Accy 309 Chapter 9 Test 3

In a multiple-product firm, the product that has the highest contribution margin per unit will A. generate more profit for each $1 of sales than the other products. B. have the highest contribution margin ratio. C. generate the most profit for each unit sold. D. have the lowest variable costs per unit.

generate the most profit for each unit sold

To compute the break-even point in units, which of the following formulas is used? A. FC/CM per unit B. FC/CM ratio C. CM/CM ratio D. (FC+VC)/CM ratio

FC/CMPU

A firm's break-even point in dollars can be found in one calculation using which of the following formulas? A. FC/CM per unit B. VC/CM C. FC/CM ratio D. VC/CM ratio

FC/CMR

Given the following notation, what is the break-even sales level in units? SP = selling price per unit, FC = total fixed cost, VC = variable cost per unit A. SP/(FC/VC) B. FC/(VC/SP) C. VC/(SP - FC) D. FC/(SP - VC)

FC/SP-VC

Cost-volume-profit analysis is a technique available to management to understand better the interrelationships of several factors that affect a firm's profit. As with many such techniques, the accountant oversimplifies the real world by making assumptions. Which of the following is not a major assumption underlying CVP analysis? A. All costs incurred by a firm can be separated into their fixed and variable components. B. The product selling price per unit is constant at all volume levels. C. Operating efficiency and employee productivity are constant at all volume levels. D. For multi-product situations, the sales mix can vary at all volume levels.

For multi-product situations, the sales mix can vary at all volume levels.

____ focuses only on factors that change from one course of action to another. A. Incremental analysis B. Margin of safety C. Operating leverage D. A break-even chart

Incremental analysis

On a break-even chart, the break-even point is located at the point where the total A. revenue line crosses the total fixed cost line. B. revenue line crosses the total contribution margin line. C. fixed cost line intersects the total variable cost line. D. revenue line crosses the total cost line.

Revenue line crosses total cost line

If a firm's net income does not change as its volume changes, the firm('s) A. must be in the service industry. B. must have no fixed costs. C. sales price must equal $0. D. sales price must equal its variable costs.

Sales price must equal its variable costs

Consider the equation X = Sales - [(CM/Sales) ´ (Sales)]. What is X? A. net income B. fixed costs C. contribution margin D. variable costs

Variable costs

A managerial preference for a very low degree of operating leverage might indicate that A. an increase in sales volume is expected. B. a decrease in sales volume is expected. C. the firm is very unprofitable. D. the firm has very high fixed costs.

a decrease in sales volume is expected

Cost-volume-profit relationships that are curvilinear may be analyzed linearly by considering only A. fixed and mixed costs. B. relevant fixed costs. C. relevant variable costs. D. a relevant range of volume.

a relevant range of volume

Which of the following factors is involved in studying cost-volume-profit relationships? A. product mix B. variable costs C. fixed costs D. all of the above

all of the above

If a company's fixed costs were to increase, the effect on a profit-volume graph would be that the A. contribution margin line would shift upward parallel to the present line. B. contribution margin line would shift downward parallel to the present line. C. slope of the contribution margin line would be more pronounced (steeper). D. slope of the contribution margin line would be less pronounced (flatter).

contribution margin line would shift downward parallel to the present line.

In CVP analysis, linear functions are assumed for A. contribution margin per unit. B. fixed cost per unit. C. total costs per unit. D. all of the above.

contribution margin per unit

CVP analysis relies on the assumptions that costs are either strictly fixed or strictly variable. Consistent with these assumptions, as volume decreases total A. fixed costs decrease . B. variable costs remain constant. C. costs decrease. D. costs remain constant.

costs decrease

As projected net income increases the A. degree of operating leverage declines. B. margin of safety stays constant. C. break-even point goes down. D. contribution margin ratio goes up.

degree of operating leverage declines.

The margin of safety is a key concept of CVP analysis. The margin of safety is the A. contribution margin rate. B. difference between budgeted contribution margin and actual contribution margin. C. difference between budgeted contribution margin and break-even contribution margin. D. difference between budgeted sales and break-even sales.

difference between budgeted sales and break-even sales.

CVP analysis requires costs to be categorized as A. either fixed or variable. B. direct or indirect. C. product or period. D. standard or actual.

either fixed or variable

At the break-even point, fixed costs are always A. less than the contribution margin. B. equal to the contribution margin. C. more than the contribution margin. D. more than the variable cost.

equal to the contribution margin

Management is considering replacing an existing sales commission compensation plan with a fixed salary plan. If the change is adopted, the company's A. break-even point must increase. B. margin of safety must decrease. C. operating leverage must increase. D. profit must increase.

operating leverage must increase

In a CVP graph, the area between the total cost line and the total revenue line represents total A. contribution margin. B. variable costs. C. fixed costs. D. profit.

profit

In a CVP graph, the slope of the total revenue line indicates the A. rate at which profit changes as volume changes. B. rate at which the contribution margin changes as volume changes. C. ratio of increase of total fixed costs. D. total costs per unit

rate at which the contribution margin changes as volume changes.

The most useful information derived from a cost-volume-profit chart is the A. amount of sales revenue needed to cover enterprise variable costs. B. amount of sales revenue needed to cover enterprise fixed costs. C. relationship among revenues, variable costs, and fixed costs at various levels of activity. D. volume or output level at which the enterprise breaks even.

relationship among revenues, variable costs, and fixed costs at various levels of activity.

With respect to fixed costs, CVP analysis assumes total fixed costs A. per unit remain constant as volume changes. B. remain constant from one period to the next. C. vary directly with volume. D. remain constant across changes in volume.

remain constant across changes in volume

If a company's variable costs per unit were to increase but its unit selling price stays constant, the effect on a profit-volume graph would be that the A. contribution margin line would shift upward parallel to the present line. B. contribution margin line would shift downward parallel to the present line. C. slope of the contribution margin line would be more pronounced (steeper). D. slope of the contribution margin line would be less pronounced (flatter).

slope of the CM line would be less pronounced-Flatter

After the level of volume exceeds the break-even point A. the contribution margin ratio increases. B. the total contribution margin exceeds the total fixed costs. C. total fixed costs per unit will remain constant. D. the total contribution margin will turn from negative to positive.

the total contribution margin exceeds the total fixed costs.

In a CVP graph, the area between the total cost line and the total fixed cost line yields the A. fixed costs per unit. B. total variable costs. C. profit. D. contribution margin.

total variable costs

Break-even analysis assumes over the relevant range that A. total variable costs are linear. B. fixed costs per unit are constant. C. total variable costs are nonlinear. D. total revenue is nonlinear.

total variable costs are linear

The method of cost accounting that lends itself to break-even analysis is A. variable. B. standard. C. absolute. D. absorption.

variable

39. CVP analysis is based on concepts from A. standard costing. B. variable costing. C. job order costing. D. process costing.

variable costing

The contribution margin ratio always increases when the A. variable costs as a percentage of net sales increase. B. variable costs as a percentage of net sales decrease. C. break-even point increases D. break-even point decreases.

variable costs as a % of net sales decreases

The margin of safety would be negative if a company('s) A. was presently operating at a volume that is below the break-even point. B. present fixed costs were less than its contribution margin. C. variable costs exceeded its fixed costs. D. degree of operating leverage is greater than 100.

was presently operating at a volume that is below the break-event point

Which of the following will decrease the break-even point?

yes no yes