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Multiple Choice Quiz
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1
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Smith wants to sell their unit with a mark-up of 60% of their product cost. What is the recommended selling price?
A)$ 38.40
B)$ 43.20
C)$518.40
D)Unable to determine based upon the information provided.
2
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With a selling price of $48/unit how many units does Smith have to sell in order not to suffer a loss?
A)7,142
B)3,125
C)5,555
D)7,143
3
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At a selling price of $48 how many units does Smith need to sell in order to generate a Profit of $60,000.
A)3,125
B)4,375
C)10,000
D)10,001
4
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Which of the following best describes the impact of increasing the Sales Price from $48 to $52?
A)The increase in sales increases contribution margin, causing net income to decrease.
B)The increase in sales increases contribution margin per unit causing the break-even point to decrease.
C)The increase in sales means more units are sold.
D)The increase in sales means an increase in variable cost.
5
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Which of the following best describes the impact of an increase in Fixed Costs?
A)The increase in fixed cost will result in an increase in selling more units.
B)The increase in fixed cost will cause an increase in variable cost.
C)The increase in fixed cost causes net income to decrease and the break-even point to decrease.
D)The increase in fixed cost causes net income to decrease and the break-even point to increase.
6
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Which of the following best describes the impact of selling more units?
A)The increase in sales volume increases total variable cost.
B)The increase in sales volume means an increase in total fixed cost.
C)The increase in sales increases contribution margin, causing net income to decrease.
D)The increase in sales increases contribution margin per unit causing the break-even point to decrease.
7
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Smith Merchandising is attempting to increase sales by changing the current packaging. They will change the colors on the box and in their advertising campaign. This will result in an increase of $1 per unit in material cost and $5,000 in their advertising. They are currently selling 10,000 units, and all other costs and pricing polices (60% mark-up) will remain the same while they maintain the same level of income $60,000. How many units do they need to sell?
A)10,000
B)10,239
C)12,798
D)13,393
8
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Smith Merchandising in their Advertising Campaign associated with promoting the changes will justify the price increase by referring to the product as new.
A)This is acceptable because everyone does it.
B)This is acceptable because the packaging is new.
C)This is unacceptable because if consumers complain the company would have to spend more money defending their new advertising.
D)There are ethical considerations that should be considered and discussed prior to just referring to the product as new because the packaging was changed.
9
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The Sales Manager is of the opinion that they cannot sell more than 10,000 units at a Sales price of $48. He does believe that if the price were lowered to $44 dollars then they could sell at least 13,000 units. He also believes they can maintain the current $60,000 of Net Income. Assume the material cost is the same but additional advertising expenses will not be necessary. Should they consider lowering the price, and if so what is the new targeted product cost?
A)No, the product cost cannot be lowered to allow a sufficient level of profitability.
B)No, even with the lowered cost they need to sell more units then the market projections allow.
C)Yes at a product cost of $27.50 they only need to sell 12,727 units.
D)Yes at a product cost of $27.85 they only need to sell 13,000 units.
10
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If Smith Merchandising lowered their sales price to $44, and budgeted 13,000 units in sales what would be the Margin of Safety?
A)2.1%
B)30%
C)103 units
D)3,909 units
11
A Cost-Volume-Profit Graph contains an "Area of Loss" and an "Area of Profitability". Which of the following best explains the difference between the two points on the graph?
A)The area of loss represents the difference between Sales and Variable Cost.
B)The area of loss begins with the concept that fixed costs have to be recovered prior to sales contributing to profit.
C)The area of profit represents the difference between Sales and Variable Cost.
D)The area of profit begins with the concept that no company would have any level of sales below the break-even point.
12
Which of the following is not a benefit of using sensitivity analysis?
A)More people can see the impact of their ideas on the project.
B)The use of a spreadsheet program increases the accuracy of the projections.
C)What will happen is not known in advance so a variety of options can be explored prior to making a decision.
D)A well-written spreadsheet will allow for a variety of questions to be answered in a minimal amount of time.
13
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ABC is discussing a new advertising campaign that would cost $50,000. What level of Sales Dollars is required for ABC to break-even?
A)$400,000
B)$933,334
C)$500,000
D)$560,000
14
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ABC wants to have a minimum Net Income of $40,000. The current level of Sales is based upon 10,000 units. What level of Sales is required to achieve this level of Net Income, including their advertising campaign?
A)$ 933,334
B)$ 973,334
C)$1,040,000
D)$ *624,000
15
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If ABC Sales can decrease the variable cost 10% what is the Breakeven point in Sales Dollars?
A)$452,830
B)$440,000
C)$432,000
D)$360,000
16
Which of the following is not a limiting factor of Cost-Volume-Profit Analysis?
A)The process assumes a linear relationship among the variables.
B)The process assumes variable costs per unit are available.
C)Efficiency is assumed to be constant.
D)Inventory levels are assumed to not change.
17
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What is the Break-Even Point for Jones Distributors?
A)534
B)1,250
C)1,784
D)1,926
18
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There are changes in the market forecast. Jones believes that the same number of units will be sold in total however, more units of Product B will be sold and less of Product A. What is the expected impact if this occurs?
A)Contribution margin will increase.
B)Total variable cost will increase.
C)Net Income will decrease.
D)Total fixed costs will decrease.
19
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There are changes in the market forecast. Jones believes that the same number of units will be sold in total however; more units of Product A will be sold and less of Product B. What is the expected impact if this occurs?
A)Contribution margin will increase.
B)Total variable cost will decrease.
C)Net Income will decrease.
D)Total fixed costs will increase.
20
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There are changes in the market forecast. Jones believes that the sales mix will stay the same, however, the number of units will increase by 25% to 3,500. What is the new projected net income?
A)$ 7,308
B)$ 8,004
C)$10,625
D)$ 1,000
21
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What sales price per plant does she need to achieve to begin making a profit if she sells the estimated monthly amount of plants?
A)$7.51
B)$7.50
C)$5.00
D)$2.50
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In her first month of operation Violet achieves $24,000 in sales by selling 3,000 plants. What is her break-even sales dollars?
A)$48,000
B)$22,500
C)$21,819
D)$21,818
23
Violet Flowers expects to sell 3,000 plants a month. She estimated the following monthly costs:
Variable Costs$ 9,000
Fixed Costs$15,000

Violet increases her variable costs by adding decorative ribbon to the plants. Violet achieves $24,000 in sales by selling 3,000 plants. What is Violet's new Break-Even Unit Sales?
A)2,727
B)2,728
C)2,999
D)3,000
24
Violet Flowers expects to sell 3,000 plants a month. She estimated the following monthly costs:
Variable Costs$ 9,000
Fixed Costs$15,000

During her second month of operation, Violet would like to earn $2,000 selling plants with ribbons at $8 each. How many plants does she have to sell in order to break-even?
A)3,091
B)3,090
C)3,400
D)3,600
25
Violet Flowers expects to sell 3,000 plants a month. She estimated the following monthly costs:
Variable Costs$ 9,000
Fixed Costs$15,000

Violet is thinking that she can increase her plant sales by advertising in the local paper. If she spends $1,600 running ads in the Sunday paper for the next 4 weeks how many plants does she have to sell $8 each. and still earn $2,000?
A)3,400
B)3,382
C)3,391
D)3,720





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