Managerial Accounting Chapter 6 : Cost-Volume-Profit RelationshipsAssignment reading

The term used for the relative proportion in which a company's products are sold is Blank______. Multiple choice question. break-even operating leverage sales price sales mix

sales mix

The rise-over-run formula for the slope of a straight line is the basis of least squares regression a scattergraph the high-low method

the high low method

Profit = (selling price per unit × quantity sold) - ( __________expense per unit × quantity sold) - ______________expenses.

variable, fixed

True or false: The margin of safety is the excess of break-even sales dollars over budgeted (or actual) sales dollars.

false

the term "cost structure" refers to the relative proportion of____ and _____costs in an organization.

fixed and variable

Profit equals: (P × Q - V × Q) - fixed expenses. (P × Q - V × Q) + fixed expenses. (P × Q + V × Q) - fixed expenses (P - V - fixed expenses) × Q.

(P × Q - V × Q) - fixed expenses.

Which of the following statements is correct? Multiple choice question. The higher the margin of safety, the higher the risk of incurring a loss. The higher the margin of safety, the lower the risk of incurring a loss. The risk of loss is not impacted by the margin of safety.

The higher the margin of safety, the lower the risk of incurring a loss.

Contribution margin: a becomes profit after fixed expenses are covered. b is first used to cover variable expenses. c equals sales minus fixed expenses. d is not affected by changes in activity.

becomes profit after fixed expenses are covered.

Company A produces and sells 10,000 units of its product for $10 per unit. Variable costs are $4 per unit and fixed costs total $30,000. A move to a larger facility would increase rent expense by $8,000, and allow the company to meet its demand for an additional 1,000 units. If the move is made, profits will ______. Multiple choice question. increase by $10,000 increase by $6,000 decrease by $8,000 decrease by $2,000

decrease by 2000

When constructing a CVP graph, the vertical axis represents: variable costs. unit volume. fixed costs. dollars.

dollars

The contribution margin equals sales minus all ______ expenses. fixed period variable product

variable

A company with a high ratio of fixed costs: Multiple select question. -is more likely to experience a loss when sales are down than a company with mostly variable costs. -will not be concerned about fluctuating sales. -is more likely to experience greater profits when sales are up than a company with mostly variable costs. -will be able to avoid some of the fixed costs when sales decrease by lowering production.

-is more likely to experience a loss when sales are down than a company with mostly variable costs. -is more likely to experience greater profits when sales are up than a company with mostly variable costs.

A company has a target profit of $204,000. The company's fixed costs are $305,000. The contribution margin per unit is $40. The BREAK-EVEN point in unit sales is ______. Multiple choice question. 7,625 12,725 5,100

7625

CVP analysis allows companies to easily identify the change in profit due to changes in: management volume costs location selling price

Selling price Volume Costs

The degree of operating leverage = Blank______. Multiple choice question. contribution margin ÷ net operating income contribution margin ÷ total sales total sales ÷ net operating income gross margin ÷ net operating income

contribution margin/ net operating income

When a company produces and sells multiple products _ -each product most likely has different costs -each product most likely has a unique contribution margin -the sales mix has no effect on the company's profit -a change in the sales mix will most likely change the break-even point

each product most likely has different costs each product most likely has a unique contribution margin a change in the sales mix will most likely change the break-even point

Estimating the fixed and variable components of a mixed cost using the__________ approach involves a detailed analysis of what cost behavior should be.

engineering

Account analysis involves a detailed analysis of what cost behavior should be, based on an industrial engineer's evaluation. True false question.TrueFalse

f

It makes sense to perform a high-low or regression analysis if a scattergraph plot reveals__________ ___________ behavior.

linear cost

Terry's Trees has reached its break-even point and has a contribution margin ratio of 70%. For each $1 increase in sales Blank______. Multiple select question. net operating income will increase by $0.70 net operating income will increase by $0.30 total contribution margin will increase by $0.30 total contribution margin will increase by $0.70

net operating income will increase by $0.70 total contribution margin will increase by $0.70

Elle's Elephant Shop sells giant stuffed elephants for $55 each. Each elephant has variable costs of $10 and total fixed costs are $700. If Ellie sells 35 elephants this month, ______. profits = $875 total sales = $1,925 total variable costs = $350 total costs = $1,250

profits = $875 total sales = $1,925 total variable costs = $350

CVP analysis focuses on how profits are affected by ______. total fixed costs mix of products sold break-even point selling price sales volume unit variable cost

total fixed costs mix of products sold selling price sales volume unit variable cost

Company A has a contribution margin ratio of 35%. For each dollar in sales, contribution margin will increase by _____ $0.35 $0.65

.35

A company currently has sales of $700,000 and a contribution margin ratio of 45%. As a result of increasing advertising expense by $8,000, the company expects to increase sales to $735,000. If this is done and these results occur, net operating income will Blank______. Multiple choice question. decrease by $12,250 increase by $7,750 decrease by $8,000 increase by $15,750

7750

A company's selling price is $90 per unit, variable cost per unit is $28 and total fixed expenses are $320,000. The number of unit sales needed to earn a target profit of $200,800 is Blank______. Multiple choice question. 8,400 18,600 5,162 5,787

8400

Vivian's Violins has sales of $326,000, contribution margin of $184,000 and fixed costs total $85,000. Vivian's Violins net operating income is Blank______. 241,000 99,000 57,000

99,000

Total contribution margin equals ______. A variable expenses plus net operating income B total sales minus net operating income C fixed expenses plus net operating income D total sales minus fixed expenses

fixed expenses plus net operating income

A company's current sales are $300,000 and fixed expenses total $85,000. The contribution margin ratio is 30%. The company has decided to expand production which is expected to increase sales by $70,000 and fixed expenses by $15,000. If these results occur, net operating income will Blank______. Multiple choice question. decrease by $15,000 decrease by $27,000 increase by $6,000 increase by $21,000

increase by $6,000

True or false: The sales mix must be taken into consideration when calculating the break-even point for more than one product due to different selling prices, costs, and contribution margins among the products.

true

True or false: Without knowing the future, it is not obvious which cost structure is better: a structure with higher fixed costs and lower variable costs or a structure with lower fixed costs and higher variable costs.

true

When preparing a CVP graph, the horizontal axis represents: total costs. sales dollars. variable costs. unit volume.

unit volume

The contribution margin is equal to sales minus ______. fixed expenses variable expenses net operating income both variable expenses and fixed expenses

variable

When using the high-low method, the slope of the line equals the ________cost per unit of activity.

variable

JVL Enterprises has set a target profit of $126,000. The company sells a single product for $50 per unit. Variable costs are $15 per unit and fixed costs total $98,000. How many units does JVL have to sell to BREAK-EVEN? Multiple choice question. 2,800 1,960 6,400 3,600

2800

Blissful Blankets' target profit is $520,000. Each blanket has a contribution margin of $21. Fixed costs are $320,000. The number of blankets that must be sold to achieve the target profit is Blank______. Multiple choice question. 15,238 9,524 24,762 40,000

40,000

An increase in sales will increase net operating income by a multiple of that increase in sales. The multiple is known as the Blank______. Multiple choice question. -leverage leap -margin of safety -sales commissions percentage -degree of operating leverage

degree of operating leverage

The contribution margin as a percentage of sales is referred to as the contribution margin or CM _________

ratio

Place the following items in the correct order in which they appear on the contribution margin format income statement. net operating income sales contribution margin fixed expenses variable expenses

sales variable contribution margin fixed net operating income/loss

Daisy's Dolls sold 30,000 dolls this year. Each doll sold for $40 and had a variable cost of $19. Fixed expenses were $250,000. Net operating income for the year is Blank______. $380,000 $630,000 $1,520,000 $(249,979)

$380,000

The amount by which sales can drop before losses are incurred is the of

margin of safety

The calculation of contribution margin (CM) ratio is Blank______. Multiple choice question. variable expenses ÷ contribution margin contribution margin ÷ sales contribution margin ÷ total expenses net operating income ÷ total contribution margin

contribution margin ÷ sales

Cost structure refers to the relative portion of product and period costs in an organization.

false

Cost behavior is considered linear whenever Blank______. Multiple choice question. -the difference between cost and activity is zero -a straight line approximates the relationship between cost and activity -a straight line approximates the difference between cost and activity -the relationship between cost and activity cannot be represented by a line

a straight line approximates the relationship between cost and activity