Question 1

Biscuit Company sells its product for $50. In addition, it has a variable cost ratio of 55 percent and total fixed costs of $6,875. How many units must be sold in order to obtain a before-tax profit of $12,000?

Accepted Answer

A)   480 units
B)   240 units
C)   600 units
D)   839 unitsE) A) and B)
F) A) and C)

Question 2

The DesMaris Company had the following income statement for the month of November 2014:  If the monthly sales volume increases by 450 units, DesMaris Company's monthly profits will increase by

Accepted Answer

A)   $13,500.00.
B)   $1,282.50.
C)   $9,450.00.
D)   $14,175.00.E) B) and C)
F) A) and D)

Question 3

Assume the following information:  How many units must be sold to generate a before-tax profit of $54,000?

Accepted Answer

A)   4,000 units
B)   2,750 units
C)   3,570 units
D)   3,750 unitsE) A) and B)
F) B) and C)

Question 4

Which of the following assumptions does NOT pertain to cost-profit-volume analysis?

Accepted Answer

A)   Sales price per unit remains constant.
B)   The sales mix is constant.
C)   Inventories in a manufacturing entity may go up or down.
D)   Fixed expenses are constant at all volumes of activities within the relevant range.E) B) and D)
F) B) and C)

Question 5

Which of the following assumptions is NOT necessary for cost-volume-profit analysis?

Accepted Answer

A)   total variable costs are linear
B)   total revenues increase when total costs increase
C)   inventories are constant
D)   the product sales mix is constantE) A) and B)
F) None of the above

Question 6

The break-even point in units can be calculated using the contribution margin approach in the formula

Accepted Answer

A)   Total Costs / Unit Contribution Margin.
B)   Total Costs / Fixed Costs.
C)   Fixed Costs / Selling Price per unit.
D)   Fixed Costs / Unit Contribution Margin.E) A) and B)
F) B) and D)

Question 7

Which of the following equations is TRUE?

Accepted Answer

A)   Contribution margin = Sales revenue ´ Variable cost ratio
B)   Contribution margin ratio = Contribution margin/Variable costs
C)   Contribution margin = Fixed costs
D)   Contribution margin ratio = 1 - Variable cost ratioE) B) and C)
F) A) and D)

Question 8

Target after-tax profit must be converted into __________ profit to calculate units or revenue needed.

Accepted Answer

before-tax...

Question 9

The Solemn Company has an operating leverage of 2. Sales for 2014 are $100,000 with a contribution margin of $50,000. Sales are expected to be $150,000 in 2015. Operating income for 2015 can be expected to increase by what amount over 2014?

Accepted Answer

A)   $50,000
B)   $25,000
C)   200%
D)   40%E) A) and C)
F) B) and C)

Question 10

Hologram Printing Company projected the following information for next year:  How many units must be sold to obtain an after-tax profit of $67,500?

Accepted Answer

A)   3,750 units
B)   5,167 units
C)   5,625 units
D)   7,750 unitsE) C) and D)
F) B) and C)

Question 11

The following diagram is a cost-volume-profit graph for a manufacturing company:  Select the answer that best describes the labeled item on the diagram.

Accepted Answer

A)   Area CDE represents the area of net loss.
B)   Line AC graphs total fixed costs.
C)   Point D represents the point at which the contribution margin per unit increases.
D)   Line AC graphs total costs.E) A) and C)
F) B) and C)

Question 12

Jamie Quinn, a sole proprietor, has the following projected figures for next year:  What is the break-even point in dollars?

Accepted Answer

A)   $426,000
B)   $900,000
C)   $189,000
D)   $2,100,000E) A) and B)
F) A) and C)

Question 13

The following data pertain to the three products produced by Culdesac Corporation:  Fixed costs are $90,000 per month.
Sixty percent of all units sold are Product A, 30 percent are Product B, and 10 percent are Product C. What is the monthly break-even point for total units?

Accepted Answer

A)   60,000 units
B)   36,000 units
C)   45,000 units
D)   180,000 unitsE) C) and D)
F) None of the above

Question 14

On a profit-volume graph, the profit line intersects the horizontal axis at

Accepted Answer

A)   the origin.
B)   the break-even point.
C)   a volume of 1,000 units.
D)   a point where profit is greater than zero.E) A) and B)
F) A) and C)

Question 15

The contribution margin at the break-even point

Accepted Answer

A)   equals total fixed costs.
B)   is zero.
C)   plus total fixed costs equals total revenues.
D)   is greater than variable costs.E) B) and C)
F) A) and D)

Question 16

Cost-volume-profit models assume that

Accepted Answer

A)   the sales mix may vary among multiple products.
B)   unit selling prices are constant.
C)   inventories are dynamic and subject to change.
D)   the total cost function is quadratic.E) A) and B)
F) A) and C)

Question 17

In multiple-product analysis, the break-even units for each product will change as the sales mix changes.

Accepted Answer

A) True 
 B)False

Question 18

Figure 16 - 1 The Cumberland Company provides the following information:
 Refer to Figure 16-1. What is the variable product cost per unit for Cumberland?

Accepted Answer

A)   $2.50
B)   $1.25
C)   $0.40
D)   $0.85E) C) and D)
F) A) and B)

Question 19

Sales mix refers to

Accepted Answer

A)   the different volume of sales achieved during the year.
B)   the contribution margins achieved on the different products during the year.
C)   the relative proportions of different products that constitute total sales.
D)   the mix of variable and fixed costs.E) B) and C)
F) A) and B)

Question 20

When a company sells more units than the break-even point, the __________ are positive.

Accepted Answer

The answer of When a company sells more units than...

Exam 16: Cost-Volume-Profit Analysis

When a company sells more units than the break-even point, the __________ are positive.

Correct AnswerverifiedShow Answer

Which of the following assumptions is NOT necessary for cost-volume-profit analysis?

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Jamie Quinn, a sole proprietor, has the following projected figures for next year: What is the break-even point in dollars?

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Sales mix refers to

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Figure 16 - 1 The Cumberland Company provides the following information: Refer to Figure 16-1. What is the variable product cost per unit for Cumberland?

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In multiple-product analysis, the break-even units for each product will change as the sales mix changes.

Correct AnswerverifiedShow Answer

Target after-tax profit must be converted into __________ profit to calculate units or revenue needed.

Correct Answerverifiedbefore-tax...View AnswerShow Answer

Cost-volume-profit models assume that

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On a profit-volume graph, the profit line intersects the horizontal axis at

Correct AnswerverifiedShow Answer

Biscuit Company sells its product for $50. In addition, it has a variable cost ratio of 55 percent and total fixed costs of $6,875. How many units must be sold in order to obtain a before-tax profit of $12,000?

Correct AnswerverifiedShow Answer

The DesMaris Company had the following income statement for the month of November 2014: If the monthly sales volume increases by 450 units, DesMaris Company's monthly profits will increase by

Correct AnswerverifiedShow Answer

The contribution margin at the break-even point

Correct AnswerverifiedShow Answer

The Solemn Company has an operating leverage of 2. Sales for 2014 are $100,000 with a contribution margin of $50,000. Sales are expected to be $150,000 in 2015. Operating income for 2015 can be expected to increase by what amount over 2014?

Correct AnswerverifiedShow Answer

Which of the following equations is TRUE?

Correct AnswerverifiedShow Answer

The following data pertain to the three products produced by Culdesac Corporation: Fixed costs are $90,000 per month. Sixty percent of all units sold are Product A, 30 percent are Product B, and 10 percent are Product C. What is the monthly break-even point for total units?

Correct AnswerverifiedShow Answer

The break-even point in units can be calculated using the contribution margin approach in the formula

Correct AnswerverifiedShow Answer

The following diagram is a cost-volume-profit graph for a manufacturing company: Select the answer that best describes the labeled item on the diagram.

Correct AnswerverifiedShow Answer

Which of the following assumptions does NOT pertain to cost-profit-volume analysis?

Correct AnswerverifiedShow Answer

Hologram Printing Company projected the following information for next year: How many units must be sold to obtain an after-tax profit of $67,500?

Correct AnswerverifiedShow Answer

Assume the following information: How many units must be sold to generate a before-tax profit of $54,000?

Correct AnswerverifiedShow Answer

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before-tax...
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