ABC Company has the following data for mixed costs:
Total units 2,000 units
produced
Total costs $30,000
The variable portion of the mixed cost has been calculated at $8.00 per unit.
What is the total fixed cost?
a) $16,000
b) $14,000
c) $20,000
d) $30,00
Answer:
b) $14,000
Total fixed cost = total mixed cost - (variable cost per unit * number of units)
$30,000 - ($8.00 * 2,000) =
$14,000
Assume fixed costs total $280,000 per month, the variable cost per unit is $140, and each unit sells for $200.
What is the contribution margin per unit?
a) $100 per unit
b) $140 per unit
c) $90 per unit
d) $60 per unit
Answer:
d) $60 per unit
Sales price per unit - Variable cost per unit
$200 - $140 = $60 per unit
Assume fixed costs total $180,000 per month, the variable cost per unit is $70, and each unit sells for $160.
What is the contribution margin ratio (rounded)?
a) 56%
b) 65%
c) 25%
d) 44%
Answer:
a) 56%
Contribution margin per unit / Sales price per unit
($160 - $70) / $160 = 56%
Jones Company has fixed costs totaling $280,000 per month, the variable cost per unit is $90, and the selling price per unit is $160.
How many units must Jones Company sell to earn $140,000 in operating income?
a) 6,000 units
b) 7,000 units
c) 4,000 units
Answer:
a) 6,000 units
(Fixed costs + Desired operating income) / Contribution margin per unit
($280,000 + $140,000) / ($160 - $90) = 6,000 units
Jones Company has fixed costs totaling $280,000 per month, the variable cost per unit is $90, and the selling price per unit is $160.
What is the breakeven point in units?
a) 5,000 units
b) 4,000 units
c) 6,000 units
d) 3,000 units
Answer:
b) 4,000 units
Fixed costs / Contribution margin per unit
$280,000 / ($160 - $90) = 4,000 units
On a CVP graph, where the total cost line intersects the total revenue line is the _________.
a) variable cost amount
b) fixed cost amount
c) breakeven point
d) expected sales
Answer:
c) breakeven point
If a company decreases the fixed costs for Product A, the contribution margin per unit will __________.
a) decrease
b) remain the same
c) more information is needed
d) increase
Answer:
b) remain the same
Contribution margin is calculated by
Sales - Variable Costs
Assume that sales are $100,000, variable costs are $40,000, and fixed costs are $10,000.
What is the degree of operating leverage?
a) 1.20
b) 2.00
c) 1.50
d) 0.02
Answer:
a) 1.20
Degree of operating leverage =
Contribution margin / Operating income
= $100,000 in sales - $40,000 in variable cots / Contribution of $60,000 - $10,000 fixed costs
= $60,000 / $50,000
= 1.20
Bold Company has fixed costs totaling $380,000 per month, the variable cost per unit is $100, and the selling price per unit is $260.
How many units must Bold Company sell to earn $240,000 in operating income?
a) 2,375 units
b) 3,875 units
c) 7,800 units
Answer:
b) 3,875 units
(Fixed costs + Desired operating income) / Contribution margin per unit
($380,000 + $240,000) / ($260 - $100) = 3,875 units
If a company decreases its sales price per unit, the new breakeven point will _________.
a) more information is needed
b) increase
c) remain the same
d) decrease
Answer:
b) increase
ABC Company sells high quality furniture. The factory supervisor earns $5,000 per month plus $10 for each piece of furniture that is produced defect free.
What is the amount paid to the factory supervisor if 200 pieces of furniture are produced this month
Answer:
b) $7,000
$5,000 + (200 pieces * $10 per piece) = $7,000
Jones Company has fixed costs totaling $48,000 per month, the variable cost per unit is $60, and selling price per unit is $100. Current sales are 1,500 units.
What is the margin of safety in units?
a) 1,500 units
b) 2,700 units
c) 300 units
d) 1,200 unit
Answer:
c) 300 units
Fixed costs / Contribution margin per unit
$48,000 / ($100 - $60) = 1,200 units
1,500 - 1,200 units for breakeven = 300 units Margin of Safety
Wages of production workers would be considered a ________.
a) mixed cost
b) variable cost
c) high-low cost
d) fixed cost
Answer:
b) variable cost
The ________ is the amount that contributes to covering the fixed costs and then to providing operating income.
a) net sales
b) variable cost
c) gross profit
d) contribution margin
Answer:
d) contribution margin
Which of the follow statements is true regarding the relevant range?
a) It is the volume where total fixed costs and variable cost per unit remain constant
b) All of the statements are true
c) Total fixed costs can differ from one relevant range to anothe
Answer:
b) All of the statements are true
CVP analysis assumes which of the following for the relevant range?
a) Fixed costs may change if needed
b) All listed are assumptions
c) Managers can classify each cost as variable, fixed, or mixed
d) The price per unit may change as volume changes
Answer:
c) Managers can classify each cost as variable, fixed, or mixed
Triple Company has the following data for mixed costs:
High month:
Total Units 3,000 units
produced
Total Costs $20,000
Low month:
Total units 600 units
produced
Total Costs $8,000
What is the variable cost per unit?
a) $10.00
b) $2.00
c) $15.00
d) $5.00
Answer:
d) $5.00
High-low Method
Variable cost per unit =
(highest - lowest cost) / (highest - lowest volume)
($20,000 - $8,000) / (3,000 - 600)
= $5.00
Jones Company has fixed costs totaling $48,000 per month, the variable cost per unit is $60, and the selling price per unit is $100.
How much revenue must Jones Company generate to earn $96,000 in target profit?
a) $360,000
b) $240,000
c) $80,000
d) $120,
Answer:
a) $360,000
Required sales in units =
Fixed costs + Target profit /
Contribution margin per unit
= $48,000 + $96,000 / $100 - $60
=$3,600
Then take 3,600 units * $100 per unit = $360,000 needed in sales revenue
Assume that sales are $200,000, variable costs are $50,000, and fixed costs are $20,000.
What is the degree of operating leverage?
a) 0.02
b) 1.15
c) 2.00
d) 1.20
Answer:
b) 1.15
Degree of operating leverage =
Contribution margin / Operating income
= $200,000 in sales - $50,000 in variable costs /
contribution of $150,000 - $20,000 fixed costs
= $150,000 / $130,000
=1.15
ABC Company has the following data for mixed costs:
High month:
Total units 2,000 units
produced
Total Costs $10,000
Low month:
Total units 500 units
produced
Total Costs $7,000
What is the variable cost per unit?
a) $10.00
b) $15.00
c) $5.00
d) $2.00
Answer:
d) $2.00
Variable cost per unit:
(Highest cost - Lowest cost) / (Highest volume - Lowest volume).
($10,000 - $7,000) / (2,000 - 500)
=$2.00 per unit
Bold Company has fixed costs totaling $380,000 per month, the variable cost per unit is $100, and the selling price per unit is $260.
What is the breakeven point in units?
a) 3,100 units
b) 5,275 units
c) 6,500 units
d) 2,375 units
Answer:
d) 2,375 units
Fixed costs / Contribution margin per unit
= $380,000 / ($260 - $100) = $2,375
Which statement is true of a CVP graph?
a) Total fixed costs always starts at zero on both the Y and X axis
b) All of the statements are true
c) Total variable costs starts at zero on both the Y and X axis when production is more than zero units
d) Total
Answer:
d) Total sales revenue starts at zero on both the Y and X axis
Assume fixed costs total $180,000 per month, the variable cost per unit is $70, and each unit sells for $160.
What is the contribution margin per unit?
a) $70 per unit
b) $100 per unit
c) $90 per unit
d) $160 per unit
Answer:
c) $90 per unit
Sales price per unit - Variable cost per unit = Contribution margin per unit
$160 - $70 = $90 per unit
Joshua Company has fixed costs totaling $169,00 per month, the variable cost per unit is $70, and selling price per unit is $200. Current sales are 2,500 units.
What is the margin of safety in units?
a) 1,500 units
b) 1,200 units
c) 2,500 units
d) 1,300 u
Answer:
b) 1,200
Calculate breakeven in units by Fixed costs / Contribution margin per unit
$169,000 / ($200 - $70) = 1,300 units
Then take current sales of 2,500 - 1,300 units for breakeven = 1,200 units margin of safety
_________ is a "what if" technique that estimates profit or loss results if sales price, costs, volume, or underlying assumptions change.
a) Breakeven analysis
b) Contribution margin analysis
c) Sensitivity analysis
d) Target profit analysis
Answer:
c) Sensitivity analysis
Monthly rent on a factory building is a _________.
a) variable cost
b) mixed cost
c) fixed cost
d) high-low cost
Answer:
c) fixed cost
Bold Company has fixed costs totaling $380,000 per month, the variable cost per unit is $100, and the selling price per unit is $260.
How many units must Bold Company sell to earn $240,000 in operating income?
a) 3,875 units
b) 2,375 units
c) 5,500 units
Answer:
a) 3,875
(Fixed costs + Desired operating income) / Contribution margin per unit.
(380,000 + 240,000) / ($260 - $100) =
3,875 units
Joshua Company has fixed costs totaling $169,000 per month, the variable cost per unit is $70, and selling price per unit is $200. Current sales are 2,500 units.
What is the margin of safety in units?
a) 1,200 units
b) 1,300 units
c) 1,500 units
d) 2,500
Answer:
a) 1,200 units
Calculate breakeven in units by...
Fixed costs / Contribution margin per unit
$169,000 / ($200 - $70) = 1,300 units
2,500 - 1,300 = 1,200 units Margin of Safety
Assume that sales are $200,000, variable costs are $50,000, and fixed costs are $20,000.
What is the degree of operating leverage?
a) 1.15
b) 0.02
c) 1.20
d) 2.00
Answer:
a) 1.15
Degree of operating leverage =
Contribution margin / Operating income
$200,000 in sales - $50,000 in variable costs / Contribution of $150,000 - $20,000 fixed costs
=$150,000 / $130,000
=1.15
ABC Company has the following data for mixed costs:
Total units 2,000 units
produced
Total costs $30,000
The variable portion of the mixed cost has been calculated at $8.00 per unit.
What is the total fixed cost?
a) $16,000
b) $14,000
c) $20,000
d) $30,00
Answer:
b) $14,000
Total fixed cost = total mixed cost - (variable cost per unit * number of units)
$30,000 - ($8.00 * 2,000) =
$14,000
Assume fixed costs total $280,000 per month, the variable cost per unit is $140, and each unit sells for $200.
What is the contribution margin per unit?
a) $100 per unit
b) $140 per unit
c) $90 per unit
d) $60 per unit
Answer:
d) $60 per unit
Sales price per unit - Variable cost per unit
$200 - $140 = $60 per unit
Assume fixed costs total $180,000 per month, the variable cost per unit is $70, and each unit sells for $160.
What is the contribution margin ratio (rounded)?
a) 56%
b) 65%
c) 25%
d) 44%
Answer:
a) 56%
Contribution margin per unit / Sales price per unit
($160 - $70) / $160 = 56%
Jones Company has fixed costs totaling $280,000 per month, the variable cost per unit is $90, and the selling price per unit is $160.
How many units must Jones Company sell to earn $140,000 in operating income?
a) 6,000 units
b) 7,000 units
c) 4,000 units
Answer:
a) 6,000 units
(Fixed costs + Desired operating income) / Contribution margin per unit
($280,000 + $140,000) / ($160 - $90) = 6,000 units
Jones Company has fixed costs totaling $280,000 per month, the variable cost per unit is $90, and the selling price per unit is $160.
What is the breakeven point in units?
a) 5,000 units
b) 4,000 units
c) 6,000 units
d) 3,000 units
Answer:
b) 4,000 units
Fixed costs / Contribution margin per unit
$280,000 / ($160 - $90) = 4,000 units
On a CVP graph, where the total cost line intersects the total revenue line is the _________.
a) variable cost amount
b) fixed cost amount
c) breakeven point
d) expected sales
Answer:
c) breakeven point
If a company decreases the fixed costs for Product A, the contribution margin per unit will __________.
a) decrease
b) remain the same
c) more information is needed
d) increase
Answer:
b) remain the same
Contribution margin is calculated by
Sales - Variable Costs
Assume that sales are $100,000, variable costs are $40,000, and fixed costs are $10,000.
What is the degree of operating leverage?
a) 1.20
b) 2.00
c) 1.50
d) 0.02
Answer:
a) 1.20
Degree of operating leverage =
Contribution margin / Operating income
= $100,000 in sales - $40,000 in variable cots / Contribution of $60,000 - $10,000 fixed costs
= $60,000 / $50,000
= 1.20
Bold Company has fixed costs totaling $380,000 per month, the variable cost per unit is $100, and the selling price per unit is $260.
How many units must Bold Company sell to earn $240,000 in operating income?
a) 2,375 units
b) 3,875 units
c) 7,800 units
Answer:
b) 3,875 units
(Fixed costs + Desired operating income) / Contribution margin per unit
($380,000 + $240,000) / ($260 - $100) = 3,875 units
If a company decreases its sales price per unit, the new breakeven point will _________.
a) more information is needed
b) increase
c) remain the same
d) decrease
Answer:
b) increase
ABC Company sells high quality furniture. The factory supervisor earns $5,000 per month plus $10 for each piece of furniture that is produced defect free.
What is the amount paid to the factory supervisor if 200 pieces of furniture are produced this month
Answer:
b) $7,000
$5,000 + (200 pieces * $10 per piece) = $7,000
Jones Company has fixed costs totaling $48,000 per month, the variable cost per unit is $60, and selling price per unit is $100. Current sales are 1,500 units.
What is the margin of safety in units?
a) 1,500 units
b) 2,700 units
c) 300 units
d) 1,200 unit
Answer:
c) 300 units
Fixed costs / Contribution margin per unit
$48,000 / ($100 - $60) = 1,200 units
1,500 - 1,200 units for breakeven = 300 units Margin of Safety
Wages of production workers would be considered a ________.
a) mixed cost
b) variable cost
c) high-low cost
d) fixed cost
Answer:
b) variable cost
The ________ is the amount that contributes to covering the fixed costs and then to providing operating income.
a) net sales
b) variable cost
c) gross profit
d) contribution margin
Answer:
d) contribution margin
Which of the follow statements is true regarding the relevant range?
a) It is the volume where total fixed costs and variable cost per unit remain constant
b) All of the statements are true
c) Total fixed costs can differ from one relevant range to anothe
Answer:
b) All of the statements are true
CVP analysis assumes which of the following for the relevant range?
a) Fixed costs may change if needed
b) All listed are assumptions
c) Managers can classify each cost as variable, fixed, or mixed
d) The price per unit may change as volume changes
Answer:
c) Managers can classify each cost as variable, fixed, or mixed
Triple Company has the following data for mixed costs:
High month:
Total Units 3,000 units
produced
Total Costs $20,000
Low month:
Total units 600 units
produced
Total Costs $8,000
What is the variable cost per unit?
a) $10.00
b) $2.00
c) $15.00
d) $5.00
Answer:
d) $5.00
High-low Method
Variable cost per unit =
(highest - lowest cost) / (highest - lowest volume)
($20,000 - $8,000) / (3,000 - 600)
= $5.00
Jones Company has fixed costs totaling $48,000 per month, the variable cost per unit is $60, and the selling price per unit is $100.
How much revenue must Jones Company generate to earn $96,000 in target profit?
a) $360,000
b) $240,000
c) $80,000
d) $120,
Answer:
a) $360,000
Required sales in units =
Fixed costs + Target profit /
Contribution margin per unit
= $48,000 + $96,000 / $100 - $60
=$3,600
Then take 3,600 units * $100 per unit = $360,000 needed in sales revenue
Assume that sales are $200,000, variable costs are $50,000, and fixed costs are $20,000.
What is the degree of operating leverage?
a) 0.02
b) 1.15
c) 2.00
d) 1.20
Answer:
b) 1.15
Degree of operating leverage =
Contribution margin / Operating income
= $200,000 in sales - $50,000 in variable costs /
contribution of $150,000 - $20,000 fixed costs
= $150,000 / $130,000
=1.15
ABC Company has the following data for mixed costs:
High month:
Total units 2,000 units
produced
Total Costs $10,000
Low month:
Total units 500 units
produced
Total Costs $7,000
What is the variable cost per unit?
a) $10.00
b) $15.00
c) $5.00
d) $2.00
Answer:
d) $2.00
Variable cost per unit:
(Highest cost - Lowest cost) / (Highest volume - Lowest volume).
($10,000 - $7,000) / (2,000 - 500)
=$2.00 per unit
Bold Company has fixed costs totaling $380,000 per month, the variable cost per unit is $100, and the selling price per unit is $260.
What is the breakeven point in units?
a) 3,100 units
b) 5,275 units
c) 6,500 units
d) 2,375 units
Answer:
d) 2,375 units
Fixed costs / Contribution margin per unit
= $380,000 / ($260 - $100) = $2,375
Which statement is true of a CVP graph?
a) Total fixed costs always starts at zero on both the Y and X axis
b) All of the statements are true
c) Total variable costs starts at zero on both the Y and X axis when production is more than zero units
d) Total
Answer:
d) Total sales revenue starts at zero on both the Y and X axis
Assume fixed costs total $180,000 per month, the variable cost per unit is $70, and each unit sells for $160.
What is the contribution margin per unit?
a) $70 per unit
b) $100 per unit
c) $90 per unit
d) $160 per unit
Answer:
c) $90 per unit
Sales price per unit - Variable cost per unit = Contribution margin per unit
$160 - $70 = $90 per unit
Joshua Company has fixed costs totaling $169,00 per month, the variable cost per unit is $70, and selling price per unit is $200. Current sales are 2,500 units.
What is the margin of safety in units?
a) 1,500 units
b) 1,200 units
c) 2,500 units
d) 1,300 u
Answer:
b) 1,200
Calculate breakeven in units by Fixed costs / Contribution margin per unit
$169,000 / ($200 - $70) = 1,300 units
Then take current sales of 2,500 - 1,300 units for breakeven = 1,200 units margin of safety
_________ is a "what if" technique that estimates profit or loss results if sales price, costs, volume, or underlying assumptions change.
a) Breakeven analysis
b) Contribution margin analysis
c) Sensitivity analysis
d) Target profit analysis
Answer:
c) Sensitivity analysis
Monthly rent on a factory building is a _________.
a) variable cost
b) mixed cost
c) fixed cost
d) high-low cost
Answer:
c) fixed cost
Bold Company has fixed costs totaling $380,000 per month, the variable cost per unit is $100, and the selling price per unit is $260.
How many units must Bold Company sell to earn $240,000 in operating income?
a) 3,875 units
b) 2,375 units
c) 5,500 units
Answer:
a) 3,875
(Fixed costs + Desired operating income) / Contribution margin per unit.
(380,000 + 240,000) / ($260 - $100) =
3,875 units
Joshua Company has fixed costs totaling $169,000 per month, the variable cost per unit is $70, and selling price per unit is $200. Current sales are 2,500 units.
What is the margin of safety in units?
a) 1,200 units
b) 1,300 units
c) 1,500 units
d) 2,500
Answer:
a) 1,200 units
Calculate breakeven in units by...
Fixed costs / Contribution margin per unit
$169,000 / ($200 - $70) = 1,300 units
2,500 - 1,300 = 1,200 units Margin of Safety
Assume that sales are $200,000, variable costs are $50,000, and fixed costs are $20,000.
What is the degree of operating leverage?
a) 1.15
b) 0.02
c) 1.20
d) 2.00
Answer:
a) 1.15
Degree of operating leverage =
Contribution margin / Operating income
$200,000 in sales - $50,000 in variable costs / Contribution of $150,000 - $20,000 fixed costs
=$150,000 / $130,000
=1.15