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Multiple Choice Quiz
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1
Cost-volume-profit (CVP) analysis can be used to summarize the effects on which of the following?
A)An organization's volume of activity on its costs, revenues, and profits
B)Profit on changes in selling prices and service fees
C)Profit on the organization's mix of products or services.
D)All of the above
2
Total contribution margin can be defined as which of the following?
A)Total sales revenue minus total fixed expenses
B)Total sales revenue minus the total of fixed and variable expenses
C)Total sales revenue minus total variable expenses
D)Total sales revenue minus profit
3
If fixed costs are $54,000, break-even sales units are 15,000, and the contribution margin ratio is .60, what is the unit contribution margin?
A)$2.40
B)$3.60
C)$6.00
D)$5.40
4
Fixed costs are $105,000. Break-even sales are $455,000. Variable costs are $350,000. One unit sells for $13. To the nearest tenth, what is the contribution-margin percentage?
A)30.0%
B)23.1%
C)10.0%
D)35.1%
5
Fixed expenses are $150,000. Current sales are $600,000. Variable expenses are $500,000. One unit sells for $15. To the nearest thousandth, what is the contribution-margin ratio?
A).167
B).250
C).200
D).083
6
Fixed expenses are $45,000. The unit sales price is $12. The contribution margin ratio is .40. What are the break-even sales units?
A)9,375
B)3,750
C)6,250
D)5,750
7
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Use the equation approach and determine the number of sales units necessary to break even.
A)3,390
B)3,200
C)6,400
D)1,300
8
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In constructing a cost-volume-profit (CVP) graph, the total expense line and the total revenue line will intersect at what level on the vertical axis?
A)$200,000
B)$160,000
C)$240,000
D)$320,000
9
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In constructing a cost-volume-profit (CVP) graph, at what level on the vertical axis will the total cost line begin?
A)$120,000
B)$80,000
C)$240,000
D)$40,000
10
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In constructing a profit-volume graph, at what level on the vertical axis will the total cost line begin?
A)$120,000 in the loss area (less than 0 on the vertical axis)
B)$80,000 in the profit area (greater than 0 on vertical axis)
C)$80,000 in the loss area (less than 0 on the vertical axis)
D)$120,000 in the profit area (greater than 0 on the vertical axis)
11
The horizontal line that intersects the 0 level on the vertical axis of a profit-volume graph shows which levels of which of the following?
A)Total variable costs
B)Total fixed costs
C)Total revenues
D)Units of sales volume
12
An organization's break-even point is 4,000 units at a sales price of $50 per unit, variable cost of $30 per unit, and total fixed costs of $80,000. If the company sells 500 additional units, by how much will its profit increase?
A)$25,000
B)$15,000
C)$10,000
D)$37,000
13
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How many sales units are required to earn the target net profit?
A)15,000 units
B)10,000 units
C)6,400 units
D)12,800 units
14
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If the break-even point in sales units is 5,120, how might you determine how many more units beyond the break-even point must be sold to achieve the target net profit?
A)Target Net Profit/Unit Contribution Margin
B)(Fixed Expenses – Target Net Profit)/Unit Contribution Margin
C)Fixed Expenses/Contribution Margin Ratio
D)Fixed Expenses/Unit Contribution Margin
15
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Use the equation method and compute the units of sales required to earn a target profit of $12,000.
A)3,220
B)4,440
C)3,840
D)4,267
16
Budgeted sales revenues are $320,000, fixed costs are $80,000, and variable costs are $120,000. What is the safety margin?
A)$200,000
B)$20,000
C)$192,000
D)$128,000
17
The break-even point in sales revenue is $360,000 and the contribution-margin percentage is 32%. What are the fixed costs?
A)$244,800
B)$115,200
C)$360,000
D)$240,400
18
The current level of sales revenue is $280,000. The net profit is $34,000. The total contribution margin is $112,000. What are the fixed expenses?
A)$168,000
B)$ 85,000
C)$134,000
D)$78,000
19
Seasonal Yard Ornaments sells lawn ornaments for $15 each. Seasonal's contribution margin ratio is .40 and fixed expenses are $32,000. Should fixed expenses increase 30%, how many additional units will Seasonal have to produce and sell to generate the same net profit as under the current conditions?
A)1,600
B)5,333
C)6,933
D)1,067
20
Budgeted sales revenues are $480,000, actual sales are $420,000, and the safety margin was predicted at $120,000. The actual sales are what percent above break-even sales?
A)33.33%
B)12.50%
C)25.00%
D)16.67%
21
ABC Company sells its product for $20 a unit. The unit variable expenses are $14 and fixed expenses total $120,000. The company is considering the purchase of an automated machine that will result in a $3 reduction in unit variable costs and an increase of $69,000 in fixed costs. Which of the following is true about the break-even point in units?
A)They will increase.
B)They will decrease.
C)They will remain unchanged.
D)They cannot be determined from the information provided.
22
Which formula will determine the net increase in units needed to increase the break-even point in units so they will cover a predicted percentage increase in fixed costs?
A)Fixed expenses/Unit contribution margin
B)(Fixed expense + Percent of increase)/Unit contribution margin
C)(Fixed expenses x (1 + Percent of increase))/Unit contribution margin
D)(Break-even point + Fixed expenses)/Unit contribution margin
23
The sales price per unit will increase from $32 to $40. The variable expense per unit will remain at $24, and the fixed expenses will remain unchanged at $400,000. How many fewer units must be sold to break-even at the new sales price of $40 per unit?
A)25,000
B)2,500
C)10,000
D)12,500
24
The sales price per unit will change from $6 to $8. The variable expense per unit will change from $4 to $5. Fixed expenses will increase by $5,000. What will be the change in profit or loss if the current number of units sold increases from 5,000 to 6,000?
A)An increase in profit of $4,000.
B)A decrease in loss of $13,000.
C)An increase in profit of $13,000.
D)An increase in profit of $3,000
25
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What is the weighted-average unit contribution margin for the sales mix?
A)$12.00
B)$17.33
C)$26.00
D)$16.00
26
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Fixed expenses are $32,000. What is the number of units of Product A sold at the break-even point?
A)2,000
B)1,000
C)8,000
D)7,000
27
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Fixed expenses are $32,000. What is the number of units of Product A sold at the break-even point?
A)6,000
B)4,000
C)1,500
D)1,000
28
Which of the following is not an assumption underlying CVP analysis?
A)The behavior of total revenue is linear.
B)Unit variable expenses remain unchanged as activity varies.
C)The number of units produced exceeds the number of units sold.
D)Fixed costs remain constant as activity changes.
29
Which of the following is an assumption underlying CVP analysis?
A)In manufacturing firms, the beginning and ending inventory levels are the same.
B)In a multiproduct organization, the sales mix varies over time.
C)The behavior of total expenses is curvilinear over the relevant range.
D)The behavior of total revenue is curvilinear.
30
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Sales revenues were $300,000. There was no beginning or ending inventory. Which of the following statements is false?
A)Income under a traditional income statement is $75,000.
B)Income under a contribution income statement is $80,000.
C)Contribution margin is $190,000.
D)A contribution income statement is an internal document (report).
31
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Which of the following statements about the companies is false?
A)The operating leverage for Company A is 6.
B)The operating leverage for Company B is less than that of Company C.
C)The break-even point in sales dollars for Company C is $360,000.
D)The operating leverage for Company B is 5.
32
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Should the sales of each company increase by 10%, which of the following statements is true?
A)Company A's percentage change in net income will be 50%.
B)Company C's percentage change in net income will be the largest of the three.
C)Company B's current operating leverage is 4.
D)All of the statement are true.
33
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Management is considering installing a new, automated manufacturing process that will increase fixed costs $50,000 and reduce variable manufacturing cost $3 per unit. What will be the change in the break-even point in dollars after installation of the automated machine?
A)$36,000 decrease
B)$16,000 decrease
C)$36,000 increase
D)$48,000 increase
34
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Management is considering installing a new, automated manufacturing process that will increase fixed costs $50,000 and reduce variable manufacturing cost $3 per unit. Consider a target net profit of $70,000 before and after the acquisition of the automated machine. After installation of the automated machine, what will be the change in the units required to achieve the target net profit?
A)6,667 unit increase
B)5,667 unit decrease
C)3,333 unit decrease
D)2,000 unit increase





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