume the following information:   What volume of sales dollars is needed to break even?</strong> A) $75,000 B) $300,000 C) $48,000 D) $12,000 <div style=padding-top: 35px> What volume of sales dollars is needed to break even?

A) $75,000
B) $300,000
C) $48,000
D) $12,000
Question
Dirth Company sells only one product at a regular price of $7.50 per unit. Variable expenses are 60% of sales and fixed expenses are $30,000. Management has decided to decrease the selling price to $6.00 in hopes of increasing its volume of sales. What is the contribution margin ratio when the selling price is reduced to $6 per unit?

A) 25%
B) 40%
C) 75%
D) 60%
Question
Which of the following equations is true?

A) Contribution margin = Sales revenue * Variable cost ratio
B) Contribution margin ratio = Contribution margin/Variable costs
C) Contribution margin = Fixed costs
D) Contribution margin ratio = 1 - Variable cost ratio
Question
Sarah Smith, a sole proprietor, has the following projected figures for next year: <strong>Sarah Smith, a sole proprietor, has the following projected figures for next year:   What is the contribution margin ratio?</strong> A) 0.300 B) 1.429 C) 0.429 D) 3.333 <div style=padding-top: 35px> What is the contribution margin ratio?

A) 0.300
B) 1.429
C) 0.429
D) 3.333
Question
Which statement is true about cost-volume profit (CVP) analysis?

A) CVP analysis is a powerful tool for planning and decision making.
B) CVP analysis allows managers to do sensitivity analysis by examining the impact of various prices or cost levels on profit.
C) CVP analysis shows how revenues, expenses, and profits behave as volume changes.
D) CVP analysis can be used in both single-product and multi-product firms.
E) All of these statements are true.
Question
Total variable cost divided by price is

A) variable cost ratio.
B) revenue ratio.
C) contribution ratio.
D) sales ratio.
E) degree of operating leverage.
Question
If fixed costs increase, the break-even point in units will

A) increase.
B) decrease.
C) remain the same.
D) remain the same; however, contribution per unit will decrease.
Question
If the selling price per unit increases, the break-even point in units will

A) decrease.
B) increase.
C) remain the same.
D) remain the same; however, contribution per unit will decrease.
Question
Patricia Company produces two products, X and Y, which account for 60% and 40%, respectively, of total sales dollars. Contribution margin ratios are 50% for X and 25% for Y. Total fixed costs are $120,000. What is Patricia's break-even point in sales dollars?

A) $300,000
B) $328,767
C) $342,856
D) $375,000
Question
Dirth Company sells only one product at a regular price of $7.50 per unit. Variable expenses are 60% of sales and fixed expenses are $30,000. Management has decided to decrease the selling price to $6.00 in hopes of increasing its volume of sales. What is the sales dollars level required to break even at the old price of $7.50?

A) $75,000
B) $12,000
C) $18,000
D) $50,000
Question
If the contribution margin ratio increases, the break-even point in sales dollars will

A) increase.
B) decrease.
C) remain the same.
D) double.
Question
The break-even point is when

A) the company is operating at a loss.
B) total revenue equals total cost.
C) the company is earning a small profit.
D) total sales equal variable costs.
E) total sales equals operating income.
Question
If variable costs per unit decrease, sales volume at the break-even point will

A) decrease.
B) stay constant.
C) double.
D) increase.
Question
Contribution margin ratio can be calculated in all of the following ways except

A) fixed costs/Contribution margin per unit.
B) 1 - Variable cost ratio.
C) contribution margin per unit/price.
D) total contribution margin/Total sales.
E) All of these are correct.
Question
Total contribution margin divided by total sales is the

A) indifference point.
B) margin of safety.
C) sales ratio.
D) target income.
E) contribution margin ratio.
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Deck 4: Cost-Volume-Profit Analysis: a Managerial Planning Tool
1
In the equation to determine the number of units that must be sold to earn a target income, targeted income is subtracted from fixed expense in the numerator.
False
2
If fixed costs increase, the break-even point decreases.
False
3
The linear equation for total cost is (Unit variable cost * Units) + Fixed cost.
True
4
To find the number of units to sell to earn a targeted income, it is acceptable to simply adjust the break-even units equation by adding target income to the variable cost.
Unlock Deck
Unlock for access to all 179 flashcards in this deck.
Unlock Deck
k this deck
5
If variable expenses decrease and the price increases, the break-even point decreases.
Unlock Deck
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6
Most firms would like to earn operating income equal to the break-even point.
Unlock Deck
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7
The profit-volume graph shows the relationship between profits and units sold.
Unlock Deck
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8
The contribution margin income statement provides a good check to determine if the sale of a certain number of units really results in operating income of the given amount.
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9
The break-even point in sales dollars is equal to the break-even units multiplied by cost.
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10
Variable expense per unit consists only of direct materials, direct labor, and variable overhead.
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11
The cost-volume profit graph depicts the relationships among cost, volume, and profits, by plotting the total revenue line and the total cost line on the graph.
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12
The linear equation for revenue is price multiplied by fixed cost.
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13
If one increases variable costs per unit, the break-even point will decrease.
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14
If a multi-product company simply wants to know the overall break-even point, it is easiest to use the break-even in sales revenue approach.
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15
It is possible to calculate the break-even point for individual products in a multiple product firm by separating the common and direct fixed expenses.
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16
The impact on a firm's income resulting from a change in the number of units sold can be assessed by multiplying the unit contribution margin by the change in units sold assuming that fixed costs remain the same.
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17
The contribution margin ratio can be calculated by subtracting the variable cost ratio from one.
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18
The break-even point is where total sales revenue equals total cost.
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19
To determine the number of units that must be sold to earn a target operating income, one can use the equation for operating income and replace the operating income term with the target operating income.
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20
The profit-volume graph shows the relationship between operating income and the number of units sold.
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21
Managers can use CVP analysis to handle risk and uncertainty.
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22
Match each item with the correct statement below.
a.break-even point
b.Common fixed expenses
c.Contribution margin
d.Direct fixed expenses
e.Margin of safety
f.Operating leverage
g.Degree of operating leverage
h.Sales mix
The relative combination of products (or services) being sold by an organization.
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23
Operating leverage is the use of fixed cost to extract higher percentage changes in profits as sales activity changes.
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24
If the break-even point increases, the margin of safety increases.
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25
Match each item with the correct statement below.
a.break-even point
b.Common fixed expenses
c.Contribution margin
d.Direct fixed expenses
e.Margin of safety
f.Operating leverage
g.Degree of operating leverage
h.Sales mix
Fixed expenses that cannot be directly traced to individual segments and that are unaffected by the elimination of any one segment.
Unlock Deck
Unlock for access to all 179 flashcards in this deck.
Unlock Deck
k this deck
26
Match each item with the correct statement below.
a.horizontal-axis of CVP graph
b.vertical-axis of CVP graph
c.slope of revenue line
d.slope of cost line
e.point where the total revenue line and the total cost line intersect
break-even point
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k this deck
27
Match each item with the correct statement below.
a.break-even point
b.Common fixed expenses
c.Contribution margin
d.Direct fixed expenses
e.Margin of safety
f.Operating leverage
g.Degree of operating leverage
h.Sales mix
A measure of the sensitivity of profit changes to changes in sales volume.
Unlock Deck
Unlock for access to all 179 flashcards in this deck.
Unlock Deck
k this deck
28
Match each item with the correct statement below.
a.horizontal-axis of CVP graph
b.vertical-axis of CVP graph
c.slope of revenue line
d.slope of cost line
e.point where the total revenue line and the total cost line intersect
measured in units sold
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Unlock for access to all 179 flashcards in this deck.
Unlock Deck
k this deck
29
Match each item with the correct statement below.
a.break-even point
b.Common fixed expenses
c.Contribution margin
d.Direct fixed expenses
e.Margin of safety
f.Operating leverage
g.Degree of operating leverage
h.Sales mix
Fixed costs that are directly traceable to a given segment and, consequently, disappear if the segment is eliminated.
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Unlock for access to all 179 flashcards in this deck.
Unlock Deck
k this deck
30
Match each item with the correct statement below.
a.break-even point
b.Common fixed expenses
c.Contribution margin
d.Direct fixed expenses
e.Margin of safety
f.Operating leverage
g.Degree of operating leverage
h.Sales mix
The point where total sales revenue equals total cost.
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Unlock for access to all 179 flashcards in this deck.
Unlock Deck
k this deck
31
Match each item with the correct statement below.
a.horizontal-axis of CVP graph
b.vertical-axis of CVP graph
c.slope of revenue line
d.slope of cost line
e.point where the total revenue line and the total cost line intersect
measured in dollars
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32
The margin of safety measures the units sold or the revenue earned above the break-even volume.
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33
Match each item with the correct statement below.
a.break-even point
b.Common fixed expenses
c.Contribution margin
d.Direct fixed expenses
e.Margin of safety
f.Operating leverage
g.Degree of operating leverage
h.Sales mix
The use of fixed costs to extract higher percentage changes in profits as sales activity changes.
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Unlock for access to all 179 flashcards in this deck.
Unlock Deck
k this deck
34
Match each item with the correct statement below.
a.break-even point
b.Common fixed expenses
c.Contribution margin
d.Direct fixed expenses
e.Margin of safety
f.Operating leverage
g.Degree of operating leverage
h.Sales mix
The units sold or expected to be sold or sales revenue earned or expected to be earned above the break-even volume.
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35
Direct fixed expenses are the fixed costs that are not traceable to the segments and would remain even if one of the segments was eliminated.
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k this deck
36
Match each item with the correct statement below.
a.break-even point
b.Common fixed expenses
c.Contribution margin
d.Direct fixed expenses
e.Margin of safety
f.Operating leverage
g.Degree of operating leverage
h.Sales mix
Sales revenue minus total variable cost or price minus unit variable cost.
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37
Common fixed expenses are the fixed costs that are traceable to the segments and would be avoided if the segment did not exist.
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38
Match each item with the correct statement below.
a.horizontal-axis of CVP graph
b.vertical-axis of CVP graph
c.slope of revenue line
d.slope of cost line
e.point where the total revenue line and the total cost line intersect
variable cost per unit
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39
In a multi-product firm, if the sales mix changes, the break-even points for each product will not change.
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40
Match each item with the correct statement below.
a.horizontal-axis of CVP graph
b.vertical-axis of CVP graph
c.slope of revenue line
d.slope of cost line
e.point where the total revenue line and the total cost line intersect
the selling price per unit
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41
The _________________________ is the proportion of each sales dollar available to cover fixed costs and provide for profit.
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42
A ________________________ visually portrays the relationship between profits and units sold.
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43
If the break-even volume for a company is 600 units and the company is currently selling 1,000 units than the 400 units would represent the company's ____________________.
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44
The _________________________________ can be measured for a given level of sales by taking the ratio of contribution margin to operating income.
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45
___________________________________ is the income statement format that is based on the separation of costs into fixed and variable components.
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46
______________________ are those fixed costs that can be traced to each segment and would be avoided if the segment did not exist.
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47
The _________________________ depicts the relationships among cost, volume, and profits by plotting the total revenue line and the total cost line on a graph.
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48
The quantity at which two systems produce the same operating income is referred to as the ___________________.
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49
__________ is the relative combination of products being sold by a firm.
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50
A company's mix of fixed costs relative to variable costs is referred to as its _______________.
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51
______________ gives us a way to determine how many units must be sold, or how much sales revenue must be generated to earn a particular target income.
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52
The amount of income an organization is trying to achieve during a particular period is known as the _____________.
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k this deck
53
Match each item with the correct statement below.
a.break-even point
b.Common fixed expenses
c.Contribution margin
d.Direct fixed expenses
e.Margin of safety
f.Operating leverage
g.Degree of operating leverage
h.Sales mix
The difference between sales and variable expenses is called the ______________________.
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54
The ______________________ is the proportion of each sales dollar that must be used to cover variable costs.
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55
Assuming that fixed costs remain unchanged, the _____________________ can be used to find the profit impact of a change in sales revenue.
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56
Fixed costs that are not traceable to the segments and would remain even if one of the segments was eliminated are known as _____________________________.
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57
The "what-if" process of altering certain key variables to assess the effect on the original outcome is also called a __________________.
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58
_____________________ is the use of fixed costs to extract higher percentage changes in profits as sales activity changes.
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Unlock for access to all 179 flashcards in this deck.
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59
The _________________ is the units sold or the revenue earned above the break-even volume.
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60
The ________________________ is the point where total revenue equals total cost.
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61
The income statement for Thomas Manufacturing Company for 2011 is as follows: <strong>The income statement for Thomas Manufacturing Company for 2011 is as follows:   What is the contribution margin per unit?</strong> A) $7.20 B) $1.20 C) $4.80 D) $120,000 What is the contribution margin per unit?

A) $7.20
B) $1.20
C) $4.80
D) $120,000
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62
If the contribution margin per unit decreases, the break-even point in units

A) will increase.
B) will decrease.
C) will remain the same.
D) cannot be determined from the information given.
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63
The ratio of fixed expenses to the contribution margin ratio is the

A) indifference point.
B) break-even point in units.
C) fixed cost ratio.
D) break-even point in sales.
E) sensitivity analysis.
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64
Clean Company sells its product for $80. In addition, it has a variable cost ratio of 60% and total fixed costs of $8,000. What is the break-even point in sales dollars for Baker Company?

A) $4,800
B) $32,000
C) $20,000
D) $8,000
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65
At the break-even point,

A) total revenue equals variable cost.
B) total fixed cost equals variable cost.
C) total contribution margin equals total fixed cost.
D) total sales equals total fixed cost.
E) total margin of safety equals variable cost.
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66
Assume the following information: <strong>Assume the following information:   What volume of sales dollars is needed to break even?</strong> A) $75,000 B) $300,000 C) $48,000 D) $12,000 What volume of sales dollars is needed to break even?

A) $75,000
B) $300,000
C) $48,000
D) $12,000
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67
Dirth Company sells only one product at a regular price of $7.50 per unit. Variable expenses are 60% of sales and fixed expenses are $30,000. Management has decided to decrease the selling price to $6.00 in hopes of increasing its volume of sales. What is the contribution margin ratio when the selling price is reduced to $6 per unit?

A) 25%
B) 40%
C) 75%
D) 60%
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68
Which of the following equations is true?

A) Contribution margin = Sales revenue * Variable cost ratio
B) Contribution margin ratio = Contribution margin/Variable costs
C) Contribution margin = Fixed costs
D) Contribution margin ratio = 1 - Variable cost ratio
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69
Sarah Smith, a sole proprietor, has the following projected figures for next year: <strong>Sarah Smith, a sole proprietor, has the following projected figures for next year:   What is the contribution margin ratio?</strong> A) 0.300 B) 1.429 C) 0.429 D) 3.333 What is the contribution margin ratio?

A) 0.300
B) 1.429
C) 0.429
D) 3.333
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70
Which statement is true about cost-volume profit (CVP) analysis?

A) CVP analysis is a powerful tool for planning and decision making.
B) CVP analysis allows managers to do sensitivity analysis by examining the impact of various prices or cost levels on profit.
C) CVP analysis shows how revenues, expenses, and profits behave as volume changes.
D) CVP analysis can be used in both single-product and multi-product firms.
E) All of these statements are true.
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71
Total variable cost divided by price is

A) variable cost ratio.
B) revenue ratio.
C) contribution ratio.
D) sales ratio.
E) degree of operating leverage.
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72
If fixed costs increase, the break-even point in units will

A) increase.
B) decrease.
C) remain the same.
D) remain the same; however, contribution per unit will decrease.
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73
If the selling price per unit increases, the break-even point in units will

A) decrease.
B) increase.
C) remain the same.
D) remain the same; however, contribution per unit will decrease.
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74
Patricia Company produces two products, X and Y, which account for 60% and 40%, respectively, of total sales dollars. Contribution margin ratios are 50% for X and 25% for Y. Total fixed costs are $120,000. What is Patricia's break-even point in sales dollars?

A) $300,000
B) $328,767
C) $342,856
D) $375,000
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75
Dirth Company sells only one product at a regular price of $7.50 per unit. Variable expenses are 60% of sales and fixed expenses are $30,000. Management has decided to decrease the selling price to $6.00 in hopes of increasing its volume of sales. What is the sales dollars level required to break even at the old price of $7.50?

A) $75,000
B) $12,000
C) $18,000
D) $50,000
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76
If the contribution margin ratio increases, the break-even point in sales dollars will

A) increase.
B) decrease.
C) remain the same.
D) double.
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77
The break-even point is when

A) the company is operating at a loss.
B) total revenue equals total cost.
C) the company is earning a small profit.
D) total sales equal variable costs.
E) total sales equals operating income.
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Unlock Deck
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78
If variable costs per unit decrease, sales volume at the break-even point will

A) decrease.
B) stay constant.
C) double.
D) increase.
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79
Contribution margin ratio can be calculated in all of the following ways except

A) fixed costs/Contribution margin per unit.
B) 1 - Variable cost ratio.
C) contribution margin per unit/price.
D) total contribution margin/Total sales.
E) All of these are correct.
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Unlock Deck
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80
Total contribution margin divided by total sales is the

A) indifference point.
B) margin of safety.
C) sales ratio.
D) target income.
E) contribution margin ratio.
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Unlock Deck
Unlock for access to all 179 flashcards in this deck.