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Accounting
Q:
Q:
Baines Brothers manufactures and sells two products, A and Z in the ratio of 4:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the number of units of Product Z Baines must sell to break even.
A. 5,080.
B. 6,200.
C. 2,540.
D. 3,100.
E. 2,790.
Q:
Baines Brothers manufactures and sells two products, A and Z in the ratio of 4:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the number of units of Product A Baines must sell to break even.
A. 5,080.
B. 6,200.
C. 5,580.
D. 3,100.
E. 9,300.
Q:
Baines Brothers manufactures and sells two products, A and Z in the ratio of 4:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the break-even point in composite units.
A. 1,748.
B. 1,468.
C. 1,550.
D. 1,395.
E. 1,270.
Q:
Baines Brothers manufactures and sells two products, A and Z in the ratio of 4:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the contribution margin per composite unit.
A. $270.
B. $240.
C. $300.
D. $330.
E. $285.
Q:
Winthrop Manufacturing produces a product that sells for $50.00. Fixed costs are $260,000 and variable costs are $24.00 per unit. Winthrop can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. Compute break-even point in dollars with the purchase of the new machine.
A. $500,000.
B. $440,678.
C. $521,923.
D. $480,000.
E. $460,000.
Q:
Winthrop Manufacturing produces a product that sells for $50.00. Fixed costs are $260,000 and variable costs are $24.00 per unit. Winthrop can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. What effect would the purchase of the new machine have on Winthrops break-even point in units?
A. 800 unit increase.
B. 800 unit decrease.
C. 5,714 unit increase.
D. 4,444 unit decrease.
E. No effect on the break-even point in units.
Q:
Winthrop Manufacturing produces a product that sells for $50.00. Fixed costs are $260,000 and variable costs are $24.00 per unit. Winthrop can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. Compute break-even point in units if the new machine is purchased.
A. 10,438 units.
B. 8,814 units.
C. 10,000 units.
D. 9,200 units.
E. 9,869 units.
Q:
Winthrop Manufacturing produces a product that sells for $50.00. Fixed costs are $260,000 and variable costs are $24.00 per unit. Winthrop can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. Compute the contribution margin per unit if the machine is purchased.
A. $22.50.
B. $26.00.
C. $29.50.
D. $28.50.
E. $27.50.
Q:
Wayward Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's break-even point in sales dollars.
A. $13,250,000.
B. $13,000,000.
C. $12,750,000.
D. $12,900,050.
E. $12,750,625.
Q:
Camden Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are: M
N
O Unit sales price......................................
$7
$4
$6 Unit variable costs......................................
3
2
3 Total fixed costs are $340,000. The break-even point in sales dollars for the current sales mix is (round to the nearest thousand):
A. $ 20,000.
B. $289,000.
C. $400,000.
D. $629,000.
E. $740,000.
Q:
Baker Company's sales mix is 3 units of A, 2 units of B, and 1 unit of C. Selling prices for each product are $20, $30, and $40, respectively. Variable costs per unit are $12, $18, and $24, respectively. Fixed costs are $320,000. What is the break-even point in composite units?
A. 1,111.
B. 1,600.
C. 2,666.
D. 4,000.
E. 5,000.
Q:
The ratio of the sales volume for the various products sold by a company is called the:
A. Current product mix.
B. Relevant mix.
C. Sales mix.
D. Inventory cost ratio.
E. Production ratio.
Q:
A firm sells two products, A and B. For every unit of A the firm sells, two units of B are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow. What is the firm's break-even point in units of A and B?
Unit Variables
Sales Costs
Product Price Per Unit
A.... $20 $8
B.... 24 4
A. 31,000 of A and 31,000 of B.
B. 31,000 of A and 62,000 of B.
C. 10,333 of A and 20,667 of B.
D. 36,167 of A and 72,333 of B.
E. 62,000 of A and 31,000 of B.
Q:
A firm sells two products, A and B. For every unit of A the firm sells, two units of B are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow. The contribution margin per composite unit is:
Unit Variables
Sales Costs
Product Price Per Unit
A.... $20 $8
B.... 24 4
A. $12.
B. $20.
C. $32.
D. $44.
E. $52.
Q:
A CVP graph presents data on:
A. Profit and loss on a per unit basis.
B. Profit, loss, and break-even on a total dollar basis.
C. Profit, loss, and break-even on a per unit basis.
D. Only profit and loss on a total basis.
E. Profit and loss on a budget and actual basis.
Q:
When graphing cost-volume-profit data on a CVP chart:
A. Units are plotted on the horizontal axis; costs on the vertical axis.
B. Units are plotted on the vertical axis; costs on the horizontal axis.
C. Both units and costs are plotted on the horizontal axis.
D. Both units and cost are plotted on the vertical axis.
E. Data points always represent expected future points.
Q:
A cost-volume-profit chart is also known as a(n)
A. Operating profit chart.
B. Operating leverage chart.
C. Break-even chart.
D. Margin of safety chart.
E. Sales chart.
Q:
In Davis Corporation's most recent fiscal year, the company reported pretax earnings of $215,000.
Fixed costs totaled $325,800, the unit selling price of the firm's only product was $60, and the variable costs per unit were 40% of the selling price. Based on this information, the firm's break-even point in units was:
A. 13,575 units.
B. 15,023 units.
C. 13,750 units.
D. 9,050 units.
E. 8,750 units.
Q:
Assume that sales are predicted to be $3,750, the expected contribution margin is $1,500, and a net loss of $250 is anticipated. The break-even point in sales dollars is:
A. $1,750.
B. $2,500.
C. $4,000.
D. $4,250.
E. $4,375.
Q:
Mueller Corp. manufactures compact discs that sell for $5.00. Fixed costs are $28,000 and variable costs are $3.60 per unit. Mueller can buy a newer production machine that will increase fixed costs by $8,000 per year, but will decrease variable costs by $0.40 per unit. What effect would the purchase of the new machine have on Mueller's break-even point in units?
A. 4,444 unit increase.
B. 9,850 unit decrease.
C. 5,714 unit increase.
D. 4,444 unit decrease.
E. No effect on the break-even point in units.
Q:
Yamaguchi Company's break even point in units is 1,000. The sales price per unit is $10 and variable cost per unit is $7. If the company sells 2,500 units, what will net income be?
A. $ 4,500
B. $ 7,500
C. $17,000
D. $35,000
E. Fixed costs must be known in order to predict net income.
Q:
Ginger Company's product has a contribution margin per unit of $11.25 and a contribution margin ratio of 22.5%. What is the selling price of the product?
A. $ 5.
B. $20.
C. $30.
D. $40.
E. $50.
Q:
Lee Company manufactures and sells widgets for $2.00 per unit. Its variable cost per unit is $1.70. Lee's total fixed costs are $10,500. How many widgets must Lee Company sell to break even?
A. 5,250.
B. 6,176.
C. 35,000.
D. 52,500.
E. 61,760.
Q:
A company has fixed costs of $90,000. Its contribution margin ratio is 30% and the product sells for $75 per unit. What is the company's break-even point in dollar sales?
A. $ 60,000.
B. $128,571.
C. $180,000.
D. $210,000.
E. $300,000.
Q:
A company manufactures and sells a product for $120 per unit. The company's fixed costs are $68,760, and its variable costs are $90 per unit. The company's break-even point in dollars is:
A. $91,680.
B. $68,760.
C. $2,292.
D. $275,040.
E. $206,280.
Q:
A company manufactures and sells a product for $120 per unit. The company's fixed costs are $68,760, and its variable costs are $90 per unit. The company's break-even point in units is:
A. 2,292.
B. 573.
C. 764.
D. 327.
E. 840.
Q:
The contribution margin per unit expressed as a percentage of the product's selling price is the:
A. Volume variance.
B. Margin of safety.
C. Contribution margin ratio.
D. Break-even point.
E. Rate of return on sales.
Q:
The difference between sales price per unit and variable cost per unit is the:
A. Gross profit from sales.
B. Gross margin per unit.
C. Fixed cost per unit.
D. Margin of safety per unit.
E. Contribution margin per unit.
Q:
A product sells for $30 per unit and has variable costs of $18 per unit. The fixed costs are $720,000. If the variable costs per unit were to decrease to $15 per unit and fixed costs increase to $900,000, and the selling price does not change, break-even point in units would:
A. Increase by 20,000.
B. Equal 6,000.
C. Increase by 6,000.
D. Decrease by 20,000.
E. Not change.
Q:
A product sells for $200 per unit, and its variable costs per unit are $130. The fixed costs are $420,000. What is the break-even point in dollar sales?
A. $2,100.
B. $6,000.
C. $420,000.
D. $646,154.
E. $1,200,000.
Q:
The sales level at which a company neither earns a profit nor incurs a loss is the:
A. Relevant range.
B. Margin of safety.
C. Step-wise variable level.
D. Break-even point.
E. Contribution margin.
Q:
A method that estimates cost behavior by connecting the costs linked to the highest and lowest volume is called the:
A. Scatter method.
B. High-low method.
C. Least-squares method.
D. Break-even method.
E. Step-wise method.
Q:
A line on a scatter diagram that is intended to reflect the past relation between cost and volume is the:
A. Margin of safety line.
B. Break-even line.
C. Contribution margin line.
D. Estimated line of cost behavior.
E. Standard cost line.
Q:
A graph used to analyze past cost behaviors by displaying costs and volume levels for each period as points on the diagram is called a:
A. Least-squares diagram.
B. Step-wise diagram.
C. Scatter diagram.
D. Break-even diagram.
E. Composite diagram.
Q:
The least-squares regression method is:
A. A graphical method to identify cost behavior.
B. An algebraic method to identify cost behavior.
C. A statistical method to identify cost behavior.
D. The only identify cost estimation method allowed by GAAP.
E. A cost estimation method that only uses the two extreme values.
Q:
A statistical method for deriving an estimated line of cost behavior is the:
A. Scatter diagram method.
B. High-low method.
C. Composite method.
D. CVP charting method.
E. Least-squares regression method.
Q:
Which of the following is the correct interpretation of a degree of operating leverage of 5?
A. Operating leverage of 5 means that sales can decrease by 5% before the firm's current level of sales will hit the break-even point.
B. Operating leverage of 5 means that if sales increase by 5% the firm will hit its break-even point.
C. Operating leverage of 5 means that if sales increase by 5%, there will be a 25% increase in the firm's pretax profit.
D. Operating leverage of 5 measures the degree of debt employed by the firm's debt structure.
E. Operating leverage of 5 means that the company would need to increase sales by 5 times in order to hit its break-even point.
Q:
Total contribution margin in dollars divided by pretax income is the:
A. Degree of operating leverage.
B. Contribution margin ratio.
C. Margin of safety.
D. Sales mix.
E. Break-even point in units.
Q:
The contribution margin ratio:
A. Is the percent of each sales dollar that remains after deducting total unit variable cost.
B. Is the percent of each sales dollar that remains after deducting total unit fixed cost.
C. Is the percent of each sales dollar that remains to cover fixed costs and contribute to the managers' incomes.
D. Cannot be used in conjunction with other analytical tools.
E. Is the same as the unit contribution margin.
Q:
In cost-volume-profit analysis, the unit contribution margin is:
A. Sales price per unit less cost of goods sold per unit.
B. Sales price per unit less unit fixed cost per unit .
C. Sales price per unit less total variable cost per unit .
D. Sales price per unit less unit total cost per unit.
E. The same as the contribution margin ratio.
Q:
The budgeted income statement presented below is for Griffith Corporation for the coming fiscal year. If Griffith Corporation is able to achieve the budgeted level of sales, its margin of safety in dollars would be:
Sales (50,000 units) $1,000,000
Costs:
Direct materials $270,000
Direct labor 240,000
Fixed factory overhead 100,000
Variable factory overhead 150,000
Fixed marketing costs 110,000
Variable marketing costs 50,000 920,000
Pretax income $ 80,000
A. $172,420.
B. $150,000.
C. $262,500.
D. $275,862.
E. $310,115.
Q:
The budgeted income statement presented below is for Griffith Corporation for the coming fiscal year. If Griffith Corporation's income tax rate is 40%, compute the number of units that must be sold in order to achieve a target pretax income of $130,000.
Sales (50,000 units) $1,000,000
Costs:
Direct materials $270,000
Direct labor 240,000
Fixed factory overhead 100,000
Variable factory overhead 150,000
Fixed marketing costs 110,000
Variable marketing costs 50,000 920,000
Pretax income $ 80,000
A. 53,165.
B. 81,250.
C. 36,207.
D. 50,000.
E. 58,621.
Q:
Use the following information to determine the margin of safety in dollars:
Unit sales 50,000 Units
Dollar sales............................................................. .............................................. $500,000
Fixed costs ............................................................. .............................................. $204,000
Variable costs............................................................. .............................................. $187,500
A. $ 88,500.
B. $108,500.
C. $173,600.
D. $326,400.
E. $500,000.
Q:
Ivan Company has a goal of earning $70,000 after-tax income. Ivan would need to pay $20,000 of income taxes at the target level of income. The contribution margin ratio is 30%. What amount of dollar sales must be achieved to reach the goal if fixed costs are $36,000?
A. $ 23,333.
B. $ 36,000.
C. $300,000.
D. $353,333.
E. $420,000.
Q:
Conan Company has total fixed costs of $112,000. Its product sells for $35 per unit and variable costs amount to $25 per unit. Next year Conan Company wishes to earn a pretax income that equals 10% of fixed costs. How many units must be sold to achieve this target income level?
A. 1,120.
B. 8,214.
C. 11,200.
D. 12,320.
E. 14,080.
Q:
A product sells for $200 per unit, and its variable costs per unit are $130. The fixed costs are $420,000. If the firm wants to earn $35,000 pretax income, how many units must be sold?
A. 6,500.
B. 6,000.
C. 500.
D. 5,000.
E. 5,500.
Q:
Hartman Co. has fixed costs of $36,000 and a contribution margin ratio of 24%. If expected sales are $200,000, what is the margin of safety as a percent of sales?
A. 6%.
B. 25%.
C. 33%.
D. 50%.
E. 75%.
Q:
During its most recent fiscal year, Simon Enterprises sold 200,000 electric screwdrivers at a price of $15 each. Fixed costs amounted to $400,000 and pretax income was $600,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?
A. $2,400,000.
B. $1,600,000.
C. $3,000,000.
D. $2,000,000.
E. $1,000,000.
Q:
The excess of expected sales over the sales level at the break-even point is known as the:
A. Sales turnover.
B. Profit margin.
C. Contribution margin.
D. Relevant range.
E. Margin of safety.
Q:
If a firm's forecasted sales are $250,000 and its break-even sales are $190,000, the margin of safety in dollars is:
A. $ 60,000.
B. $250,000.
C. $190,000.
D. $440,000.
E. $ 24,000.
Q:
The margin of safety is the excess of:
A. Break-even sales over expected sales.
B. Expected sales over variable costs.
C. Expected sales over fixed costs.
D. Fixed costs over expected sales.
E. Expected sales over break-even sales.
Q:
A target income refers to:
A. Income at the break-even point.
B. Income from the most recent period.
C. Income planned for a future period.
D. Income only in a multiproduct environment.
E. Income at the minimum contribution margin.
Q:
Cost-volume-profit analysis is based on three basic assumptions. Which of the following is not one of these assumptions?
A. Total fixed costs remain constant over changes in volume.
B. Curvilinear costs change proportionately with changes in volume throughout the relevant range.
C. Variable costs per unit of output remain constant as volume changes.
D. Sales price per unit remains constant as volume changes.
E. All of these are basic assumptions.
Q:
A term describing a firm's normal range of operating activities is:
A. Relevant range of operations.
B. Break-even level of operations.
C. Margin of safety of operations.
D. Relevant operating analysis.
E. High-low level of operations.
Q:
A company's normal operating range, which excludes extremely high and low volumes that are not likely to occur, is called the:
A. Margin of safety.
B. Contribution range.
C. Break-even point.
D. Relevant range.
E. High-low point.
Q:
Select cost information for Winfrey Enterprises is as follows:
1,000 units of output 5,000 units of output
Total Cost/Unit Total Cost/Unit
Direct materials $5,000 $5.00 $25,000 $5.00
Utilities expense $1,000 $1.00 $ 3,750 $0.75
Rent expense $4,000 $4.00 $ 4,000 $0.80 Based on this information:
A. Both direct materials and rent expense are variable costs.
B. Utilities expense is a mixed cost and rent expense is a variable cost.
C. Utilities expense is a mixed cost and rent expense is a fixed cost.
D. Direct materials is a fixed cost and utilities expense is a mixed cost.
E. Both direct materials and utilities expense are mixed costs.
Q:
An important tool in predicting the volume of activity, the costs to be incurred, the sales to be earned, and the profit to be received is:
A. Target income analysis.
B. Cost-volume-profit analysis.
C. Least-squares regression of costs.
D. Variance analysis.
E. Process costing.
Q:
Which one of the following statements is not true?
A. Total fixed costs remain the same regardless of volume within the relevant range.
B. Total variable costs change with volume.
C. Total variable costs decrease as the volume increases.
D. Fixed costs per unit increase as the volume decreases.
E. Variable costs per unit remain the same regardless of the volume.
Q:
Curvilinear costs always increase:
A. With decreases in volume.
B. In constant proportion to changes in production levels.
C. When management performs break-even analysis.
D. When volume increases, but not at a constant rate.
E. On a per unit basis when volume of activity goes down.
Q:
A cost that can be separated into fixed and variable components is called a:
A. Mixed cost.
B. Step-variable cost.
C. Composite cost.
D. Curvilinear cost.
E. Differential cost.
Q:
A cost that remains constant over a limited range of volume, but increases by a lump sum when volume increases beyond a maximum amount, is a(n):
A. Step-wise cost.
B. Fixed cost.
C. Curvilinear cost.
D. Incremental cost.
E. Opportunity cost.
Q:
A cost that changes with volume, but not at a constant rate, is called a:
A. Variable cost.
B. Curvilinear cost.
C. Step-wise variable cost.
D. Fixed cost.
E. Differential cost.
Q:
A cost that changes in proportion to changes in volume of activity is a(n):
A. Differential cost.
B. Fixed cost.
C. Incremental cost.
D. Variable cost.
E. Product cost.
Q:
A cost that remains the same in total even when volume of activity varies is a:
A. Fixed cost.
B. Curvilinear cost.
C. Variable cost.
D. Step-wise variable cost.
E. Standard cost.
Q:
An important assumption in multiproduct analysis is that the sales mix is known and remains constant.
Q:
The proportion of sales volumes for various products is known as the composite mix.
Q:
Cost-volume-profit analysis cannot be used when a firm produces and sells more than one product.
Q:
On a typical cost-volume-profit graph, unit sales are shown on the horizontal axis and both dollars of sales and dollars of costs are represented on the vertical axis.
Q:
A cost-volume-profit (CVP) chart is a graph that plots volume on the horizontal axis and costs and sales on the vertical axis.
Q:
A graphic depiction of the break-even point is known as a cost-volume-profit (CVP) chart.
Q:
The contribution margin ratio is the percent by which the margin of safety exceeds the break-even point.
Q:
To calculate the break-even point in units, one must know unit fixed cost, unit variable cost, and sales price.
Q:
The contribution margin per unit is the price at which a unit must be sold in order for the company to break even.
Q:
The break-even point is the sales level at which a company neither earns a profit nor incurs a loss.
Q:
A break-even point can be calculated either in units or in dollars.
Q:
The high-low method is used to derive an estimated line of cost behavior by graphically connecting the two cost amounts identified with the highest and lowest volume levels.
Q:
To determine the slope of the variable cost from a scatter diagram, divide the change in volume by the change in cost.
Q:
Scatter diagrams plot volume on the vertical axis and cost on the horizontal axis.
Q:
There are only two methods to derive an estimated line of cost behavior; the high-low method and the scatter diagram.