Question 1

Swanson Company has two divisions; Sporting Goods and Sports Gear.The sales mix is 65% for Sporting Goods and 35% for Sports Gear.Swanson incurs $4,440,000 in fixed costs.The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%.
-The weighted-average contribution margin ratio is

Accepted Answer

A) 37%. 
B) 40%. 
C) 43%. 
D) 50%.

Question 2

If Sprinkle Industries has a margin of safety ratio of .60, it could sustain a 60 percent decline in sales before it would be operating at a loss.

Accepted Answer

A) True 
 B)False

Question 3

Roosevelt Corporation has a weighted-average unit contribution margin of $40 for its two products, Standard and Supreme.Expected sales for Roosevelt are 40,000 Standard and 60,000 Supreme.Fixed expenses are $1,800,000.How many Standards would Roosevelt sell at the break-even point?

Accepted Answer

A) 18,000 
B) 27,000 
C) 30,000 
D) 45,000

Question 4

When a company has limited resources to manufacture products, it should manufacture those products which have the highest contribution margin per unit.

Accepted Answer

A) True 
 B)False

Question 5

Roosevelt Corporation has a weighted-average unit contribution margin of $40 for its two products, Standard and Supreme.Expected sales for Roosevelt are 40,000 Standard and 60,000 Supreme.Fixed expenses are $1,800,000.At the expected sales level, Roosevelt's net income will be

Accepted Answer

A) $(200,000). 
B) $ - 0 -. 
C) $2,200,000. 
D) $4,000,000.

Question 6

The required sales in units to achieve a target net income is

Accepted Answer

A) (sales + target net income) divided by contribution margin per unit. 
B) (sales + target net income) divided by contribution margin ratio. 
C) (fixed cost + target net income) divided by contribution margin per unit. 
D) (fixed cost + target net income) divided by contribution margin ratio.

Question 7

Ramirez Corporation sells two types of computer chips.The sales mix is 30% (Q-Chip) and 70% (Q-Chip Plus).Q-Chip has variable costs per unit of $60 and a selling price of $100.Q-Chip Plus has variable costs per unit of $70 and a selling price of $130.Ramirez's fixed costs are $540,000.How many units of Q-Chip would be sold at the break-even point?

Accepted Answer

A) 3,000 
B) 3,522 
C) 5,000 
D) 7,000

Question 8

MacCloud Industries has two divisions-Standard and Premium.Each division has hundreds of different types of tennis racquets and tennis products.The following information is available: $\begin{array}{lrr}&\text { Standard Division}&\text { Premium Division }&\text {Total }\
\text { Sales } & \$ 400,000 & \$ 600,000&\$1,000,000 \
\text { Variable costs } & 280,000 & 360,000 \
\text { Contribution margin }&\$120,000&\$240,000\\text { Total fixed costs }&&&\$320,000
\end{array}$
-What is the break-even point in dollars?

Accepted Answer

A) $115,200 
B) $888,889 
C) $914,286 
D) $941,117

Question 9

The break-even point in dollars is variable costs divided by the weighted-average contribution margin ratio.

Accepted Answer

A) True 
 B)False

Question 10

Swanson Company has two divisions; Sporting Goods and Sports Gear.The sales mix is 65% for Sporting Goods and 35% for Sports Gear.Swanson incurs $4,440,000 in fixed costs.The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%.
-What will be the total contribution margin at the break-even point?

Accepted Answer

A) $3,820,466 
B) $4,440,000 
C) $4,480,000 
D) $5,160,000

Question 11

In 2012, Carow sold 3,000 units at $500 each.Variable expenses were $250 per unit, and fixed expenses were $250,000.The same selling price is expected for 2013.Carow is tentatively planning to invest in equipment that would increase fixed costs by 20%, while decreasing variable costs per unit by 20%.What is Carow's break-even point in units for 2013?

Accepted Answer

A) 1,000 
B) 1,200 
C) 1,250 
D) 1,500

Question 12

Moonwalker's CVP income statement included sales of 4,000 units, a selling price of $100, variable expenses of $60 per unit, and fixed expenses of $88,000.
-Contribution margin is

Accepted Answer

A) $400,000. 
B) $240,000. 
C) $160,000. 
D) $72,000.

Question 13

Mercantile Corporation has sales of $2,000,000, variable costs of $1,100,000, and fixed costs of $750,000.Mercantile's margin of safety ratio is

Accepted Answer

A) .08. 
B) .17. 
C) .20. 
D) .83.

Question 14

Swanson Company has two divisions; Sporting Goods and Sports Gear.The sales mix is 65% for Sporting Goods and 35% for Sports Gear.Swanson incurs $4,440,000 in fixed costs.The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%.
-The break-even point in dollars is

Accepted Answer

A) $1,642,800. 
B) $10,325,582. 
C) $11,100,000. 
D) $12,000,000.

Question 15

The CVP income statement classifies costs

Accepted Answer

A) as variable or fixed and computes contribution margin. 
B) by function and computes a contribution margin. 
C) as variable or fixed and computes gross margin. 
D) by function and computes a gross margin.

Question 16

According to the theory of constraints, a company must identify its constraints and find ways to reduce or eliminate them.

Accepted Answer

A) True 
 B)False

Question 17

What is the key factor in determining sales mix if a company has limited resources?

Accepted Answer

A) Contribution margin per unit of limited resource 
B) The amount of fixed costs per unit 
C) Total contribution margin 
D) The cost of limited resources

Question 18

When a company has limited resources, management must decide which products to make and sell in order to maximize net income.

Accepted Answer

A) True 
 B)False

Question 19

A company with a higher contribution margin ratio is

Accepted Answer

A) more sensitive to changes in sales revenue. 
B) less sensitive to changes in sales revenue. 
C) either more or less sensitive to changes in sales revenue, depending on other factors. 
D) likely to have a lower breakeven point.

Question 20

The margin of safety ratio is

Accepted Answer

A) expected sales divided by break-even sales. 
B) expected sales less break-even sales. 
C) margin of safety in dollars divided by expected sales. 
D) margin of safety in dollars divided by break-even sales.

Exam 6: Reporting and Analyzing Inventory

If Sprinkle Industries has a margin of safety ratio of .60, it could sustain a 60 percent decline in sales before it would be operating at a loss.

Roosevelt Corporation has a weighted-average unit contribution margin of $40 for its two products, Standard and Supreme.Expected sales for Roosevelt are 40,000 Standard and 60,000 Supreme.Fixed expenses are $1,800,000.How many Standards would Roosevelt sell at the break-even point?

When a company has limited resources to manufacture products, it should manufacture those products which have the highest contribution margin per unit.

Roosevelt Corporation has a weighted-average unit contribution margin of $40 for its two products, Standard and Supreme.Expected sales for Roosevelt are 40,000 Standard and 60,000 Supreme.Fixed expenses are $1,800,000.At the expected sales level, Roosevelt's net income will be

The required sales in units to achieve a target net income is

The break-even point in dollars is variable costs divided by the weighted-average contribution margin ratio.

Moonwalker's CVP income statement included sales of 4,000 units, a selling price of $100, variable expenses of $60 per unit, and fixed expenses of $88,000. -Contribution margin is

Mercantile Corporation has sales of $2,000,000, variable costs of $1,100,000, and fixed costs of $750,000.Mercantile's margin of safety ratio is

Swanson Company has two divisions; Sporting Goods and Sports Gear.The sales mix is 65% for Sporting Goods and 35% for Sports Gear.Swanson incurs $4,440,000 in fixed costs.The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. -The break-even point in dollars is

The CVP income statement classifies costs

According to the theory of constraints, a company must identify its constraints and find ways to reduce or eliminate them.

What is the key factor in determining sales mix if a company has limited resources?

When a company has limited resources, management must decide which products to make and sell in order to maximize net income.

A company with a higher contribution margin ratio is

The margin of safety ratio is