Question 1

Which of the following is not a plausible explanation of why variable costs often behave in a curvilinear fashion?

Accepted Answer

A)   Labor specialization
B)   Overtime wages
C)   Total variable costs are constant within the relevant range
D)   Availability of quantity discountsE) C) and D)
F) A) and B)

Question 2

If variable costs per unit are 70% of sales, fixed costs are $290,000 and target net income is $70,000, required sales are $1,200,000.

Accepted Answer

A) True 
 B)False

Question 3

In using the high-low method, the fixed cost

Accepted Answer

A)   is determined by subtracting the total cost at the high level of activity from the total cost at the low activity level.
B)   is determined by adding the total variable cost to the total cost at the low activity level.
C)   is determined before the total variable cost.
D)   may be determined by subtracting the total variable cost from either the total cost at the low or high activity level.E) B) and C)
F) A) and D)

Question 4

CVP analysis does not consider

Accepted Answer

A)   level of activity.
B)   fixed cost per unit.
C)   variable cost per unit.
D)   sales mix.E) A) and D)
F) B) and C)

Question 5

The difference between the costs at the high and low levels of activity represents the fixed cost element of a mixed cost.

Accepted Answer

A) True 
 B)False

Question 6

The margin of safety is the difference between contribution margin and fixed costs.

Accepted Answer

A) True 
 B)False

Question 7

The relevant range of activity refers to the

Accepted Answer

A)   geographical areas where the company plans to operate.
B)   activity level where all costs are curvilinear.
C)   levels of activity over which the company expects to operate.
D)   level of activity where all costs are constant.E) A) and B)
F) C) and D)

Question 8

Cost behavior analysis is a study of how a firm's costs

Accepted Answer

A)   relate to competitors' costs.
B)   relate to general price level changes.
C)   respond to changes in the level of business activity.
D)   respond to changes in the gross national product.E) A) and D)
F) A) and B)

Question 9

The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

Accepted Answer

A) True 
 B)False

Question 10

Cunningham, Inc. sells MP3 players for $60 each. Variable costs are $40 per unit, and fixed costs total $120,000. How many MP3 players must Cunningham sell to earn net income of $280,000?

Accepted Answer

A)   20,000.
B)   7,000.
C)   5,000.
D)   6,000.E) B) and C)
F) A) and B)

Question 11

A fixed cost is a cost which

Accepted Answer

A)   varies in total with changes in the level of activity.
B)   remains constant per unit with changes in the level of activity.
C)   varies inversely in total with changes in the level of activity.
D)   remains constant in total with changes in the level of activity.E) A) and D)
F) A) and C)

Question 12

Aero, Inc. requires sales of $2,000,000 to cover its fixed costs of $600,000 and to earn net income of $500,000. What percent are variable costs of sales?

Accepted Answer

A)   25%
B)   45%
C)   30%
D)   55%E) None of the above
F) A) and C)

Question 13

Portman Company's activity for the first three months of 2019 are as follows:   Machine Hours Electrical Cost  January 2,100$4,800 February 2,600$5,800 March 2,900$6,400\begin{array}{lll}&	ext { Machine Hours}&	ext {  Electrical Cost }\	ext { January } & 2,100 & \$ 4,800 \	ext { February } & 2,600 & \$ 5,800 \	ext { March } & 2,900 & \$ 6,400\end{array} January  February  March ​ Machine Hours2,1002,6002,900​ Electrical Cost $4,800$5,800$6,400​  Using the high-low method, how much is the cost per machine hour?

Accepted Answer

A)   $2.00
B)   $3.00
C)   $2.26
D)   $1.78 E) None of the above
F) All of the above

Question 14

The equation which reflects a CVP income statement is

Accepted Answer

A)   Sales = Cost of goods sold + Operating expenses + Net income.
B)   Sales + Fixed costs = Variable costs + Net income.
C)   Sales - Variable costs + Fixed costs = Net income.
D)   Sales - Variable costs - Fixed costs = Net income.E) C) and D)
F) B) and D)

Question 15

For an activity base to be useful in cost behavior analysis,

Accepted Answer

A)   the activity should always be stated in dollars.
B)   there should be a correlation between changes in the level of activity and changes in costs.
C)   the activity should always be stated in terms of units.
D)   the activity level should be constant over a period of time.E) A) and B)
F) A) and C)

Question 16

Keene, Inc. produces flash drives for computers, which it sells for $20 each. Each flash drive costs $6 of variable costs to make. During March, 1,000 drives were sold. Fixed costs for March were $5.60 per unit for a total of $5,600 for the month. If variable costs decrease by 10%, what happens to the break-even level of units per month for Keene?

Accepted Answer

A)   It is 10% higher than the original break-even point.
B)   It decreases about 16 units.
C)   It decreases about 40 units.
D)   It depends on the number of units the company expects to produce and sell.E) B) and C)
F) A) and C)

Question 17

For analysis purposes, the high-low method usually produces a(n)

Accepted Answer

A)   reasonable estimate.
B)   precise estimate.
C)   overstated estimate.
D)   understated estimate.E) B) and C)
F) A) and C)

Question 18

Wendy Industries produces only one product. Monthly fixed expenses are $12,000, monthly unit sales are 4,000, and the unit contribution margin is $10. How much is monthly net income?

Accepted Answer

A)   $40,000
B)   $52,000
C)   $0
D)   $28,000E) All of the above
F) B) and C)

Question 19

Boswell company reported the following information for the current year: Sales (50,000 units)  $1,000,000, direct materials and direct labor $500,000, other variable costs $50,000, and fixed costs $360,000. What is Boswell's break-even point in units?

Accepted Answer

A)   32,728.
B)   40,000.
C)   51,112.
D)   56,250.E) B) and C)
F) A) and D)

Question 20

Walters Corporation sells radios for $50 per unit. The fixed costs are $525,000 and the variable costs are 60% of the selling price. As a result of new automated equipment, it is anticipated that fixed costs will increase by $125,000 and variable costs will be 50% of the selling price. The new break-even point in units is:

Accepted Answer

A)   26,250
B)   26,000
C)   25,750
D)   21,000E) B) and D)
F) B) and C)

Exam 5: Cost-Volume-Profit

Cunningham, Inc. sells MP3 players for $60 each. Variable costs are $40 per unit, and fixed costs total $120,000. How many MP3 players must Cunningham sell to earn net income of $280,000?

Correct Answer
verified

Cost behavior analysis is a study of how a firm's costs

Correct Answer
verified

A fixed cost is a cost which

Correct Answer
verified

Wendy Industries produces only one product. Monthly fixed expenses are $12,000, monthly unit sales are 4,000, and the unit contribution margin is $10. How much is monthly net income?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

For an activity base to be useful in cost behavior analysis,

Correct Answer
verified

CVP analysis does not consider

Correct Answer
verified

In using the high-low method, the fixed cost

Correct Answer
verified

Boswell company reported the following information for the current year: Sales (50,000 units) $1,000,000, direct materials and direct labor $500,000, other variable costs $50,000, and fixed costs $360,000. What is Boswell's break-even point in units?

Correct Answer
verified

The margin of safety is the difference between contribution margin and fixed costs.

Correct Answer
verified

The difference between the costs at the high and low levels of activity represents the fixed cost element of a mixed cost.

Correct Answer
verified

If variable costs per unit are 70% of sales, fixed costs are $290,000 and target net income is $70,000, required sales are $1,200,000.

Correct Answer
verified

The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

Correct Answer
verified

For analysis purposes, the high-low method usually produces a(n)

Correct Answer
verified

The relevant range of activity refers to the

Correct Answer
verified

Which of the following is not a plausible explanation of why variable costs often behave in a curvilinear fashion?

Correct Answer
verified

Aero, Inc. requires sales of $2,000,000 to cover its fixed costs of $600,000 and to earn net income of $500,000. What percent are variable costs of sales?

Correct Answer
verified

Correct Answer
verified

The equation which reflects a CVP income statement is

Correct Answer
verified

Exam 5: Cost-Volume-Profit

Cunningham, Inc. sells MP3 players for $60 each. Variable costs are $40 per unit, and fixed costs total $120,000. How many MP3 players must Cunningham sell to earn net income of $280,000?

Correct AnswerverifiedShow Answer

Cost behavior analysis is a study of how a firm's costs

Correct AnswerverifiedShow Answer

A fixed cost is a cost which

Correct AnswerverifiedShow Answer

Wendy Industries produces only one product. Monthly fixed expenses are $12,000, monthly unit sales are 4,000, and the unit contribution margin is $10. How much is monthly net income?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

For an activity base to be useful in cost behavior analysis,

Correct AnswerverifiedShow Answer

CVP analysis does not consider

Correct AnswerverifiedShow Answer

In using the high-low method, the fixed cost

Correct AnswerverifiedShow Answer

Boswell company reported the following information for the current year: Sales (50,000 units) $1,000,000, direct materials and direct labor $500,000, other variable costs $50,000, and fixed costs $360,000. What is Boswell's break-even point in units?

Correct AnswerverifiedShow Answer

The margin of safety is the difference between contribution margin and fixed costs.

Correct AnswerverifiedShow Answer

The difference between the costs at the high and low levels of activity represents the fixed cost element of a mixed cost.

Correct AnswerverifiedShow Answer

If variable costs per unit are 70% of sales, fixed costs are $290,000 and target net income is $70,000, required sales are $1,200,000.

Correct AnswerverifiedShow Answer

The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

Correct AnswerverifiedShow Answer

For analysis purposes, the high-low method usually produces a(n)

Correct AnswerverifiedShow Answer

The relevant range of activity refers to the

Correct AnswerverifiedShow Answer

Which of the following is not a plausible explanation of why variable costs often behave in a curvilinear fashion?

Correct AnswerverifiedShow Answer

Aero, Inc. requires sales of $2,000,000 to cover its fixed costs of $600,000 and to earn net income of $500,000. What percent are variable costs of sales?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The equation which reflects a CVP income statement is

Correct AnswerverifiedShow Answer

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