Question 1

In a CVP income statement, a selling expense is generally

Accepted Answer

A)   completely a variable cost.
B)   completely a fixed cost.
C)   neither a variable cost nor a fixed cost.
D)   partly a variable cost and partly a fixed cost.E) C) and D)
F) None of the above

Question 2

The CVP income statement classifies costs as variable or fixed and computes a contribution margin.

Accepted Answer

A) True 
 B)False

Question 3

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.E) A) and C)
F) A) and B)

Question 4

When absorption costing is used, management may be tempted to overproduce in a given period in order to increase net income.

Accepted Answer

A) True 
 B)False

Question 5

Use the following information for questions 
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:   Standard Division  Premium Division  Total  Sales $400,000$600,000$1,000,000 Variable costs 280,000360,000 Contribution margin $120,000$240,000 Total fixed costs $300,000\begin{array}{lll}&	ext { Standard Division }&	ext { Premium Division } & 	ext { Total }\\hline	ext { Sales } & \$ 400,000 & \$ 600,000&\$1,000,000 \	ext { Variable costs } & 280,000 & 360,000 \	ext { Contribution margin } & \$ 120,000 & \$ 240,000\	ext { Total fixed costs }&&&\$300,000\end{array} Sales  Variable costs  Contribution margin  Total fixed costs ​ Standard Division $400,000280,000$120,000​ Premium Division $600,000360,000$240,000​ Total $1,000,000$300,000​​ 
-What is the break-even point in dollars?

Accepted Answer

A)   $108,000
B)   $833,333
C)   $857,143
D)   $882,353 E) B) and D)
F) B) and C)

Question 6

Margin of safety in dollars is

Accepted Answer

A)   expected sales divided by break-even sales.
B)   expected sales less break-even sales.
C)   actual sales less expected sales.
D)   expected sales less actual sales.E) A) and B)
F) A) and D)

Question 7

The difference between absorption costing and variable costing is the treatment of fixed manufacturing overhead.

Accepted Answer

A) True 
 B)False

Question 8

A cost structure which relies more heavily on fixed costs makes the company

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)   have a lower break-even point.E) A) and B)
F) B) and C)

Question 9

Use the following information for questions 
Sprinkle Co. sells its product for $60 per unit. During 2019, it produced 60,000 units and sold 50,000 units (there was no beginning inventory) . Costs per unit are: direct materials $15, direct labor $9, and variable overhead $3. Fixed costs are: $720,000 manufacturing overhead, and $90,000 selling and administrative expenses.
-The per unit manufacturing cost under variable costing is

Accepted Answer

A)   $24.
B)   $27.
C)   $39.
D)   $40.E) B) and D)
F) B) and C)

Question 10

In 2019, Teller Company sold 3,000 units at $600 each. Variable expenses were $420 per unit, and fixed expenses were $270,000. The same selling price, variable expenses, and fixed expenses are expected for 2020. What is Teller's break-even point in units for 2020?

Accepted Answer

A)   1,500
B)   643
C)   450
D)   750E) B) and D)
F) All of the above

Question 11

Use the following information for questions 
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:   Standard Division  Premium Division  Total  Sales $400,000$600,000$1,000,000 Variable costs 280,000360,000 Contribution margin $120,000$240,000 Total fixed costs $300,000\begin{array}{lll}&	ext { Standard Division }&	ext { Premium Division } & 	ext { Total }\\hline	ext { Sales } & \$ 400,000 & \$ 600,000&\$1,000,000 \	ext { Variable costs } & 280,000 & 360,000 \	ext { Contribution margin } & \$ 120,000 & \$ 240,000\	ext { Total fixed costs }&&&\$300,000\end{array} Sales  Variable costs  Contribution margin  Total fixed costs ​ Standard Division $400,000280,000$120,000​ Premium Division $600,000360,000$240,000​ Total $1,000,000$300,000​​ 
-What is the weighted-average contribution margin ratio?

Accepted Answer

A)   34%
B)   35%
C)   36%
D)   50% E) None of the above
F) All of the above

Question 12

Contribution margin is the amount of revenue remaining after deducting

Accepted Answer

A)   cost of goods sold.
B)   fixed costs.
C)   variable costs.
D)   contra-revenue.E) A) and B)
F) A) and C)

Question 13

Use the following information for questions 
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 $6,660,000 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%.E) A) and B)
F) A) and D)

Question 14

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.E) A) and C)
F) None of the above

Question 15

The sales mix percentages for Novotna's Boston and Seattle Divisions are 70% and 30%. The contribution margin ratios are: Boston (40%)  and Seattle (30%) . Fixed costs are $2,220,000. What is Novotna's break-even point in dollars?

Accepted Answer

A)   $777,000
B)   $6,000,000
C)   $6,342,856
D)   $6,727,272E) B) and D)
F) A) and C)

Question 16

The one primary difference between variable and absorption costing is that under

Accepted Answer

A)   variable costing, companies charge the fixed manufacturing overhead as an expense in the current period.
B)   absorption costing, companies charge the fixed manufacturing overhead as an expense in the current period.
C)   variable costing, companies charge the variable manufacturing overhead as an expense in the current period.
D)   absorption costing, companies charge the variable manufacturing overhead as an expense in the current period.E) C) and D)
F) A) and C)

Question 17

If fixed costs are $100,000 and weighted-average unit contribution margin is $50, then the break-even point in units is 2,000 units.

Accepted Answer

A) True 
 B)False

Question 18

Cost structure

Accepted Answer

A)   refers to the relative proportion of fixed versus variable costs that a company incurs.
B)   generally has little impact on profitability.
C)   cannot be significantly changed by companies.
D)   refers to the relative proportion of operating versus nonoperating costs that a company incurs.E) B) and D)
F) None of the above

Question 19

Use the following information for questions 
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 $6,660,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%.
-What will sales be for the Sporting Goods Division at the break-even point?

Accepted Answer

A)   $5,400,000
B)   $6,300,000
C)   $10,067,442
D)   $11,700,000E) C) and D)
F) A) and D)

Question 20

Ramirez Corporation sells two types of computer hard drives. The sales mix is 30% (Q-Drive)  and 70% (Q-Drive Plus) . Q-Drive has variable costs per unit of $90 and a selling price of $150. Q-Drive Plus has variable costs per unit of $105 and a selling price of $195. Ramirez's fixed costs are $891,000. How many units of Q-Drive would be sold at the break-even point?

Accepted Answer

A)   3,300
B)   4,455
C)   11,000
D)   7,700E) A) and D)
F) A) and C)

Exam 6: Cost-Volume-Profit Analysis: Additional Issues

The margin of safety ratio is

Correct Answer
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In 2019, Teller Company sold 3,000 units at $600 each. Variable expenses were $420 per unit, and fixed expenses were $270,000. The same selling price, variable expenses, and fixed expenses are expected for 2020. What is Teller's break-even point in units for 2020?

Correct Answer
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In a CVP income statement, a selling expense is generally

Correct Answer
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If fixed costs are $100,000 and weighted-average unit contribution margin is $50, then the break-even point in units is 2,000 units.

Correct Answer
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Correct Answer
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The sales mix percentages for Novotna's Boston and Seattle Divisions are 70% and 30%. The contribution margin ratios are: Boston (40%) and Seattle (30%) . Fixed costs are $2,220,000. What is Novotna's break-even point in dollars?

Correct Answer
verified

When absorption costing is used, management may be tempted to overproduce in a given period in order to increase net income.

Correct Answer
verified

The CVP income statement classifies costs as variable or fixed and computes a contribution margin.

Correct Answer
verified

The difference between absorption costing and variable costing is the treatment of fixed manufacturing overhead.

Correct Answer
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Contribution margin is the amount of revenue remaining after deducting

Correct Answer
verified

Correct Answer
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Margin of safety in dollars is

Correct Answer
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Cost structure

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

Correct Answer
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A cost structure which relies more heavily on fixed costs makes the company

Correct Answer
verified

The one primary difference between variable and absorption costing is that under

Correct Answer
verified

Exam 6: Cost-Volume-Profit Analysis: Additional Issues

The margin of safety ratio is

Correct AnswerverifiedShow Answer

In 2019, Teller Company sold 3,000 units at $600 each. Variable expenses were $420 per unit, and fixed expenses were $270,000. The same selling price, variable expenses, and fixed expenses are expected for 2020. What is Teller's break-even point in units for 2020?

Correct AnswerverifiedShow Answer

In a CVP income statement, a selling expense is generally

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If fixed costs are $100,000 and weighted-average unit contribution margin is $50, then the break-even point in units is 2,000 units.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The sales mix percentages for Novotna's Boston and Seattle Divisions are 70% and 30%. The contribution margin ratios are: Boston (40%) and Seattle (30%) . Fixed costs are $2,220,000. What is Novotna's break-even point in dollars?

Correct AnswerverifiedShow Answer

When absorption costing is used, management may be tempted to overproduce in a given period in order to increase net income.

Correct AnswerverifiedShow Answer

The CVP income statement classifies costs as variable or fixed and computes a contribution margin.

Correct AnswerverifiedShow Answer

The difference between absorption costing and variable costing is the treatment of fixed manufacturing overhead.

Correct AnswerverifiedShow Answer

Contribution margin is the amount of revenue remaining after deducting

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Margin of safety in dollars is

Correct AnswerverifiedShow Answer

Cost structure

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A cost structure which relies more heavily on fixed costs makes the company

Correct AnswerverifiedShow Answer

The one primary difference between variable and absorption costing is that under

Correct AnswerverifiedShow Answer

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