Question 1

The contribution margin is the difference between total revenue and fixed costs.

Accepted Answer

A) True 
 B)False

Question 2

If monthly fixed costs are $21,000 and the contribution margin ratio is 42%,the monthly sales volume required to break even is:

Accepted Answer

A)  $8,820.
B)  $50,000.
C)  $78,000.
D)  $39,207.E) A) and B)
F) A) and C)

Question 3

As volume increases,total fixed costs remain the same.

Accepted Answer

A) True 
 B)False  True

Question 4

Operating income can be calculated by:

Accepted Answer

A)  Dividing fixed costs by the contribution margin ratio.
B)  Multiplying fixed costs by the contribution margin ratio.
C)  Multiplying the margin of safety by the contribution margin ratio.
D)  Dividing the margin of safety by the contribution margin ratio.E) A) and B)
F) A) and C) C

Question 5

With variable costs,the cost per unit varies with changes in volume.

Accepted Answer

A) True 
 B)False

Question 6

The break-even point in a cost-volume-profit graph is always found:

Accepted Answer

A)  At 50% of full capacity.
B)  At the sales volume resulting in the lowest average unit cost.
C)  At the volume at which total revenue equals total variable costs.
D)  At the volume at which total revenue equals total fixed costs plus total variable costs.E) All of the above
F) C) and D)

Question 7

A company's relevant range of production is:

Accepted Answer

A)  The production range from zero to 100% of plant capacity.
B)  The production range over which CVP assumptions are valid.
C)  The production range beyond the break-even point.
D)  The production range that covers fixed but not variable costs.E) A) and D)
F) A) and B)

Question 8

A manufacturing company produced the following report:  Required:
(1)How many units would have to be sold to break-even?
(2)If fixed overhead were to increase by $1,800 what would the break-even point in units be?
(3)What is operating income if sales increase by 25%?

Accepted Answer

(1)113 uni...

Question 9

Montclair Company earns an average contribution margin ratio of 40% on its sales.The local store manager estimates that he can increase monthly sales volume by $45,000 by spending an additional $7,000 per month for direct mail advertising.Compute the monthly increase in operating income if the manager's estimate about the increased sales volume is accurate.

Accepted Answer

A)  $11,000.
B)  $23,000.
C)  $16,000.
D)  $18,000.E) None of the above
F) A) and C)

Question 10

In cost-volume-profit analysis,income tax expense:

Accepted Answer

A)  Is included among the monthly operating expenses as a variable cost.
B)  Is considered a fixed cost of doing business.
C)  Is treated as a semi-variable cost that is partially dependent upon sales volume.
D)  Is generally ignored.E) A) and B)
F) B) and C)

Question 11

If unit sales prices are $7 and variable costs are $5 per unit,how many units would have to be sold to break-even if fixed costs equal $8,000?

Accepted Answer

A)  2,000 units.
B)  3,000 units.
C)  4,000 units.
D)  3,800 units.E) B) and D)
F) A) and C)

Question 12

As volume increases,per unit variable costs will decrease on a per-unit basis and stay the same in total.

Accepted Answer

A) True 
 B)False

Question 13

The margin of safety sales volume times the contribution margin ratio equals operating income.

Accepted Answer

A) True 
 B)False

Question 14

As volume increases,per unit fixed costs stay the same.

Accepted Answer

A) True 
 B)False

Question 15

When cost-volume-profit analysis is used,the need for a cost accounting system is eliminated.

Accepted Answer

A) True 
 B)False

Question 16

A company's most profitable products are often those which:

Accepted Answer

A)  Have the highest contribution margin ratios and the highest sales volumes.
B)  Have the highest contribution margin ratios and the lowest sales volumes.
C)  Have the lowest contribution margin ratios and the highest sales volumes.
D)  Have the lowest contribution margin ratios and the lowest sales volumes.E) B) and D)
F) B) and C)

Question 17

Any business which operates at less than capacity will have smaller fixed costs than variable costs.

Accepted Answer

A) True 
 B)False

Question 18

High-low method
The following information is available regarding the total repair costs of Alexander Design Company for six months of 2015:  (a)Using the high-low method,compute the following:
(1)The variable element of repair cost per unit of production:
$_________________ per unit
(2)The fixed element of the monthly repair cost: $__________________
(b)Use the cost relationship determined in part a to estimate the total repair cost for July 2015,given that production is scheduled for 2,300 units.$___________________

Accepted Answer

(a)(1)$7.20 per unit...

Question 19

Cost-volume-profit graph
Describe the important relationships shown on a cost-volume-profit graph.

Accepted Answer

The important relationships shown on a cost-volume-profit graph are changes in revenue,costs,and operating income in relation to changes in the level of business activity.The point at which a business moves from a loss to a profit position (the break-even point)is also shown,but this is relatively less important because the objective of a business endeavor is to earn a high rate of return on investment,not to break even.

Question 20

Contribution margin is total revenue less variable costs.

Accepted Answer

A) True 
 B)False

Exam 20: Cost-Volume-Profit Analysis

The contribution margin is the difference between total revenue and fixed costs.

Correct Answer
verified

If monthly fixed costs are $21,000 and the contribution margin ratio is 42%,the monthly sales volume required to break even is:

Correct Answer
verified

As volume increases,total fixed costs remain the same.

Correct Answer
verified
True

Operating income can be calculated by:

Correct Answer
verified
C

With variable costs,the cost per unit varies with changes in volume.

Correct Answer
verified

The break-even point in a cost-volume-profit graph is always found:

Correct Answer
verified

A company's relevant range of production is:

Correct Answer
verified

A manufacturing company produced the following report: Required: (1)How many units would have to be sold to break-even? (2)If fixed overhead were to increase by $1,800 what would the break-even point in units be? (3)What is operating income if sales increase by 25%?

Correct Answer
verified
(1)113 uni...
View Answer

Correct Answer
verified

In cost-volume-profit analysis,income tax expense:

Correct Answer
verified

If unit sales prices are $7 and variable costs are $5 per unit,how many units would have to be sold to break-even if fixed costs equal $8,000?

Correct Answer
verified

As volume increases,per unit variable costs will decrease on a per-unit basis and stay the same in total.

Correct Answer
verified

The margin of safety sales volume times the contribution margin ratio equals operating income.

Correct Answer
verified

As volume increases,per unit fixed costs stay the same.

Correct Answer
verified

When cost-volume-profit analysis is used,the need for a cost accounting system is eliminated.

Correct Answer
verified

A company's most profitable products are often those which:

Correct Answer
verified

Any business which operates at less than capacity will have smaller fixed costs than variable costs.

Correct Answer
verified

Correct Answer
verified
(a)(1)$7.20 per unit...
View Answer

Cost-volume-profit graph Describe the important relationships shown on a cost-volume-profit graph.

Contribution margin is total revenue less variable costs.

Correct Answer
verified

Exam 20: Cost-Volume-Profit Analysis

The contribution margin is the difference between total revenue and fixed costs.

Correct AnswerverifiedShow Answer

If monthly fixed costs are $21,000 and the contribution margin ratio is 42%,the monthly sales volume required to break even is:

Correct AnswerverifiedShow Answer

As volume increases,total fixed costs remain the same.

Correct AnswerverifiedTrue

Operating income can be calculated by:

Correct AnswerverifiedC

With variable costs,the cost per unit varies with changes in volume.

Correct AnswerverifiedShow Answer

The break-even point in a cost-volume-profit graph is always found:

Correct AnswerverifiedShow Answer

A company's relevant range of production is:

Correct AnswerverifiedShow Answer

A manufacturing company produced the following report: Required: (1)How many units would have to be sold to break-even? (2)If fixed overhead were to increase by $1,800 what would the break-even point in units be? (3)What is operating income if sales increase by 25%?

Correct Answerverified(1)113 uni...View AnswerShow Answer

Correct AnswerverifiedShow Answer

In cost-volume-profit analysis,income tax expense:

Correct AnswerverifiedShow Answer

If unit sales prices are $7 and variable costs are $5 per unit,how many units would have to be sold to break-even if fixed costs equal $8,000?

Correct AnswerverifiedShow Answer

As volume increases,per unit variable costs will decrease on a per-unit basis and stay the same in total.

Correct AnswerverifiedShow Answer

The margin of safety sales volume times the contribution margin ratio equals operating income.

Correct AnswerverifiedShow Answer

As volume increases,per unit fixed costs stay the same.

Correct AnswerverifiedShow Answer

When cost-volume-profit analysis is used,the need for a cost accounting system is eliminated.

Correct AnswerverifiedShow Answer

A company's most profitable products are often those which:

Correct AnswerverifiedShow Answer

Any business which operates at less than capacity will have smaller fixed costs than variable costs.

Correct AnswerverifiedShow Answer

Correct Answerverified(a)(1)$7.20 per unit...View AnswerShow Answer

Cost-volume-profit graph Describe the important relationships shown on a cost-volume-profit graph.

Contribution margin is total revenue less variable costs.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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True

Correct Answer
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C

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
(1)113 uni...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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(a)(1)$7.20 per unit...
View Answer

Correct Answer
verified