Deck 7: Cost-Volume-Profit Analysis

Question 1

If a unit sells for $11.40 and has a variable cost of $3.80,its contribution margin per unit is $7.60.

Answer 1

True

Question 2

CVP analysis assumes that the only factor that affects costs is a change in volume.

Answer 2

True

Question 3

Which of the following represents the excess of the selling price per unit of a product over the variable cost of obtaining and selling each unit?

A)Gross margin
B)Unit contribution margin
C)Net income
D)Operating income

Answer 3

B

Question 4

Managers can quickly forecast the operating income by multiplying ________ and then subtracting fixed costs.

A)projected sales revenue by the contribution margin ratio
B)projected sales units by the contribution margin ratio
C)projected sales revenue by the unit contribution margin
D)projected sales units by the variable cost ratio

Question 5

CVP stands for Cost-Volume-Profit.

Question 6

When using the contribution margin ratio,managers project operating income based upon sales units.

Question 7

Gross margin is another term for net income.

Question 8

On a contribution margin income statement,to what is contribution margin equal?

A)Fixed expenses plus variable expenses
B)Sales revenues minus variable expenses
C)Fixed expenses minus variable expenses
D)Sales revenues minus fixed expenses

Question 9

CVP analysis assumes all of the following except that

A)a change in volume is the only factor that affect costs.
B)inventory levels will increase.
C)revenues are linear throughout the relevant range.
D)the mix of products will not change.

Question 10

Managers can quickly forecast the total contribution margin by multiplying the projected

A)sales revenue by the contribution margin ratio.
B)sales units by the contribution margin ratio.
C)sales revenue by the unit contribution margin.
D)sales units by the variable cost ratio.

Question 11

The contribution margin ratio explains the percentage of each sales dollar that contributes towards

A)variable costs.
B)sales revenue.
C)fixed costs and generating a profit.
D)period expenses.

Question 12

Contribution margin ratio is computed by dividing

A)contribution margin by sales revenue.
B)contribution margin by operating income.
C)sales revenue by contribution margin.
D)operating income by contribution margin.

Question 13

A product's contribution margin per unit is the excess value of the selling price per unit over the fixed cost of obtaining and selling each unit.

Question 14

The contribution margin derived from different products can be used to motivate the sales force to increase sales of the most profitable products.

Question 15

What is Akron Laser Wash's contribution margin ratio?

A)40%
B)250%
C)6%
D)60%

Question 16

The unit contribution margin is computed by

A)dividing the variable cost per unit by the sales revenue.
B)subtracting the sales price per unit from the variable cost per unit.
C)subtracting the variable cost per unit from the sales price per unit.
D)dividing the sales revenue by variable cost per unit.

Question 17

CVP assumes that inventory levels change.

Question 18

Contribution margin on an income statement is equal to sales revenue minus variable expenses.

Question 19

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

Question 20

To compute the unit contribution margin,________ should be subtracted from the sales price per unit.

A)only variable period costs
B)only variable inventoriable product costs
C)all variable costs
D)all fixed costs

Question 21

What is the contribution margin per rider at Express Bus Company?

A)$15.00
B)$0.30
C)$35.00
D)$3.33

Question 22

What is the contribution margin per refill at Anthony Office Supplies?

A)$1.33
B)$0.75
C)$12.00
D)$4.00

Question 23

The Sage Group produces a single product selling for $60 per unit.Variable costs are $12 per unit and total fixed costs are $6,000.What is the contribution margin ratio?

A)0.48
B)0.20
C)0.80
D)1.25

Question 24

What is the contribution margin ratio at Express Bus Company?

A)70%
B)30%
C)333%
D)15%

Question 25

What is Akron Laser Wash's contribution margin per car wash?

A)$0.40
B)$9.00
C)$6.00
D)$2.50

Question 26

What is the contribution margin ratio for the printer ink cartridge refills at Anthony Office Supplies?

A)133%
B)12%
C)25%
D)75%

Question 27

What is the contribution margin per passenger at the Burr Mystery Dinner Theatre?

A)$2.50
B)$30.00
C)$0.40
D)$20.00

Question 28

What is the operating income (loss)for the year at the Lambert Company?

A)$94,000
B)$301,000
C)$500,000
D)$293,000

Question 29

Mario's Pizza sells pizzas for $10.The variable costs for each pizza are $4,while the total fixed costs are $1,500.The contribution margin for 1,000 pizzas is

A)$8,500.
B)$4,500.
C)$6,000.
D)$10,000.

Question 30

If sales revenue per unit increases to $27 and 8,000 units are sold,what is the contribution margin at the Lazarus Corporation?

A)$50,000
B)$72,000
C)$56,000
D)$360,000

Question 31

What is the contribution margin for the year at the Lambert Company?

A)$94,000
B)$293,000
C)$301,000
D)$500,000

Question 32

First Robotics Company sells basic kits to build robots for $112 each.The variable costs for each kit are $72.The total contribution margin for 20 kits is

A)$2,240.
B)$3,680.
C)$1,440.
D)$800.

Question 33

Gibbs Company has a product which sells for $100 and has a unit contribution margin of $45.It has fixed costs of $30/unit at the current production volume.Gibbs Company's contribution margin ratio is

A)45%.
B)30%.
C)85%.
D)75%.

Question 34

What is the operating income (loss)for the year at Cornell Corporation?

A)$92,000
B)$480,000
C)$282,000
D)$290,000

Question 35

Izzy Creations provides the following information about its single product:

What is the contribution margin ratio?

A)2.50
B)0.08
C)0.40
D)0.60

Question 36

What is the contribution margin for the year at Cornell Corporation?

A)$92,000
B)$282,000
C)$480,000
D)$290,000

Question 37

Branson Movies sells movie tickets for $13 per movie patron.Variable costs are $8 per movie patron and fixed costs are $60,000 per month.The company's relevant range extends to 35,000 movie patrons per month.What is Branson's projected operating income if 28,000 movie patrons see movies during a month?

A)$364,000
B)$140,000
C)$304,000
D)$80,000

Question 38

What is the projected monthly income if 12,000 patrons visit the theatre each month?

A)$200,000
B)$340,000
C)$140,000
D)$240,000

Question 39

Assuming 8,000 units are sold,what is the contribution margin at the Lazarus Corporation?

A)$56,000
B)$78,000
C)$34,000
D)$344,000

Question 40

What is the contribution margin ratio at the Burr Mystery Dinner Theatre?

A)40%
B)250%
C)60%
D)20%

Question 41

On a CVP graph,total fixed costs are shown as a vertical line.

Question 42

To find the break-even point using the shortcut formulas,you use zero for the

A)operating income.
B)fixed expenses.
C)contribution margin ratio.
D)contribution margin per unit.

Question 43

Which of the following is TRUE when using the income statement approach to finding break-even?

A)Sales revenue - variable expenses - fixed expenses = operating income
B)(Variable expenses × number of units)- fixed expenses = operating income
C)Fixed expenses + variable expenses + sales revenue = operating income
D)Fixed expenses + variable expenses - sales revenue = operating income

Question 44

Sales below the break-even point indicate a ________,whereas sales above the break-even point indicate a ________.

A)loss;loss
B)loss;profit
C)profit;profit
D)profit;loss

Question 45

A company that sells thousands of different products would be more likely to calculate break-even in terms of sales units,rather than sales revenue.

Question 46

Fixed costs of $10,000 divided by the contribution margin ratio of 40% would yield the dollar amount of break-even sales as $25,000.

Question 47

The formula used to find the sales revenue (sales in dollars)needed in order to break-even or generate a target profit is

A)(fixed expenses + operating income)÷ contribution margin ratio.
B)(fixed expenses + operating income)÷ contribution margin per unit.
C)(fixed expenses - operating income)÷ contribution margin ratio.
D)(fixed expenses - operating income)÷ contribution margin per unit.

Question 48

The break-even point can either be calculated in terms of number of units or in terms of sales revenue.

Question 49

Roller Corp sells wagon wheels for $150.The variable costs for each wheel are $85,while the total fixed costs are $60,000.The contribution margin for 500 wheels is

A)$75,000.
B)$32,500.
C)$42,500.
D)$10,000.

Question 50

Only the unit contribution margin approach may be used to calculate the break-even point.

Question 51

The break-even point may be defined as the number of units a company must sell to do which of the following?

A)Generate a zero profit
B)Generate a net loss
C)Earn more net income than the previous accounting period
D)Generate a net income

Question 52

The break-even point on a CVP graph is the point where the fixed expenses line intersects the total expense costs line.

Question 53

Wiser Group sells a single product for $30 per unit.The variable costs for each unit are $7.50,while the total fixed costs are $4,500.If a 10% sales commission is introduced what is the new Contribution Margin Ratio?

A)72.5%
B)65%
C)75%
D)No Change

Question 54

The break-even point represents the minimum number of units a company must sell before it earns a profit.

Question 55

During the past year,Pettay Enterprises had the following fixed costs:

The company also had the following variable costs:

During the year,the company produced and sold 60,000 units of the product at a selling price of $7.00 per unit.The company had no inventory at the beginning of the year.
Required: Prepare a contribution margin income statement for the year.

Question 56

The formula used to find the number of units that need to be sold in order to break-even or generate a target profit is

A)(fixed expenses + operating income)÷ contribution margin ratio.
B)(fixed expenses + operating income)÷ contribution margin per unit.
C)(fixed expenses - operating income)÷ contribution margin ratio.
D)(fixed expenses - operating income)÷ contribution margin per unit.

Question 57

When calculating the break-even point in terms of sales revenue,fixed costs should be divided by the contribution margin ratio.

Question 58

On a CVP graph,the total cost line intersects the total revenue line at which of the following points?

A)The level of the fixed costs
B)The level of the variable costs
C)The break-even point
D)None of the above

Question 59

When calculating the break-even point in terms of units,fixed costs should be divided by the contribution margin ratio.

Question 60

On a CVP graph,the vertical distance between the total expense line and the total fixed cost line equals the operating income or operating loss.

Question 61

If the contribution margin ratio is 32%,target operating income is $60,000,and the sales revenue needed to achieve the target operating income is $400,000,what are total fixed expenses?

A)$68,000
B)$128,000
C)$19,200
D)$188,000

Question 62

Assume the following amounts:

If sales revenue per unit decreases to $22 and 10,000 units are sold,what is the operating income?

A)$50,000
B)$90,000
C)$220,000
D)$70,000

Question 63

On a CVP graph,the intersection of the sales revenue line and the variable expense line is considered to be

A)the margin of safety point.
B)the break-even point.
C)the unit contribution margin.
D)unlikely for most companies.

Question 64

On a CVP graph,the horizontal line intersecting the vertical y-axis represents

A)total costs.
B)total fixed costs.
C)total variable costs.
D)break-even point.

Question 65

On a CVP graph,the line that begins at the origin represents

A)total fixed expenses.
B)total expenses.
C)total sales revenues.
D)both the total expenses and the total sales revenues.

Question 66

If the sale price per unit is $100,variable expenses per unit are $45,target operating income is $35,000,and total fixed expenses are $20,000,how many units must be sold to reach the target operating income?

A)350
B)364
C)1,000
D)636

Question 67

What is the break-even point in units at the Schimmel Company?

A)55,000
B)2,509
C)6,900
D)20,000

Question 68

If the sale price per unit is $75,the variable expense per unit is $45,and total fixed expenses are $1,155,000,what will the break-even sales in units be?

A)15,400
B)25,667
C)38,500
D)9,625

Question 69

What is the contribution margin per unit at the Schimmel Company?

A)$6.10
B)$1.75
C)$0.22
D)$13.95

Question 70

If the sale price per unit is $30.00,the variable expense per unit is $21,and total fixed expenses are $300,000,what are the break-even sales in dollars?

A)$10,000
B)$1,000,000
C)$90,000
D)$176,471

Question 71

If the sale price per unit is $38,the unit contribution margin is $17,and total fixed expenses are $56,950,what will the break-even sales in units be?

A)1,499
B)968,150
C)2,712
D)3,350

Question 72

How many units must be sold to earn the targeted operating income at the Schimmel Company?

A)9,409
B)20,000
C)55,000
D)75,000

Question 73

Given break-even sales in units of 56,000 and a unit contribution margin of $6,how many units must be sold to reach a target operating income of $24,000?

A)4,000
B)60,000
C)52,000
D)144,000

Question 74

What are break-even sales in dollars at The Sweet Factory?

A)$9,000
B)$3,750
C)$750
D)$15,000

Question 75

If total fixed costs are $120,000,the contribution margin per unit is $16.00,and targeted operating income is $30,000,how many units must be sold to break-even?

A)1,920,000
B)7,500
C)9,375
D)480,000

Question 76

If the sale price per unit is $12,the unit contribution margin is $5,and total fixed expenses are $21,000,what are the break-even sales in units?

A)105,000
B)252,000
C)4,200
D)1,750

Question 77

Which of the following is an underlying assumption of the cost-volume-profit graph?

A)Total fixed expenses will change during the accounting period.
B)The sales mix of products is constantly changing.
C)Inventory levels are constantly changing.
D)Volume is the only cost driver.

Question 78

The area to the right of the break-even point and between the total revenue line and total expense line represents

A)expected losses.
B)expected profits.
C)variable expenses.
D)fixed expenses.

Question 79

Given break-even sales in units of 28,000 and a unit contribution margin of $4,how many units must be sold to reach a target operating income of $4,000?

A)29,000
B)1,000
C)16,000
D)27,000

Question 80

How many pounds of fudge must The Sweet Factory sell to break-even?

A)15,000
B)300
C)750
D)188