5. A company's product sells at $12 per unit and has a $5 per unit variable cost. The company's total fixed costs are $98,000. The break-even point in units is:
A) 5,158.
B) 7,000.
C) 8,167.
D) 14,000.
E) 19,600.
6. 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)Expected sales over break-even sales.
7. Cost-volume-profit analysis is based on necessary assumptions. Which of the following is not one of these assumptions?
A) Costs can be classified as variable or fixed.
B) Relevant range includes all possible levels of activity that a company might experience.
C) Sales price and variable costs per unit of output remain constant as volume changes.
D) A constant sales mix in a multiproduct company.
8. 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.
9. 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) Margin of safety.
10. During March, a firm expects its total sales to be $160,000, its total variable costs to be $95,000, and its total fixed costs to be $25,000. The contribution margin for March is:
A) $65,000.
B) $90,000.
C) $120,000.
D) $40,000.
E) $25,000.
11. A firm expects to sell 25,000 units of its product at $11 per unit and to incur variable costs per unit of $6. Total fixed costs are $70,000. The total contribution margin is:
A) $55,000.
B) $90,000.
C) $125,000.
D) $150,000.
12. Gladstone Co. has expected sales of $326,000 for the upcoming month and its monthly break even sales are $300,000. What is the margin of safety as a percent of sales, rounded to the nearest whole percent?
A) 9%.
B) 108%.
C) 52%.
D) 8%.
13. A company has fixed costs of $320,000 and a contribution margin per unit of $15. If the firm wants to earn a target $40,000 pretax income, how many units must be sold (rounded to the nearest whole unit)?
A) 24,000.
B) 21,333.
C) 18,666.
D) 2,667.
14. Use the following information to determine the break-even point in sales 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.
15. Use the following information to determine the contribution margin ratio:
|
Unit sales |
50,000 Units |
||
|
Unit selling price |
$ |
14.50 |
|
|
Unit variable cost |
$ |
7.50 |
|
|
Fixed costs |
$ |
204,000 |
|
A) 6.9%.
B) 48.3%.
C) 24.5%.
D) 51.7%.
16. The following information is available for a company's utility cost for operating its machines over the last four months.
|
Month |
Machine hours |
Utility cost |
||
|
January |
900 |
$ |
5,450 |
|
|
February |
1,800 |
$ |
6,900 |
|
|
March |
2,400 |
$ |
8,100 |
|
|
April |
600 |
$ |
3,600 |
|
Using the high-low method, the estimated variable cost per unit for utilities is:
A) $3.38.
B) $6.00.
C) $2.50.
D) $4.22.
17. 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) Contribution Margin
D) Break-even point.
18. 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, 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) Not change
19. A firm sells two products, Regular and Ultra. For every unit of Regular the firm sells, two units of Ultra 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 Regular and Ultra?
|
Product |
Unit Sales Price |
Variable Cost Per Unit |
||
|
Regular |
$ |
20 |
$ |
8 |
|
Ultra |
24 |
4 |
||
A) 31,000 Regular units and 31,000 Ultra units.
B) 31,000 Regular units and 62,000 Ultra units.
C) 10,333 Regular units and 20,667 Ultra units.
D) 36,167 Regular units and 72,333 Ultra units.
20. The ratio (proportion) of the sales volumes 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.
In CVP analysis, the unit contribution margin is:
c. Sales price per unit less total VC per unit
Break even point in sales = Fixed Costs/CM Ratio
= 84000/24%
= $350,000
i.e. d
Margin of Safety in Dollars= Sales – break even sales
= 250,000-190,000
= $60,000
i.e. b
c.Variable cost changes with change in volume of activity
5.Break even point = Fixed costs/(Selling price per unit – Variable cost per unit)
= 98000/(12-5)
= 14,000 units
6. D)Expected sales over break-even sales.
7. B) Relevant range includes all possible levels of activity that a company might experience.
Relevant Range is the levels of activity at which fixed cost remains constant.
8. C) Total variable costs decrease as the volume increases.
9. D) Margin of safety.
10.Contribution Margin = Sales – variable costs
= 160,000-95000
= $65000
i.e. A
11.CM = (11-6)*25000
= $125000
i.e. C
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