Question

1 A company makes two products: tables and chairs. While performing a multi-product Cost-Volume-Profit Analysis for this company, you noticed that break-even sales INCREASED due to

A a decrease in the total fixed cost.

B a decrease in the variable cost per unit for tables.

C a decrease in the selling price per unit for tables.

D an increase in the selling price per unit for chairs.

2 A company makes two products: tables and chairs. While performing a multi-product Cost-Volume-Profit Analysis for this company, you noticed that break-even sales DECREASED due to

A an increase in the total fixed cost.

B an increase in the variable cost per unit for tables.

C an increase in the variable cost per unit for chairs.

D an increase in the contribution margin ratio.

3 A company makes two products: tables and chairs. While performing a multi-product Cost-Volume-Profit Analysis for this company, you noticed that break-even units for chairs INCREASED due to

A a decrease in the total fixed cost.

B an increase in the variable cost per unit for tables.

C a decrease in the variable cost per unit for chairs.

D None of the above

4 Which of the following is TRUE about allocating overhead using a volume-based overhead rate?

A You need to know the budgeted overhead and budgeted cost driver to compute the predetermined overhead rate.

B You need to know the budgeted overhead and actual cost driver to compute the predetermined overhead rate.

C You need to know the actual overhead and budgeted cost driver to compute the predetermined overhead rate.

D You need to know the actual overhead and actual cost driver to compute the predetermined overhead rate.

5 As volume increases, what happens to your total variable cost?

A it increases within the relevant range

B it decreases within the relevant range

C it stays constant within the relevant range

D it stays constant between relevant ranges

6 When are fixed costs going to be constant?

A In total between relevant ranges

B In total within the relevant range

C Per unit between relevant ranges

D Per unit within the relevant range

7 Which of the following is FALSE about allocating overhead using activity-based costing overhead rates?

A You need to know the budgeted overhead amount for each activity pool to compute the predetermined overhead rate for that activity.

B You need to know the budgeted cost driver amount for each activity to compute the predetermined overhead rate for that activity.

C You need to know the actual overhead amount for each activity pool to allocate overhead to that activity.

D You need to know the actual cost driver amount for each activity to allocate overhead to that activity.

Answer 1

1)a correct option is "C"

Decrease in selling price will decrease contribution margin which in turn increase Break even point [BEP =Fixed cost /contribution margin ]

2)correct option is "D" -an increase in the contribution margin ratio.

increase in contribution margin ratio will decrease break even point.

3)correct option is "D"

none of the option given will increase breakeven point for chairs .

4)correct option is "A"" -You need to know the budgeted overhead and budgeted cost driver to compute the predetermined overhead rate.

Predetermined overhead rate =estimated overhead /estimated cost driver.