Deck 4: Costvolumeprofit Analysis

Question 1

Platypus Company sells its only product for $18 per unit,variable production costs are $6 per unit,and selling and administrative costs are $3 per unit.Fixed costs for 10 000 units are $10 000.The contribution margin is:

A)$8 per unit.
B)$9 per unit.
C)$11 per unit.
D)$12 per unit.

Answer 1

B

Question 2

A 'revenue driver' is defined as:

A)any factor that affects revenues.
B)only factors that can influence a change in selling price.
C)any factor that affects costs and revenues.
D)only factors that can influence a change in demand.

Answer 2

A

Question 3

In CVP analysis,variable costs include direct variable costs,but do not include indirect variable costs.

Answer 3

False

Question 4

Which of the following items is NOT an assumption of CVP analysis?

A)All revenues and costs can be added and compared without taking into account the time value of money.
B)The unit-selling price is known and constant.
C)Total costs can be divided into a fixed component and a component that is variable with respect to the level of output.
D)When graphed,total costs curve upward.

Question 5

To perform cost-volume-profit analysis,a company must be able to separate costs into fixed and variable components.

Question 6

Contribution margin equals:

A)revenues minus product costs.
B)revenues minus fixed costs.
C)revenues minus period costs.
D)revenues minus variable costs.

Question 7

Many companies find even the simplest CVP analysis helps with strategic and long-range planning.

Question 8

Total revenues less total fixed costs equal the contribution margin.

Question 9

To determine contribution margin use:

A)both variable and fixed manufacturing costs
B)only fixed manufacturing costs
C)only variable manufacturing costs
D)both variable manufacturing costs and variable nonmanufacturing costs

Question 10

If selling price per unit is $30,variable costs per unit are $20,total fixed costs are $10 000,the tax rate is 30%,and the company sells 6000 units,net profit after tax is:

A)$12 000.
B)$40 000.
C)$35 000.
D)$14 000.

Question 11

If the selling price per unit of a product is $30,variable costs per unit are $20,and total fixed costs are $10 000 and a company sells 5000 units,operating profit would be $40 000.

Question 12

Which of the following items is NOT an assumption of CVP analysis?

A)Proportions of different products will remain constant when multiple products are sold.
B)Total revenues and total costs are linear in relation to output units.
C)Unit selling price and unit fixed costs are known and remain constant.
D)Costs may be separated into separate fixed and variable components.

Question 13

The selling price per unit less the variable cost per unit is the:

A)contribution margin per unit
B)margin of safety
C)fixed cost per unit
D)gross margin

Question 14

Cost-volume-profit analysis may be used for multi-product analysis when the proportion of different products remains constant.

Question 15

Contribution margin = revenue less cost of goods sold.

Question 16

Cost-volume-profit analysis assumes all of the following EXCEPT:

A)total fixed costs remain the same over the relevant range.
B)total variable costs remain the same over the relevant range.
C)units manufactured equal units sold.
D)all costs are variable or fixed.

Question 17

Which of the following statements about operating profit (OP)is TRUE?

A)OP = revenue less fixed costs
B)OP = revenue less cost of goods sold less other variable costs
C)OP = revenue less variable costs
D)OP = revenue less variable and fixed costs

Question 18

Operating profit calculations DO NOT use:

A)operating costs.
B)income tax expense.
C)cost of goods sold.
D)revenue.

Question 19

Fixed costs equal $12 000,unit contribution margin equals $20,and the number of units sold equal 1600.Operating profit is:

A)$32 000.
B)$20 000.
C)$40 000.
D)$12 000.

Question 20

If the selling price per unit is $20 and the contribution margin percentage is 30%,then the variable cost per unit must be $6.

Question 21

When fixed costs are $140 000 and variable costs are 30% of the selling price,then break-even sales will be:

A)$500 000.
B)$200 000.
C)$140 000.
D)indeterminable.

Question 22

Which of the following statements about determining the break-even point is FALSE?

A)Revenues equal fixed costs plus variable costs.
B)Break-even revenues equal fixed costs divided by the variable cost per unit.
C)Contribution margin - fixed costs is equal to zero.
D)Operating profit is equal to zero.

Question 23

A revenue driver is defined as a variable that causes changes in prices.

Question 24

It is assumed in CVP analysis that the unit selling price,unit variable costs,and unit fixed costs are known and constant.

Question 25

If unit outputs exceed the break-even point:

A)total sales revenue exceeds total costs.
B)there is a profit.
C)there is a loss.
D)both total sales revenue exceeds total costs and there is a profit.

Question 26

In CVP analysis,an assumption is made that the total revenues are linear with respect to output units,but that total costs are non-linear with respect to output units.

Question 27

Which of the following is true about the assumptions underlying basic CVP analysis?

A)Only selling price is known and constant.
B)Only selling price and variable cost per unit are known and constant.
C)Selling price,variable cost per unit,fixed cost per unit,and total fixed costs are known and constant.
D)Only selling price,variable cost per unit,and total fixed costs are known and constant.

Question 28

How many units would have to be sold to yield a target operating profit of $44 000,assuming variable costs are $30 per unit,total fixed costs are $4000,and the unit selling price is $40?

A)4800 units
B)4400 units
C)4000 units
D)3600 units

Question 29

Answer the following questions using the information below:
Campesi intends to sell his customers a special round-trip airline ticket package.He is able to purchase the package from the airline carrier for $250 each.The round-trip tickets will be sold for $300 each and the airline intends to reimburse Campesi for any unsold ticket packages.Fixed costs include $7500 in advertising costs.
How many ticket packages will Campesi need to sell to break even?

A)65 packages
B)100 packages
C)150 packages
D)250 packages

Question 30

What is the break-even point in units,assuming a product's selling price is $100,fixed costs are $8000,unit variable costs are $20,and operating profit is $32 000?

A)100 units.
B)300 units.
C)400 units.
D)500 units.

Question 31

Break-even point is:

A)fixed costs divided by contribution margin per unit.
B)total costs divided by variable costs per unit.
C)contribution margin per unit divided by revenue per unit.
D)the sum of fixed and variable costs divided by contribution margin per unit.

Question 32

At the break-even point of 200 units,variable costs total $400 and fixed costs total $600.The 201st unit sold will contribute ________ to profits.

A)$1
B)$2
C)$3
D)$5

Question 33

The break-even point is the activity level where:

A)revenues equal fixed costs.
B)contribution margin equals variable costs.
C)revenues equal the sum of variable and fixed costs.
D)revenues equal variable costs.

Question 34

Sales total $250 000 when variable costs total $187 500 and fixed costs total $40 000.The break-even point in sales dollars is:

A)$40 000.
B)$160 000.
C)$62 500.
D)$250 000.

Question 35

The break-even point in CVP analysis is defined as:

A)revenues less variable costs equal operating profit.
B)when the contribution margin percentage equals total revenues divided by variable costs.
C)when fixed costs equal total revenues.
D)fixed costs divided by the contribution margin per unit.

Question 36

In CVP analysis it is assumed the number of output units is the only revenue driver.

Question 37

If break-even point is 100 units,each unit sells for $30,and fixed costs are $1000,then on a graph the:

A)revenue line will start at $1000.
B)total revenue line and the total cost line will intersect at $3000 of revenue.
C)total cost line will be zero at zero units sold.
D)All of these answers are correct.

Question 38

If the break-even point is 100 units and each unit sells for $50,then:

A)sales of $4000 will result in a loss.
B)sales of $5000 will result in zero profit.
C)selling 125 units will result in a profit.
D)All of these answers are correct.

Question 39

In CVP analysis,total costs can be separated into a fixed component that does not vary with output and a component that is variable with output level.

Question 40

Answer the following questions using the information below:
Campesi intends to sell his customers a special round-trip airline ticket package.He is able to purchase the package from the airline carrier for $250 each.The round-trip tickets will be sold for $300 each and the airline intends to reimburse Campesi for any unsold ticket packages.Fixed costs include $7500 in advertising costs.
What is the contribution margin per ticket package?

A)$50
B)$100
C)$150
D)$200

Question 41

Answer the following questions using the information below:
Warne's Flipper Company sells several products.Information of average revenue and costs is as follows:
$\begin{array}{lr}\text { Selling price per unit } & \$ 25.00 \\\text { Variable costs per unit: } & \\\text { Direct material } & \$ 5.00 \\\text { Direct manufacturing labour } & \$ 1.80 \\\text { Manufacturing overhead } & \$ 0.80 \\\text { Selling costs } & \$ 2.00 \\\text { Annual fixed costs } & \$ 96000\end{array}$

-The number of units that Warne's Flipper must sell each year to break even is:

A)6234 units.
B)12 896 units.
C)16 358 units.
D)indeterminable.

Question 42

Answer the following questions using the information below:
Kelly's Armoured Suits sells a single product.10 000 units were sold resulting in $100 000 of sales revenue,$40 000 of variable costs,and $12 000 of fixed costs.
Contribution margin per unit is:

A)$4.00.
B)$4.29.
C)$6.00.
D)None of these answers are correct.

Question 43

All of the following are assumed in the above analysis EXCEPT:

A)a constant product mix.
B)cost and revenue relationships are reflected accurately.
C)per unit variable costs increase when activity increases.
D)all costs can be classified as either fixed or variable.

Question 44

Answer the following questions using the information below:
Gundagai Company sells several products.Information of average revenue and costs is as follows:
$\begin{array}{lr}\text { Selling price per unit } & \$ 28.50 \\\text { Variable costs per unit: } & \\\quad \text { Direct material } & \$ 5.25 \\\text { Direct manufacturing labour } & \$ 1.15 \\\text { Manufacturing overhead } & \$ 0.25 \\\quad \text { Selling costs } & \$ 1.85 \\\text { Annual fixed costs } & \$ 110000\end{array}$

-The number of units that Gundagai must sell annually to make a profit of $90 000 is:

A)10 000 units.
B)12 000 units.
C)15 000 units.
D)20 000 units.

Question 45

Answer the following questions using the information below:
Kelly's Armoured Suits sells a single product.10 000 units were sold resulting in $100 000 of sales revenue,$40 000 of variable costs,and $12 000 of fixed costs.
Break-even point in units is:

A)2000 units.
B)3000 units.
C)5000 units.
D)None of these answers are correct.

Question 46

Answer the following questions using the information below:
The following information is for Mt.Panorama Company:
$\begin{array}{lr}\text { Selling price } & \$ 300 \text { per unit } \\\text { Variable costs } & \$ 180 \text { per unit } \\\text { Total fixed costs } & \$ 500000\end{array}$

-If targeted operating profit is $120 000,then targeted sales revenue is:

A)$1 550 000.
B)$700 000.
C)$950 000.
D)$1 050 000.

Question 47

Answer the following questions using the information below:
Koscuiszko Chalet,Inc.sells burgers during the major ski season.During the current year 11 000 burgers were sold resulting in $220 000 of sales revenue,$55 000 of variable costs,and $24 000 of fixed costs.
Contribution margin per burger is:

A)$5.00.
B)$15.00.
C)$20.00.
D)None of these answers are correct.

Question 48

Answer the following questions using the information below:
Campesi intends to sell his customers a special round-trip airline ticket package.He is able to purchase the package from the airline carrier for $250 each.The round-trip tickets will be sold for $300 each and the airline intends to reimburse Campesi for any unsold ticket packages.Fixed costs include $7500 in advertising costs.
For every $28 500 of ticket packages sold,operating profit will increase by:

A)$4750.
B)$10 500.
C)$15 750.
D)an indeterminable amount.

Question 49

Answer the following questions using the information below:
Kelly's Armoured Suits sells a single product.10 000 units were sold resulting in $100 000 of sales revenue,$40 000 of variable costs,and $12 000 of fixed costs.
The number of units that must be sold to achieve $60 000 of operating profit is:

A)10 000 units.
B)11 666 units.
C)12 000 units.
D)None of these answers are correct.

Question 50

Answer the following questions using the information below:
Kelly's Armoured Suits sells a single product.10 000 units were sold resulting in $100 000 of sales revenue,$40 000 of variable costs,and $12 000 of fixed costs.
If sales increase by $25 000,operating profit will increase by:

A)$10 000.
B)$15 000.
C)$22 200.
D)None of these answers are correct.

Question 51

Answer the following questions using the information below:
Warne's Flipper Company sells several products.Information of average revenue and costs is as follows:
$\begin{array}{lr}\text { Selling price per unit } & \$ 25.00 \\\text { Variable costs per unit: } & \\\text { Direct material } & \$ 5.00 \\\text { Direct manufacturing labour } & \$ 1.80 \\\text { Manufacturing overhead } & \$ 0.80 \\\text { Selling costs } & \$ 2.00 \\\text { Annual fixed costs } & \$ 96000\end{array}$

-The number of units that Warne's Flipper must sell annually to make a profit of $289 000 is:

A)12 000 units.
B)18 000 units.
C)25 000 units.
D)30 000 units.

Question 52

Answer the following questions using the information below:
Warne's Flipper Company sells several products.Information of average revenue and costs is as follows:
$\begin{array}{lr}\text { Selling price per unit } & \$ 25.00 \\\text { Variable costs per unit: } & \\\text { Direct material } & \$ 5.00 \\\text { Direct manufacturing labour } & \$ 1.80 \\\text { Manufacturing overhead } & \$ 0.80 \\\text { Selling costs } & \$ 2.00 \\\text { Annual fixed costs } & \$ 96000\end{array}$

-The contribution margin per unit is:

A)$8.80.
B)$11.00.
C)$15.40.
D)$16.44.

Question 53

Answer the following questions using the information below:
Warne's Flipper Company sells several products.Information of average revenue and costs is as follows:
$\begin{array}{lr}\text { Selling price per unit } & \$ 25.00 \\\text { Variable costs per unit: } & \\\text { Direct material } & \$ 5.00 \\\text { Direct manufacturing labour } & \$ 1.80 \\\text { Manufacturing overhead } & \$ 0.80 \\\text { Selling costs } & \$ 2.00 \\\text { Annual fixed costs } & \$ 96000\end{array}$

-All of the following are assumed in the above analysis EXCEPT:

A)fixed costs increase when activity increases.
B)a constant product mix.
C)all costs can be classified as either fixed or variable.
D)cost and revenue relationships are reflected accurately.

Question 54

Answer the following questions using the information below:
Campesi intends to sell his customers a special round-trip airline ticket package.He is able to purchase the package from the airline carrier for $250 each.The round-trip tickets will be sold for $300 each and the airline intends to reimburse Campesi for any unsold ticket packages.Fixed costs include $7500 in advertising costs.
How many ticket packages will Campesi need to sell in order to achieve $60 000 of operating profit?

A)367 packages
B)434 packages
C)1100 packages
D)1350 packages

Question 55

Answer the following questions using the information below:
Koscuiszko Chalet,Inc.sells burgers during the major ski season.During the current year 11 000 burgers were sold resulting in $220 000 of sales revenue,$55 000 of variable costs,and $24 000 of fixed costs.
The number of burgers that must be sold to achieve $75 000 of operating profit is:

A)6600 burgers.
B)7500 burgers.
C)8400 burgers.
D)None of these answers are correct.

Question 56

Answer the following questions using the information below:
Gundagai Company sells several products.Information of average revenue and costs is as follows:
$\begin{array}{lr}\text { Selling price per unit } & \$ 28.50 \\\text { Variable costs per unit: } & \\\quad \text { Direct material } & \$ 5.25 \\\text { Direct manufacturing labour } & \$ 1.15 \\\text { Manufacturing overhead } & \$ 0.25 \\\quad \text { Selling costs } & \$ 1.85 \\\text { Annual fixed costs } & \$ 110000\end{array}$

-The contribution margin per unit is:

A)$15.
B)$20.
C)$22.
D)$125.

Question 57

Answer the following questions using the information below:
Gundagai Company sells several products.Information of average revenue and costs is as follows:
$\begin{array}{lr}\text { Selling price per unit } & \$ 28.50 \\\text { Variable costs per unit: } & \\\quad \text { Direct material } & \$ 5.25 \\\text { Direct manufacturing labour } & \$ 1.15 \\\text { Manufacturing overhead } & \$ 0.25 \\\quad \text { Selling costs } & \$ 1.85 \\\text { Annual fixed costs } & \$ 110000\end{array}$

-The number of units that Gundagai must sell each year to break even is:

A)1000 units.
B)4000 units.
C)5500 units.
D)indeterminable.

Question 58

Answer the following questions using the information below:
Koscuiszko Chalet,Inc.sells burgers during the major ski season.During the current year 11 000 burgers were sold resulting in $220 000 of sales revenue,$55 000 of variable costs,and $24 000 of fixed costs.
If sales increase by $40 000,operating profit will increase by:

A)$10 000.
B)$20 000.
C)$30 000.
D)None of these answers are correct.

Question 59

Answer the following questions using the information below:
Koscuiszko Chalet,Inc.sells burgers during the major ski season.During the current year 11 000 burgers were sold resulting in $220 000 of sales revenue,$55 000 of variable costs,and $24 000 of fixed costs.
Break-even point in units is:

A)1000 burgers.
B)1200 burgers.
C)1600 burgers.
D)None of these answers are correct.

Question 60

Answer the following questions using the information below:
The following information is for Mt.Panorama Company:
$\begin{array}{lr}\text { Selling price } & \$ 300 \text { per unit } \\\text { Variable costs } & \$ 180 \text { per unit } \\\text { Total fixed costs } & \$ 500000\end{array}$

-The number of units that Mt.Panorama Company must sell to reach targeted operating profit of $180 000 is:

A)3334 units.
B)5667 units.
C)5000 units.
D)4334 units.

Question 61

Break-even point is that quantity of output where total revenues equal total costs.

Question 62

Which of the following will increase a company's break-even point?

A)Increasing contribution margin per unit
B)Reducing its total fixed costs
C)Increasing variable cost per unit
D)Increasing the selling price per unit

Question 63

The break-even point in total sales dollars is:

A)$40 000.
B)$13 334.
C)$100 000.
D)None of these answers are correct.

Question 64

The variable costing break-even point is dependent upon:

A)contribution margin per unit.
B)fixed (manufacturing and operating)costs.
C)Both A and B.
D)Neither A or B.

Question 65

Answer the following questions using the information below:
Nancy's Niche sells a single product.8000 units were sold resulting in $80 000 of sales revenue,$20 000 of variable costs,and $10 000 of fixed costs.
The contribution margin percentage is:

A)25.0%.
B)12.5%.
C)37.5%.
D)75.0%.

Question 66

Ponsford's Cellular sells phones for $100.The unit variable cost per phone is $50 plus a selling commission of 10%.Fixed manufacturing costs total $1250 per month,while fixed selling and administrative costs total $2500.
Required:
a.What is the contribution margin per phone?
b.What is the break-even point in phones?
c.How many phones must be sold to earn pre-tax profit of $7500?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 67

In the graph method of CVP analysis,the break-even point is the (X-axis)quantity of units sold for which the total revenues line crosses the total costs line.

Question 68

When variable costing is used,there will be more than one break-even point.

Question 69

In the graph method of CVP analysis,the total revenue line can be calculated by determining the total revenue at only one real output level because the starting point of the line is always the intersection of the X and Y axes.

Question 70

To achieve $100 000 in operating profit,sales must total:

A)$130 000.
B)$440 000.
C)$160 000.
D)None of these answers are correct.

Question 71

Which one of the following is not a requirement for calculating the absorption costing break-even point?

A)Variable operating costs
B)Fixed manufacturing costs
C)Unit level of production
D)Contribution margin per unit

Question 72

A company with sales of $100 000,variable costs of $70 000,and fixed costs of $50 000 will reach its break-even point if sales are increased by $20 000.

Question 73

The break-even point is not affected by income tax.

Question 74

The selling price per unit is $30,variable cost per unit $20,and fixed cost per unit is $3.When this company operates above the break-even point,the sale of one more unit will increase net profit by $7.

Question 75

If the selling price per unit of a product is $50,variable costs per unit are $40,and total fixed costs are $50 000,a company must sell 6000 units to make a target operating profit of $10 000.

Question 76

If variable costs decrease by $1 per unit,the new break-even point is:

A)1539 units.
B)492 units.
C)$11 765 in total sales dollars.
D)None of these answers are correct.

Question 77

The strategy MOST likely to reduce the break-even point would be to:

A)decrease the fixed costs and increase the contribution margin.
B)decrease both the fixed costs and the contribution margin.
C)increase the fixed costs and decrease the contribution margin.
D)increase both the fixed costs and the contribution margin.

Question 78

The break-even point decreases if:

A)the selling price per unit decreases.
B)the variable cost per unit increases.
C)the contribution margin per unit decreases.
D)total fixed costs decrease.

Question 79

A profit-volume graph shows the impact on operating profit from changes in the output level.

Question 80

Break-even point is not a good planning tool since the goal of business is to make a profit.