Question 1

Which of the following would cause the break-even point to change?

Accepted Answer

A)   An increase in fixed costs due to an addition to equipment
B)   An increase in the amount of inventory held
C)   A decrease in total production
D)   An increase in salesE) A) and B)
F) None of the above

Question 2

The budgeted sales price multiplied by the difference between the actual and budgeted number of units sold is the:

Accepted Answer

A)   variable cost variance
B)   sales price variance
C)   sales volume variance
D)   margin of safety varianceE) C) and D)
F) All of the above

Question 3

Within the relevant range of activity fixed cost per unit will tend to:

Accepted Answer

A)   vary directly and proportionately with the level of activity.
B)   vary inversely with the level of activity.
C)   exhibit erratic movements.
D)   remain constant.E) None of the above
F) A) and D)

Question 4

Given the following information, the break-even point in sales dollars is:
Unit sales price $100
Variable production costs per unit $65
Fixed production costs $18 000
Selling and Administrative costs $3 000 + 5% of sales

Accepted Answer

A)   $25 714
B)   $21 000
C)   $51 429
D)   $60 000E) C) and D)
F) A) and B)

Question 5

The following information is available for Alfred Ltd

The variable expense variance is:

Accepted Answer

A)   $30 000 F
B)   $30 000 U
C)   $21 000 U
D)   $21 000 FE) C) and D)
F) B) and C)

Question 6

Mailroom clerks at Snail Mail are paid a salary of $3200 per month. All clerks are full time. A new clerk is hired whenever the volume of mail increases by 30 000 pieces since the last clerk was hired. If volume of mail is the activity base, mail-handling costs are:

Accepted Answer

A)   committed fixed costs.
B)   indirect costs.
C)   step-variable costs.
D)   discretionary fixed costs.E) B) and D)
F) B) and C)

Question 7

A retail organisation pays its sales staff a commission of four percent on each sale. This is a:

Accepted Answer

A)   fixed cost.
B)   constant cost.
C)   variable cost.
D)   mixed cost.E) A) and B)
F) A) and D)

Question 8

If the targeted sales are 18 000 units, the sales price per unit is $50, fixed costs are $120 000 and variable costs are $40 per unit, then planned profit must be:

Accepted Answer

A)   $90 000.
B)   $120 000.
C)   $180 000.
D)   $60 000.E) All of the above
F) B) and C)

Question 9

The formula for break-even point sales in dollars is:

Accepted Answer

A)   FC = VC.
B)   Sales = VC.
C)   FC = Sales.
D)   (FC + Profit)  / CM%.E) A) and D)
F) All of the above

Question 10

A change in which of the following would not affect the break-even point?

Accepted Answer

A)   Total fixed costs
B)   Number of units sold
C)   Variable cost per unit
D)   Sales price per unitE) C) and D)
F) None of the above

Question 11

The vertical axis of the cost-volume-profit chart represents:

Accepted Answer

A)   direct costs.
B)   margin of safety.
C)   volume of units.
D)   committed fixed costs.E) B) and C)
F) A) and D)

Question 12

Which of the following is an example of a fixed cost?

Accepted Answer

A)   Factory rental
B)   Raw materials
C)   Packaging costs
D)   Factory bonuses linked to the level of productionE) All of the above
F) B) and D)

Question 13

The term 'relevant range', as used in cost accounting, means the range:

Accepted Answer

A)   over which costs may fluctuate.
B)   over which relevant costs are incurred.
C)   over which the firm has a margin of safety.
D)   of activity within which an entity expects to operate.E) A) and C)
F) B) and C)

Question 14

Which of the following costs is a variable manufacturing cost?

Accepted Answer

A)   Depreciation costs computed using the straight-line method
B)   General Manager's salary
C)   Factory rent
D)   Direct labour costsE) C) and D)
F) A) and B)

Question 15

Hanson Company's data are:
Selling price per unit $120
Variable cost per unit $50
Fixed cost of operations per year $210 000
What is the break-even point in units?

Accepted Answer

A)   1 750
B)   3 000
C)   1 235
D)   4 200E) A) and B)
F) B) and C)

Question 16

The income statement for Brisbane Co is:
  Sales $300000 Variable Expense 200000 Contribution Margin $100000 Fixed Expenses 60000 Profit $40000\begin{array} { l r } 	ext { Sales } & \$ 300000 \	ext { Variable Expense } & 200000 \	ext { Contribution Margin } & \$ 100000 \	ext { Fixed Expenses } & 60000 \	ext { Profit } & \$ 40000\end{array} Sales  Variable Expense  Contribution Margin  Fixed Expenses  Profit ​$300000200000$10000060000$40000​  What is the break-even point in sales dollars?

Accepted Answer

A)   $20 000
B)   $60 000
C)   $90 000
D)   $180 000 E) C) and D)
F) B) and D)

Question 17

Downs Co sells a single product for $20 per unit. Fixed costs are $85 000 and variable costs equal 60% of sales. If fixed costs increase by $20 000, Downs Co will have to increase sales by how much just to earn profits equal to those earned before costs increased?

Accepted Answer

A)   $12 000
B)   $20 000
C)   $42 000
D)   $50 000E) B) and C)
F) A) and B)

Question 18

Which of the following most accurately explains the behaviour of costs?

Accepted Answer

A)   The majority of costs are fixed per unit of production.
B)   The majority of costs are variable per unit of production.
C)   Costs can be fixed or variable but not a combination of both.
D)   There is no norm; costs can be fixed, variable or a combination of both.E) C) and D)
F) B) and D)

Question 19

Genuine Auto Parts has reported sales of $500 000, a contribution margin of $8 per unit, fixed costs of $75 000 and a profit of $45 000. How many units did they sell?

Accepted Answer

A)   9 375
B)   15 000
C)   62 500
D)   47 500E) A) and B)
F) B) and D)

Question 20

In terms of cost behaviour, telephone expense and rent of premises are classified as:

Accepted Answer

A)   variable and fixed, respectively.
B)   mixed and variable, respectively.
C)   fixed and variable, respectively.
D)   mixed and fixed, respectively.E) A) and C)
F) All of the above

Exam 22: Cost-Volume-Profit Analysis for Decision Making

Downs Co sells a single product for $20 per unit. Fixed costs are $85 000 and variable costs equal 60% of sales. If fixed costs increase by $20 000, Downs Co will have to increase sales by how much just to earn profits equal to those earned before costs increased?

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Given the following information, the break-even point in sales dollars is: Unit sales price $100 Variable production costs per unit $65 Fixed production costs $18 000 Selling and Administrative costs $3 000 + 5% of sales

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Which of the following most accurately explains the behaviour of costs?

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Which of the following costs is a variable manufacturing cost?

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Which of the following is an example of a fixed cost?

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If the targeted sales are 18 000 units, the sales price per unit is $50, fixed costs are $120 000 and variable costs are $40 per unit, then planned profit must be:

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The formula for break-even point sales in dollars is:

Correct AnswerverifiedShow Answer

The vertical axis of the cost-volume-profit chart represents:

Correct AnswerverifiedShow Answer

The term 'relevant range', as used in cost accounting, means the range:

Correct AnswerverifiedShow Answer

A retail organisation pays its sales staff a commission of four percent on each sale. This is a:

Correct AnswerverifiedShow Answer

Which of the following would cause the break-even point to change?

Correct AnswerverifiedShow Answer

Genuine Auto Parts has reported sales of $500 000, a contribution margin of $8 per unit, fixed costs of $75 000 and a profit of $45 000. How many units did they sell?

Correct AnswerverifiedShow Answer

The budgeted sales price multiplied by the difference between the actual and budgeted number of units sold is the:

Correct AnswerverifiedShow Answer

In terms of cost behaviour, telephone expense and rent of premises are classified as:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The following information is available for Alfred Ltd The variable expense variance is:

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Mailroom clerks at Snail Mail are paid a salary of $3200 per month. All clerks are full time. A new clerk is hired whenever the volume of mail increases by 30 000 pieces since the last clerk was hired. If volume of mail is the activity base, mail-handling costs are:

Correct AnswerverifiedShow Answer

Hanson Company's data are: Selling price per unit $120 Variable cost per unit $50 Fixed cost of operations per year $210 000 What is the break-even point in units?

Correct AnswerverifiedShow Answer

Within the relevant range of activity fixed cost per unit will tend to:

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A change in which of the following would not affect the break-even point?

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