Question 1

If employees accept a wage contract that decreases the unit contribution margin, the break-even point will decrease.

Accepted Answer

A) True 
 B)False

Question 2

The difference between the current sales revenue and the sales at the break-even point is called the:

Accepted Answer

A)  contribution margin. 
B)  margin of safety. 
C)  price factor. 
D)  operating leverage.

Question 3

Total fixed costs remain constant as the level of activity changes within the relevant range.

Accepted Answer

A) True 
 B)False

Question 4

The point where the profit line intersects the horizontal axis on the profit-volume graph represents:

Accepted Answer

A)  the maximum possible operating loss. 
B)  the maximum possible operating income. 
C)  the total fixed costs. 
D)  the break-even point.

Question 5

Currently, fixed costs are $810,000, the unit selling price is $60, and the unit variable cost is $48.What would be the break-even sales (in units), if the variable cost is increased by $2?

Accepted Answer

A)  16,200 units 
B)  57,875 units 
C)  81,000 units 
D)  67,500 units

Question 6

Which of the following statements is true if the number of units produced decreases?

Accepted Answer

A)  The total variable cost remains constant. 
B)  The total variable cost decreases. 
C)  The variable cost per unit decreases. 
D)  The variable cost per unit increases.

Question 7

Cost behavior refers to the manner in which:

Accepted Answer

A)  a cost changes as the related activity changes. 
B)  a cost is allocated to products. 
C)  a cost is used in setting selling prices. 
D)  a cost is estimated.

Question 8

A change in fixed costs as a result of increase in yearly insurance premium will decrease the break-even point.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following costs is an example of a fixed cost?

Accepted Answer

A)  Direct labor cost 
B)  Insurance cost 
C)  Commission paid 
D)  Capital stock

Question 10

The electricity expense in a production plant is an example of a:

Accepted Answer

A)  variable cost. 
B)  margin cost. 
C)  fixed cost. 
D)  distribution cost.

Question 11

Activities that cause costs to change are called activity bases.

Accepted Answer

A) True 
 B)False

Question 12

Currently, fixed costs are $500,000 and the unit contribution margin is $40.What would be the break-even point in units if fixed costs are reduced by $80,000?

Accepted Answer

A)  14,500 units 
B)  20,000 units 
C)  10,500 units 
D)  12,500 units

Question 13

Calculate the number of units that must be sold in order to realize an operating income of $139,000 when fixed costs are $440,000 and unit contribution margin is $20.

Accepted Answer

A)  28,950 units 
B)  29,650 units 
C)  30,350 units 
D)  31,550 units

Question 14

Calculate the contribution margin ratio of a company with sales of $180,000 and operating income of $37,000.Variable costs of the company are 52% of sales.

Accepted Answer

A)  41% 
B)  48% 
C)  36% 
D)  24%

Question 15

_____ per unit increases or decreases in inverse proportion to its activity level.

Accepted Answer

A)  Variable cost 
B)  Opportunity cost 
C)  Contribution cost 
D)  Fixed cost

Question 16

The range of activity over which changes in cost are of interest to management is called the relevant range.

Accepted Answer

A) True 
 B)False

Question 17

Sales amount to $774,000, variable costs are 59% of sales, and fixed cost is $120,000.What is the contribution margin ratio?

Accepted Answer

A)  37% 
B)  44% 
C)  39% 
D)  41%

Question 18

The relative distribution of sales among the various products sold by a business is termed as:

Accepted Answer

A)  business's basket of goods. 
B)  contribution margin mix. 
C)  sales mix. 
D)  product portfolio.

Question 19

Compute the number of units that must be sold in order to have zero profit when fixed costs are $810,000 and unit contribution margin is $90.

Accepted Answer

A)  8,100 units 
B)  9,000 units 
C)  6,500 units 
D)  6,810 units

Question 20

The relevant range is useful for analyzing cost behavior for management decision-making purposes.

Accepted Answer

A) True 
 B)False

Exam 11: Cost-Volume-Profit Analysis

If employees accept a wage contract that decreases the unit contribution margin, the break-even point will decrease.

The difference between the current sales revenue and the sales at the break-even point is called the:

Total fixed costs remain constant as the level of activity changes within the relevant range.

The point where the profit line intersects the horizontal axis on the profit-volume graph represents:

Currently, fixed costs are $810,000, the unit selling price is $60, and the unit variable cost is $48.What would be the break-even sales (in units) , if the variable cost is increased by $2?

Which of the following statements is true if the number of units produced decreases?

Cost behavior refers to the manner in which:

A change in fixed costs as a result of increase in yearly insurance premium will decrease the break-even point.

Which of the following costs is an example of a fixed cost?

The electricity expense in a production plant is an example of a:

Activities that cause costs to change are called activity bases.

Currently, fixed costs are $500,000 and the unit contribution margin is $40.What would be the break-even point in units if fixed costs are reduced by $80,000?

Calculate the number of units that must be sold in order to realize an operating income of $139,000 when fixed costs are $440,000 and unit contribution margin is $20.

Calculate the contribution margin ratio of a company with sales of $180,000 and operating income of $37,000.Variable costs of the company are 52% of sales.

_____ per unit increases or decreases in inverse proportion to its activity level.

The range of activity over which changes in cost are of interest to management is called the relevant range.

Sales amount to $774,000, variable costs are 59% of sales, and fixed cost is $120,000.What is the contribution margin ratio?

The relative distribution of sales among the various products sold by a business is termed as:

Compute the number of units that must be sold in order to have zero profit when fixed costs are $810,000 and unit contribution margin is $90.

The relevant range is useful for analyzing cost behavior for management decision-making purposes.