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Enhanced Quizzes
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1
Total contribution margin can be calculated by subtracting total fixed expenses from total revenues.
A)TRUE
B)FALSE
2
The contribution-margin ratio of a firm is determined by dividing the per unit contribution margin by the per unit sales price.
A)TRUE
B)FALSE
3
The profit area shown on a cost-volume-profit graph is comprised of the contribution margin per unit multiplied by the number of units sold after the break-even point.
A)TRUE
B)FALSE
4
If the sales price per unit is $24, the variable cost per unit is $14, fixed expenses are $62,000, and the target net profit is $18,000 then 6,200 sales units required to earn the target net profit.
A)TRUE
B)FALSE
5
If a company sells 50 units of A at a $5.00 contribution margin and 200 units of B at a $6.25 contribution margin, and the fixed expenses are $24,000, then the break-even point is 4,000 units.
A)TRUE
B)FALSE
6
A technique for determining what would happen in a decision analysis if a key prediction or assumption proves to be wrong is called CVP analysis.
A)TRUE
B)FALSE
7
An income statement in which fixed and variable expenses are separated is called a contribution income statement.
A)TRUE
B)FALSE
8
If the fixed cost total of $450,000 is 60% of sales and the variable cost total of $240,000 is 40% of sales, then the relationship fixed costs to variable costs can be referred to as the cost structure of the firm.
A)TRUE
B)FALSE
9
The CVP approach to cost analysis is consistent with activity-based costing.
A)TRUE
B)FALSE
10
One of the major differences between the traditional CVP analysis and the activity-based costing CVP analysis is the number of cost drivers used.
A)TRUE
B)FALSE
11
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
E)Total fixed expenses minus total variable costs
12
If fixed expenses 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
E)$4.50
13
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)8,450
B)3,750
C)6,250
D)5,750
E)9,375
14
Consider the following:
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In constructing a cost-volume-profit (CVP) graph, at what level on the vertical axis will the total expenses line begin?
A)$120,000
B)$80,000
C)$240,000
D)$40,000
E)$200,000
15
Consider the following:
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073526924/594030/Ch7_Q15.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (15.0K)</a>

In constructing a profit-volume graph, at what level on the vertical axis will the total expenses 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)
E)None of the above
16
Consider the following:
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How many sales units are required to earn the target net profit?
A)15,000 units
B)12,000 units
C)6,400 units
D)12,800 units
E)10,000 units
17
Consider the following:
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073526924/594030/Ch7_Q17.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (16.0K)</a>

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
E)Fixed Expenses/Variable Expenses
18
Consider the following:
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073526924/594030/ch7_q18.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (11.0K)</a>

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
E)4,560
19
Budgeted sales revenues are $320,000, fixed expenses are $80,000, and variable expenses are $120,000. What is the safety margin?
A)$200,000
B)$ 20,000
C)$172,000
D)$128,000
E)$192,000
20
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 expenses. 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.
E)They will vary between 18,000 and 22,000 units
21
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
E)None of the above
22
Consider the following:
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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
E)$15.00
23
Consider the following:
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073526924/594030/Ch7_Q23.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (17.0K)</a>

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
E)2,500
24
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 expenses remain constant as activity changes.
E)All of the above
25
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.
E)Only (B) and (C)
26
Consider the following:
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073526924/594030/Ch7_Q26.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (24.0K)</a>

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).
E)Contribution margin is $270,000.
27
Consider the following:
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073526924/594030/Ch7_Q27.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (60.0K)</a>

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.
E)The operating leverage for Company B is 7.
28
Consider the following:
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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 statements are true.
E)None of the statements are true.
29
Consider the following:
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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)3,000 unit decrease
D)2,000 unit increase
E)3,333 unit decrease
30
Consider the following:
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073526924/594030/ch7_30q.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (36.0K)</a>

What will be the increase or decrease in break-even units and the increase or decrease in units necessary to achieve a target income of $45,000 when changing from current conditions to advanced technology in machinery and JIT implementation?
A)No change in break-even point; increase in sales volume to achieve target income
B)Increase in break-even point; increase in sales volume to achieve target income
C)No change in break-even point; decrease in sales volume to achieve target income
D)Decrease in break-event point; decrease in sales volume to achieve target income
E)None of the above







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