ACCT 308 -- Chapter 3
Multiple cost drivers ________. A) have only one revenue driver B) can utilize the simple CVP formula C) have no unique breakeven point D) are the result of multiple products
C) have no unique breakeven point
) Frazer Corp sells several products. Information of average revenue and costs is as follows: Selling price per unit $28.50 Variable costs per unit: Direct material $5.50 Direct manufacturing labor $1.15 Manufacturing overhead $0.85 Selling costs $2.50 Annual fixed costs $125,000 If the company decides to lower its selling price by 12.25%, the operating income is reduced by ________. A) $52,500 B) $50,500 C) $55,500 D) $29,500
A) $52,500
The following information is for High Corp: Selling price $60 per unit Variable costs $40 per unit Total fixed costs $125,000 If targeted operating income is $50,000, then targeted sales revenue is ________. A) $525,052 B) $533,333 C) $498,133 D) $517,072
A) $525,052
Ruben intends to sell his customers a special round-trip airline ticket package. He is able to purchase the package from the airline carrier for $150 each. The round-trip tickets will be sold for $200 each and the airline intends to reimburse Ruben for any unsold ticket packages. Fixed costs include $5,000 in advertising costs. For every $25,000 of ticket packages sold, operating income will increase by ________. A) $6,250 B) $12,500 C) $18,750 D) $15,000
A) $6,250
Zealz Manufacturing produces a single product that sells for $80. Variable costs per unit equal $30. The company expects total fixed costs to be $70,000 for the next month at the projected sales level of 2,000 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately. What is the current breakeven point in terms of number of units? A) 1,400 units B) 2,250 units C) 3,333 units D) 1725 units
A) 1,400 units
Sky High sells helicopters. During the current year, 100 helicopters were sold resulting in $820,000 of sales revenue, $250,000 of variable costs, and $342,000 of fixed costs. The number of helicopters that must be sold to achieve $300,000 of operating income is ________. A) 113 units B) 102 units C) 96 units D) 100 units
A) 113 units
) Stephanie's Bridal Shoppe sells wedding dresses. The average selling price of each dress is $1,000, variable costs are $400, and fixed costs are $90,000. How many dresses must the Bridal Shoppe sell to yield after-tax net income of $18,000, assuming the tax rate is 40%? A) 200 dresses B) 170 dresses C) 150 dresses D) 145 dresses
A) 200 dresses
Assume the following cost information for Fernandez Company: Selling price $120 per unit Variable costs $80 per unit Total fixed costs $80,000 Tax rate 40% What is the number of units that must be sold to earn an after-tax net income of $42,000? A) 3,750 units B) 4,625 units C) 3,050 units D) 1,875 units
A) 3,750 units
Dr. Charles Hunter, MD, performs a certain outpatient procedure for $1,000. His fixed costs are $20,000, while his variable costs are $500 per procedure. Dr. Hunter currently plans to perform 200 procedures this month.What is the breakeven point for the month assuming that Dr. Hunter plans to perform the procedure 200 times? A) 40 times B) 30 times C) 20 times D) 10 times
A) 40 times
) Bovous Stores, Inc., sells several products. Information of average revenue and costs is as follows: Selling price per unit $20.00 Variable costs per unit: Direct material $4.00 Direct manufacturing labor $1.60 Manufacturing overhead $0.40 Selling costs $2.00 Annual fixed costs $96,000 What is the contribution margin percentage? A) 60% B) 66% C) 33% D) 55%
A) 60%
Which of the following is an assumption of CVP analysis? A) Total costs can be divided into a fixed component and a component that is variable with respect to the level of output. B) When graphed, total costs curve upward. C) The unit-selling price is variable as it is subject to demand and supply. D) Total costs can be divided into inventoriable and period costs with respect to the level of output
A) Total costs can be divided into a fixed component and a component that is variable with respect to the level of output.
If the sales mix shifts to one unit of Product X and two units of Product Y, then the weighted-average contribution margin will ________. A) increase per unit B) stay the same C) decrease per unit D) decrease by $0.50 per unit
A) increase per unit
Which of the following will increase a company's breakeven point? A) increasing variable cost per unit B) increasing contribution margin per unit C) reducing its total fixed costs D) increasing the selling price per unit
A) increasing variable cost per unit
To apply CVP analysis in the hotel industry, which of the following is the most important measure of output? A) number of room-nights occupied B) number of visitors C) number of dishes on the menu D) number of employees
A) number of room-nights occupied
In the merchandising sector ________. A) only variable costs are subtracted to determine gross margin B) fixed overhead costs are subtracted to determine gross margin C) fixed overhead costs are subtracted to determine contribution margin D) all operating costs are subtracted to determine contribution margin
A) only variable costs are subtracted to determine gross margin
At breakeven point, ________. A) operating income is equal to zero B) contribution margin minus fixed costs is equal to profits earned C) revenues equal fixed costs minus variable costs D) breakeven revenues equal fixed costs divided by the variable cost per unit
A) operating income is equal to zero
Globus Autos sells a single product. 8,000 units were sold resulting in $80,000 of sales revenue, $20,000 of variable costs, and $10,000 of fixed costs. If a change is made in one parameter of CVP analysis, it is an example of ________. A) sensitivity analysis B) incremental budgeting C) variance analysis D) multiple cost drivers
A) sensitivity analysis
If breakeven point is 1,000 units, each unit sells for $30, and fixed costs are $10,000, then on a graph the ________. A) total revenue line and the total cost line will intersect at $30,000 of revenue B) total cost line will be zero at zero units sold C) revenue line will start at $10,000 D) total revenue line and the total cost line will intersect at $40,000 of revenue
A) total revenue line and the total cost line will intersect at $30,000 of revenue
Pearl Lights sells only pearl necklaces. 8,000 units were sold resulting in $240,000 of sales revenue, $60,000 of variable costs, and $40,000 of fixed costs. The breakeven point in total sales dollars is ________. A) $40,000 B) $53,334 C) $100,000 D) $58,334
B) $53,334
Helping Hands is a nonprofit organization that supplies electric fans during summer for individuals in need. Fixed costs are $225,000. The fans cost $25.00 each. The organization has a budgeted appropriation of $675,000. How many people can receive a fan during summer? A) 15,000 people B) 18,000 people C) 22,000 people D) 16,000 people
B) 18,000 people
) Winnz sells 8,000 units resulting in $100,000 of sales revenue, $35,000 of variable costs, and $45,000 of fixed costs. The contribution margin percentage is ________. A) 66.67% B) 65.0% C) 37.5% D) 75.0%
B) 65.0%
The following information is for High Corp: Selling price $60 per unit Variable costs $40 per unit Total fixed costs $125,000 The number of units that High Corp must sell to reach targeted operating income of $25,000 is ________. A) 6,000 units B) 7,500 units C) 3,334 units D) 4,334 units
B) 7,500 units
________ is the process of varying key estimates to identify those estimates that are the most critical to a decision. A) The graph method B) A sensitivity analysis C) The degree of operating leverage D) Sales mix
B) A sensitivity analysis
) Which of the following is true of cost-volume-profit analysis? A) The theory assumes that all costs are variable. B) The theory assumes that units manufactured equal units sold. C) The theory states that total variable costs remain the same over a relevant range. D) The theory states that total costs remain the same over the relevant range.
B) The theory assumes that units manufactured equal units sold.
) The margin of safety is the difference between ________. A) budgeted expenses and breakeven expenses B) budgeted revenues and breakeven revenues C) actual operating income and budgeted operating income D) actual sales margin and budgeted sales margin
B) budgeted revenues and breakeven revenues
) The planned operating income is calculated by ________. A) dividing net income by tax rate B) dividing net income by 1 − tax rate C) multiplying net income by tax rate D) multiplying net income by 1 − tax rate
B) dividing net income by 1 − tax rate
The breakeven point revenues is calculated by dividing ________. A) fixed costs by total revenues B) fixed costs by contribution margin percentage C) total revenues by fixed costs D) contribution margin percentage by fixed costs
B) fixed costs by contribution margin percentage
In the manufacturing sector, ________. A) only variable costs are subtracted to determine gross margin B) fixed overhead costs are subtracted to determine gross margin C) fixed overhead costs are subtracted to determine contribution margin D) all operating costs are subtracted to determine contribution margin
B) fixed overhead costs are subtracted to
Managers use cost-volume-profit (CVP) analysis to ________. A) forecast the cost of capital for a given period of time B) to study the behavior of and relationship among the elements such as total revenues, total costs, and income C) estimate the risks associated with a given job D) analyse a firm's profitability and help to decide wealth distribution among its stakeholders
B) to study the behavior of and relationship among the elements such as total revenues, total costs, and income
Globus Autos sells a single product. 8,000 units were sold resulting in $80,000 of sales revenue, $20,000 of variable costs, and $10,000 of fixed costs. If variable costs decrease by $1 per unit, the new margin of safety is ________. A) $65,000 B) $73,567 C) $68,235 D) $66,765
C) $68,235
Ruben intends to sell his customers a special round-trip airline ticket package. He is able to purchase the package from the airline carrier for $150 each. The round-trip tickets will be sold for $200 each and the airline intends to reimburse Ruben for any unsold ticket packages. Fixed costs include $5,000 in advertising costs. How many ticket packages will Ruben need to sell to break even? A) 34 packages B) 50 packages C) 100 packages D) 150 packages
C) 100 packages
) A nonprofit organization aids the unemployed by supplementing their incomes by $5,000 annually, while they seek new employment skills. The organization has fixed costs of $200,000 and the budgeted appropriation for the year totals $700,000. How many individuals can receive financial assistance this year? A) 115 people B) 110 people C) 100 people D) 95 people
C) 100 people
How many units would have to be sold to yield a target operating income of $23,000, assuming variable costs are $25 per unit, total fixed costs are $2,000, and the unit selling price is $30? A) 4,800 units B) 4,400 units C) 5,000 units D) 5,200 units
C) 5,000 units
) Sky High sells helicopters. During the current year, 100 helicopters were sold resulting in $820,000 of sales revenue, $250,000 of variable costs, and $342,000 of fixed costs. Breakeven point in units is ________. A) 80 units B) 64 units C) 60 units D) 78 units
C) 60 units
Star Jewelry sells 500 units resulting in $75,000 of sales revenue, $28,000 of variable costs, and $18,000 of fixed costs. The number of units that must be sold to achieve $40,000 of operating income is ________. A) 677 units B) 717 units C) 617 units D) 650 units
C) 617 units
Which of the following statements about net income (NI) is true? A) NI = operating income plus nonoperating revenue. B) NI = operating income plus operating costs. C) NI = operating income less income taxes. D) NI = operating income less cost of goods sold.
C) NI = operating income less income taxes.
Which of the following is true of net income? A) Net income is operating income divided by income tax rate. B) Net income is operating income plus operating revenues minus operating costs minus income taxes. C) Net income is operating income plus nonoperating revenues minus nonoperating costs minus income taxes. D) Net income is operating income minus nonoperating revenues minus nonoperating costs minus sales taxes.
C) Net income is operating income plus nonoperating revenues minus nonoperating costs minus income taxes.
Northern Star sells several products. Information of average revenue and costs is as follows: Selling price per unit $20.00 Variable costs per unit: Direct material $4.00 Direct manufacturing labor $1.60 Manufacturing overhead $0.40 Selling costs $2.00 Annual fixed costs $96,000 The company sells 12,000 units at the end of the year. If direct labor and direct material costs increase by $1 each, contribution margin ________. A) increases by $20,000 B) increases by $14,000 C) decreases by $24,000 D) decreases by $14,000
C) decreases by $24,000
) If the breakeven point is 1,000 units and each unit sells for $50, then ________. A) selling 1,040 units will result in a loss B) selling $60,000 will result in a loss C) selling $50,000 will result in zero profit D) selling $45,000 will result in profit
C) selling $50,000 will result in zero profit
In CVP analysis, focusing on target net income rather than operating income ________. A) will increase the breakeven point B) will decrease the breakeven point C) will not change the breakeven point D) will help managers construct a better capital policy
C) will not change the breakeven point
Shine Jewelry sells 400 units resulting in $7,000 of sales revenue, $3,000 of variable costs, and $1,500 of fixed costs. Calculate the variable cost per unit. A) $11.00 B) $7.00 C) $8.00 D) $7.50
D) $7.50
) Lights Manufacturing produces a single product that sells for $125. Variable costs per unit equal $50. The company expects total fixed costs to be $75,000 for the next month at the projected sales level of 1,000 units. What is the current breakeven point in terms of number of units? A) 800 units B) 1033 units C) 667 units D) 1,000 units
D) 1,000 units
Ruben intends to sell his customers a special round-trip airline ticket package. He is able to purchase the package from the airline carrier for $150 each. The round-trip tickets will be sold for $200 each and the airline intends to reimburse Ruben for any unsold ticket packages. Fixed costs include $5,000 in advertising costs. How many ticket packages will Ruben need to sell in order to achieve $60,000 of operating income? A) 367 packages B) 434 packages C) 1,100 packages D) 1,300 packages
D) 1,300 packages
Star Jewelry sells 500 units resulting in $75,000 of sales revenue, $28,000 of variable costs, and $18,000 of fixed costs. Breakeven point in units is ________. A) 196 units B) 203 units C) 185 units D) 192 units
D) 192 units
Sales of Blistre Autos are 350,000, variable cost is 200,000, fixed cost is 75,000, tax rate is 20%. Calculate the operating leverage of the company. A) 1.00 time B) 1.50 times C) 2.50 times D) 2.00 times
D) 2.00 times
What is the breakeven point in units, assuming a product's selling price is $100, fixed costs are $16,000, unit variable costs are $20, and operating income is $5,200? A) 100 units B) 300 units C) 400 units D) 200 units
D) 200 units
The contribution margin income statement ________. A) reports gross margin B) is allowed for external reporting to shareholders C) categorizes costs as either direct or indirect D) can be used to predict future profits at different levels of activity
D) can be used to predict future profits at different levels of activity
If a company would like to increase its degree of operating leverage it should ________. A) increase its sales relative to its fixed costs B) increase its sales relative to its variable costs C) increase its variable costs relative to its fixed costs D) increase its fixed costs relative to its variable costs
D) increase its fixed costs relative to its variable costs
In a company with low operating leverage, ________. A) fixed costs are more than the contribution margin B) contribution margin and operating income are inversely related C) there is a higher possibility of net loss than a higher-leveraged firm D) less risk is assumed than in a highly leveraged firm
D) less risk is assumed than in a highly leveraged firm
In multiproduct situations, when sales mix shifts toward the product with the lowest contribution margin then ________. A) total revenues will increase B) interest cost will decrease C) total contribution margin will increase D) operating income will decrease
D) operating income will decrease
) Assume only the specified parameters change in a cost-volume-profit analysis. If the contribution margin increases by $6 per unit, then ________. A) fixed costs increases by $6 per unit B) operating profits decreases by $6 per unit C) fixed costs decreases by $6 per unit D) operating profits increases by $6 per unit
D) operating profits increases by $6 per unit
If a company has a degree of operating leverage of 3.0 and sales increase by 25%, then ________. A) total fixed costs will increase by 75% B) total costs will increase by 75% C) profit will increase by 30% D) profit will increase by 75%
D) profit will increase by 75%
All else being equal, a reduction in selling price will ________. A) increase contribution margin B) reduce fixed costs C) increase variable costs D) reduce operating income
D) reduce operating income
The breakeven point is the activity level where ________. A) revenues equal fixed costs B) revenues equal variable costs C) contribution margin equals total costs D) revenues equal the sum of variable and fixed costs
D) revenues equal the sum of variable and fixed costs
If unit outputs exceed the breakeven point ________. A) there will be an increase in fixed costs B) total sales revenue will exceed fixed costs C) total sales revenue will exceed variable costs D) there will be a profit
D) there will be a profit
The contribution income statement highlights ________. A) gross margin B) the segregation of costs into period costs and inventoriable costs C) different product lines D) variable and fixed costs
D) variable and fixed costs
) Assume only the specified parameters change in a CVP analysis. The contribution margin percentage increases when ________. A) total fixed costs increase B) total fixed costs decrease C) variable costs per unit increase D) variable costs per unit decrease
D) variable costs per unit decrease
Sales total $400,000 when variable costs total $300,000 and fixed costs total $50,000. The breakeven point in sales dollars is ________. A) $200,000 B) $120,000 C) $170,000 D) $210,000
A) $200,000
Stephanie's Bridal Shoppe sells wedding dresses. The average selling price of each dress is $1,000, variable costs are $400, and fixed costs are $90,000. 30) What is the Bridal Shoppe's operating income when 200 dresses are sold? A) $30,000 B) $80,000 C) $200,000 D) $100,000
A) $30,000
Ruben intends to sell his customers a special round-trip airline ticket package. He is able to purchase the package from the airline carrier for $150 each. The round-trip tickets will be sold for $200 each and the airline intends to reimburse Ruben for any unsold ticket packages. Fixed costs include $5,000 in advertising costs. What is the contribution margin per ticket package? A) $50 B) $100 C) $150 D) $200
A) $50
Which of the following is the mathematical expression of contribution margin ratio? A) Contribution margin ratio = Contribution margin percentage × Revenues (in dollars) B) Contribution margin ratio = Contribution margin percentage × Fixed costs (in dollars) C) Contribution margin ratio = Contribution margin percentage × Variable costs (in dollars) D) Contribution margin ratio = Contribution margin percentage × Operating leverage
A) Contribution margin ratio = Contribution margin percentage × Revenues (in dollars)
Craylon Manufacturing produces a single product that sells for $100. Variable costs per unit equal $25. The company expects total fixed costs to be $60,000 for the next month at the projected sales level of 1,000 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately. What is the effect on operating income with the increase of advertising expenses? A) Operating income will decrease by $10,000. B) Operating income will increase by $11,000. C) Operating income will decrease by $18,000. D) Operating income will increase by $17,000.
A) Operating income will decrease by $10,000.
Fixed costs ________. A) are considered variable costs over the long run B) provide less operating leverage C) reduce the risk of loss D) are graphed as a steeply sloped line
A) are considered variable costs over the long run
Tony Manufacturing produces a single product that sells for $80. Variable costs per unit equal $30. The company expects total fixed costs to be $78,000 for the next month at the projected sales level of 2,500 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately.Suppose that management believes that a 10% reduction in the selling price will result in a 10% increase in sales. If this proposed reduction in selling price is implemented ________. A) operating income will decrease by $9,500 B) operating income will increase by $10,000 C) operating income will decrease by $6,000 D) operating income will increase by $11,300
A) operating income will decrease by $9,500
All else being equal, an increase in advertising expenditures will ________. A) reduce operating income B) reduce contribution margin C) increase variable costs D) increase selling price
A) reduce operating income
Northern Star sells several products. Information of average revenue and costs is as follows: Selling price per unit $20.00 Variable costs per unit: Direct material $4.00 Direct manufacturing labor $1.60 Manufacturing overhead $0.40 Selling costs $2.00 Annual fixed costs $96,000 The company sells 12,000 units at the end of the year. 20) The contribution margin per unit is ________. A) $11.00 B) $12.00 C) $4.00 D) $14.00
B) $12.00
When fixed costs are $50,000 and variable costs are 60% of the selling price, then breakeven sales are ________. A) $115,000 B) $125,000 C) $175,000 D) $275,000
B) $125,000
Fixed costs equal $15,000, unit contribution margin equals $25, and the number of units sold equal 1,150. Operating income is ________. A) $28,750 B) $13,750 C) $15,000 D) $14,750
B) $13,750
Alex Furniture sells a table for $850. His fixed costs are $25,000, while his variable costs are $500 per table. He currently plans to sell 175 tables this month What is the budgeted revenue for the month assuming that Alex sells 175 tables? A) $145,750 B) $148,750 C) $150,000 D) $142,250
B) $148,750
Bell Company sells several products. Information of average revenue and costs is as follows: Selling price per unit $28.50 Variable costs per unit: Direct material $5.25 Direct manufacturing labor $1.15 Manufacturing overhead $0.25 Selling costs $1.85 Annual fixed costs $110,000 The company sells 10,000 units. The contribution margin per unit is ________. A) $15 B) $20 C) $22 D) $125
B) $20
Tally Corp. sells softwares during the recruiting seasons. During the current year, 11,000 softwares were sold resulting in $440,000 of sales revenue, $110,000 of variable costs, and $48,000 of fixed costs. 15) Contribution margin per software is ________. A) $10.00 B) $30.00 C) $40.00 D) $36.00
B) $30.00
) If Beta Corp's net income is $210,000 and the tax rate is 30%, then the company's planned operating income is ________. A) $325,000 B) $300,000 C) $273,000 D) $357,000
B) $300,000
If the contribution margin ratio is 0.40, targeted operating income is $50,000, and fixed costs are $75,000, then sales volume in dollars is ________. A) $250,000 B) $312,500 C) $275,000 D) $350,000
B) $312,500
Pacific Company sells only one product for $11 per unit, variable production costs are $3 per unit, and selling and administrative costs are $1.50 per unit. Fixed costs for 10,000 units are $5,000. The operating income is ________. A) $6.50 per unit B) $6.00 per unit C) $5.50 per unit D) $5.00 per unit
B) $6.00 per unit
Tony Manufacturing produces a single product that sells for $80. Variable costs per unit equal $30. The company expects total fixed costs to be $78,000 for the next month at the projected sales level of 2,500 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately.Suppose management believes that a $75,000 increase in the monthly advertising expense will result in a considerable increase in sales. Sales must increase by ________ to justify this additional expenditure? A) 1,698 units B) 1,500 units C) 1,550 units D) 1,339 units
B) 1,500 units
Craylon Manufacturing produces a single product that sells for $100. Variable costs per unit equal $25. The company expects total fixed costs to be $60,000 for the next month at the projected sales level of 1,000 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately. Suppose that management believes that a $10,000 increase in the monthly advertising expense will result in a considerable increase in sales. Sales must increase by ________ to justify this additional expenditure. A) 123 units B) 134 units C) 243 units D) 143 units
B) 134 units
Stephanie's Bridal Shoppe sells wedding dresses. The average selling price of each dress is $1,000, variable costs are $400, and fixed costs are $90,000. How many dresses are sold when operating income is zero? A) 225 dresses B) 150 dresses C) 100 dresses D) 90 dresses
B) 150 dresses
Which of the following is true of CVP analysis? A) Costs may be separated into separate inventoriable and period components with respect to the level of output. B) Total revenues and total costs are linear in relation to output units. C) Unit selling price, unit variable costs, and unit fixed costs are known and remain constant. D) Proportion of different products will vary according to demand and supply when multiple products are sold.
B) Total revenues and total costs are linear in relation to output units.
A revenue driver is defined as ________. A) any factor that affects costs and revenues B) any factor that affects revenues C) the only factor that can influence a change in selling price D) the only factor that can influence a change in demand
B) any factor that affects revenues
One of the first steps to take when using CVP analysis to help make decisions is ________. A) calculating the break-even point B) identifying the variable and fixed costs C) calculation of the degree of operating leverage for the company D) estimating the volume of sales to make a good profit
B) identifying the variable and fixed costs
Gross margin is ________. A) sales revenue less variable costs B) sales revenue less cost of goods sold C) contribution margin less fixed costs D) contribution margin less variable costs
B) sales revenue less cost of goods sold
) The breakeven point decreases if ________. A) the variable cost per unit increases B) the total fixed costs decrease C) the contribution margin per unit decreases D) the selling price per unit decreases
B) the total fixed costs decrease
When a greater proportion of costs are fixed costs, then ________. A) a small increase in sales results in a small decrease in operating income B) when demand is low the risk of loss is high C) a decrease in sales reduces the total fixed cost per unit D) a decrease in sales reduces the cost per unit
B) when demand is low the risk of loss is high
Shine Jewelry sells 400 units resulting in $7,000 of sales revenue, $3,000 of variable costs, and $1,500 of fixed costs. 13) Contribution margin per unit is ________. A) $4.00 B) $11.00 C) $10.00 D) $8.00
C) $10.00
Stones Manufacturing, sells a marble slab for $1,000. Fixed costs are $30,000, while the variable costs are $400 per slab. The company currently plans to sell 200 slabs this month. What is the margin of safety assuming 75 slabs are budgeted? A) $40,000 B) $38,000 C) $25,000 D) $33,000
C) $25,000
At the breakeven point of 2,000 units, variable costs total $4,000 and fixed costs total $6,000. The 2,001st unit sold will contribute ________ to profits. A) $1 B) $2 C) $3 D) $5
C) $3
Alex Furniture sells a table for $850. His fixed costs are $25,000, while his variable costs are $500 per table. He currently plans to sell 175 tables this month What is the budgeted operating income for the month assuming that Alex sells 175 tables? A) $45,250 B) $37,000 C) $36,250 D) $36,750
C) $36,250
Assume the following cost information for Fernandez Company: Selling price $120 per unit Variable costs $80 per unit Total fixed costs $80,000 Tax rate 40% What minimum volume of sales dollars is required to earn an after-tax net income of $30,000? A) $465,000 B) $330,000 C) $390,000 D) $165,000
C) $390,000
Blistre Company operates on a contribution margin of 20% and currently has fixed costs of $500,000. Next year, sales are projected to be $3,000,000. An advertising campaign is being evaluated that costs an additional $80,000. How much would sales have to increase to justify the additional expenditure? A) $320,000 B) $380,000 C) $400,000 D) $600,000
C) $400,000
Bovous Stores, Inc., sells several products. Information of average revenue and costs is as follows: Selling price per unit $20.00 Variable costs per unit: Direct material $4.00 Direct manufacturing labor $1.60 Manufacturing overhead $0.40 Selling costs $2.00 Annual fixed costs $96,000 The revenues that the company must earn annually to make a profit of $144,000 are ________. A) $378,000 B) $425,000 C) $400,000 D) $450,000
C) $400,000
If the contribution margin ratio is 0.40, targeted operating income is $80,000, and targeted sales volume in dollars is $500,000, then the degree of operating leverage is ________. A) 1.50 times B) 2.00 times C) 2.50 times D) 3.00 times
C) 2.50 times
Which of the following is true about the assumptions underlying basic CVP analysis? A) Selling price varies with demand and supply of the product. B) Only selling price and variable cost per unit are known and constant. C) Only selling price, variable cost per unit, and total fixed costs are known and constant. D) Selling price, variable cost per unit, fixed cost per unit, and total fixed costs are known and constant.
C) Only selling price, variable cost per unit, and total fixed costs are known and constant.
As per CVP, operating income calculations use ________. A) net income and dividends B) income tax expense and net income C) contribution margins and fixed costs D) nonoperating revenues and nonoperating expenses
C) contribution margins and fixed costs
Which of the following forms a part of decision making in CVP analysis? A) selection of inventory method for financial reporting purposes B) decision to form a capital policy C) decision to advertise D) decision to improve the efficiency of the work force
C) decision to advertise
Breakeven point in units is ________. A) total costs divided by profit margin per unit B) contribution margin per unit divided by total cost per unit C) fixed costs divided by contribution margin per unit D) the sum of fixed and variable costs divided by contribution margin per unit
C) fixed costs divided by contribution margin per unit
The Marietta Company has fixed costs of $60,000 and variable costs are 75% of the selling price. To realize profits of $10,000 from sales of 50,000 units, the selling price per unit ________. A) must be $1.20 B) must be $6.00 C) must be $5.60 D) must be $4.23
C) must be $5.60
Which of the following is an output measure for a hospital? A) number of doctors needed to cater to patients B) number of patients admitted every day in a hospital C) number of days spent by a patient in a hospital D) charges applicable on the number of days spent by a patient in a hospital
C) number of days spent by a patient in a hospital
Contribution margin equals ________. A) revenues minus period costs B) revenues minus product costs C) revenues minus variable costs D) revenues minus fixed costs
C) revenues minus variable costs
If the contribution margin ratio is 0.25, targeted operating income is $50,000, and targeted sales volume in dollars is $250,000, then total fixed costs are ________. A) $11,500 B) $15,000 C) $20,000 D) $12,500
D) $12,500
) Frazer Corp sells several products. Information of average revenue and costs is as follows: Selling price per unit $28.50 Variable costs per unit: Direct material $5.50 Direct manufacturing labor $1.15 Manufacturing overhead $0.85 Selling costs $2.50 Annual fixed costs $125,000 What is the operating income earned if the company sells 15,000 units? A) $162,750 B) $150,000 C) $148,500 D) $152,500
D) $152,500
Winnz sells 8,000 units resulting in $100,000 of sales revenue, $35,000 of variable costs, and $45,000 of fixed costs. To achieve $150,000 in operating income, sales must total ________. A) $440,000 B) $160,000 C) $130,000 D) $300,000
D) $300,000
) If selling price per unit is $40, variable costs per unit are $25, total fixed costs are $20,000, the tax rate is 30%, and the company sells 5,000 units, net income is ________. A) $32,158 B) $26,548 C) $28,500 D) $38,500
D) $38,500
Tally Corp. sells softwares during the recruiting seasons. During the current year, 11,000 softwares were sold resulting in $440,000 of sales revenue, $110,000 of variable costs, and $48,000 of fixed costs. ) If sales increase by $60,000, operating income will increase by ________. A) $10,000 B) $40,000 C) $45,000 D) $60,000
D) $60,
Bell Company sells several products. Information of average revenue and costs is as follows: Selling price per unit $28.50 Variable costs per unit: Direct material $5.25 Direct manufacturing labor $1.15 Manufacturing overhead $0.25 Selling costs $1.85 Annual fixed costs $110,000 The company sells 10,000 units. What is the proportion of variable costs to total costs? A) 45.00% B) 48.56% C) 53.56% D) 43.56%
D) 43.56%
) The selling price per unit less the variable cost per unit is the ________. A) fixed cost per unit B) gross margin C) margin of safety D) contribution margin per unit
D) contribution margin per unit
To apply CVP analysis in not-for profit organization ________. A) managers need to focus on the customer base rather than the cost drivers B) managers need to focus on measuring their output, which is the same as tangible units sold by manufacturing and merchandising companies C) managers need to focus on measuring their input, which is different from the tangible units consumed by manufacturing and merchandising companies D) managers need to focus on measuring their output, which is different from the tangible units sold by manufacturing and merchandising companies
D) managers need to focus on measuring their output, which is different from the tangible units sold by manufacturing and merchandising companies
