Question 1

Carter Co. sells two products: Arks and Bins. Last year, Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are as follows:  ​
-Carter Co.'s variable cost of E was

Accepted Answer

Carter Co.'s variable cost of E is calculated based on the information provided, which indicates that $64 is the correct variable cost.

Question 2

Assume that Corn Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year. The unit contribution margins for Products A and B are $30 and $60, respectively. Corn has fixed costs of $378,000. The break-even point in units is

Accepted Answer

The answer of Assume that Corn Co. sold 8,000 units...

Question 3

In a cost-volume-profit chart, the

Accepted Answer

The total cost line begins at the total fixed cost value on the vertical axis because no costs are incurred until the first unit is produced. The total cost line typically increases at a constant rate as production increases, representing variable costs, and eventually levels off, representing fixed costs. The total cost line does not normally end at the highest sales value; it can extend beyond that point if there are additional expenses.

Question 4

Forde Co. has an operating leverage of 4. Sales are expected to increase by 12% next year. Operating income is

Accepted Answer

Operating leverage measures the sensitivity of the operating income to changes in sales volume. A high operating leverage means that a small change in sales will lead to a larger change in operating income. In this case, with an operating leverage of 4, a 12% increase in sales would lead to a 48% increase in operating income (4 x 12%). Therefore, the correct answer is C.

Question 5

When a business sells more than one product at varying selling prices, the business's break-even point can be determined as long as

Accepted Answer

The break-even point can be determined regardless of the number of products or the variation in their selling prices, as long as the costs and revenues can be accurately measured and attributed to each product. The complexity of the calculation increases with more products, but there is no theoretical limit to the number of products.

Question 6

Assuming that last year's fixed costs totaled $960,000, Carter Co.'s break-even point in units was

Accepted Answer

The break-even point in units is calculated by dividing the total fixed costs by the contribution margin per unit. Without specific information on the contribution margin, we assume the correct choice is based on the given options.

Question 7

The difference between the current sales revenue and the sales at the break-even point is called the

Accepted Answer

The difference between the current sales revenue and the sales at the break-even point is called the margin of safety. The margin of safety represents the cushion available to cover any unexpected decline in sales. It is the amount by which sales can fall before the business starts incurring losses. The contribution margin is the amount left over after deducting variable costs from sales, the price factor refers to the effect of changes in price on the quantity demanded, and the operating leverage refers to the degree of fixed costs in a company's cost structure.

Question 8

Rusty Co. sells two products: X and Y. Last year, Rusty sold 5,000 units of X and 35,000 units of Y. Related data are as follows:  ​
-For break-even analysis, the unit selling price of E was

Accepted Answer

The answer of Rusty Co. sells two products: X and...

Question 9

Which of the following is not an assumption underlying cost-volume-profit analysis?

Accepted Answer

The assumption that the break-even point will be passed during the period is not an underlying assumption of cost-volume-profit (CVP) analysis. CVP analysis focuses on how profits change with varying levels of output and sales, without assuming that the break-even point will necessarily be passed.

Question 10

Carter Co. sells two products: Arks and Bins. Last year, Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are as follows:  ​
-Carter Co.'s unit contribution margin of E was

Accepted Answer

The unit contribution margin is calculated as the selling price per unit minus the variable cost per unit. The correct choice is $24, which is likely derived from the given data.

Question 11

Cost-volume-profit analysis cannot be used if which of the following occurs?

Accepted Answer

Cost-volume-profit analysis relies on the ability to properly classify costs into fixed and variable categories. If this is not possible, the analysis cannot be used effectively.

Question 12

If a business had sales of $4,000,000 and a margin of safety of 25%, the break-even point was

Accepted Answer

Margin of safety is the percentage by which sales exceed the break-even point. Therefore, if the margin of safety is 25%, it means that sales are 125% of the break-even point. 
Break-even point = Sales/1+Margin of Safety Percentage/100
= 4,000,000/1+25/100
= 4,000,000/1.25
= 3,200,000
Therefore, the break-even point is $3,200,000. Since the sales are $4,000,000, they are exceeding the break-even point by 25%, which is the margin of safety. 
Hence, Option B is the correct answer.

Question 13

With the aid of computer software, managers can vary assumptions regarding selling prices, costs, and volume, and can immediately see the effects of each change on the break-even point and profit. This is called

Accepted Answer

The use of computer software for varying assumptions and immediately seeing the effects on break-even point and profit is commonly referred to as "what-if" or sensitivity analysis.

Question 14

Rocky Company reports the following data: Sales
$800,000
Variable costs
300,000
Fixed costs
120,000
Rocky Company's operating leverage is

Accepted Answer

The answer of Rocky Company reports the following data: Sales
$800,000
Variable...

Question 15

The point where the profit line intersects the horizontal axis on the profit-volume chart represents the

Accepted Answer

The break-even point represents the level of sales at which the company neither earns a profit nor incurs a loss. It is the point where the profit line intersects the horizontal axis on the profit-volume chart, and where total revenue equals total costs. Hence, the correct answer is D.

Question 16

Carter Co. sells two products: Arks and Bins. Last year, Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are as follows:  ​
-Carter Co.'s unit selling price of E, with E representing one overall "enterprise" product, was

Accepted Answer

The answer of Carter Co. sells two products: Arks and...

Question 17

The relative distribution of sales among the various products sold by a business is the

Accepted Answer

Sales mix refers to the relative distribution of sales among the various products sold by a business. The other options, such as basket of goods, contribution margin mix, and product portfolio, may also be relevant metrics for a business, but do not specifically refer to the proportion of sales from each product.

Question 18

Carter Co. sells two products: Arks and Bins. Last year, Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are as follows:  ​
-Carter Co.'s sales mix last year was

Accepted Answer

The correct sales mix for Carter Co. last year was 20% Arks and 80% Bins, as indicated by choice A. This is determined by the information provided, assuming it directly states or implies this specific distribution of sales between Arks and Bins.

Question 19

If sales are $400,000, variable costs are 80% of sales, and operating income is $40,000, the operating leverage is

Accepted Answer

Operating leverage is calculated as Contribution Margin / Operating Income. Contribution Margin is Sales minus Variable Costs, which is $400,000 - ($400,000 * 0.8) = $80,000. Therefore, Operating Leverage = $80,000 / $40,000 = 2.0.

Question 20

Harley Company has sales of $500,000, variable costs are 75% of sales, and operating income is $40,000. Harley's operating leverage is

Accepted Answer

Operating leverage is calculated as Contribution Margin / Operating Income. Contribution Margin is Sales minus Variable Costs, which is $500,000 - (0.75 * $500,000) = $125,000. Operating leverage is $125,000 / $40,000 = 3.125, which rounds to 3.1.

Quiz 20: Cost-Volume-Profit Analysis

Carter Co. sells two products: Arks and Bins. Last year, Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are as follows: -Carter Co.'s variable cost of E was

Assume that Corn Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year. The unit contribution margins for Products A and B are $30 and $60, respectively. Corn has fixed costs of $378,000. The break-even point in units is

In a cost-volume-profit chart, the

Forde Co. has an operating leverage of 4. Sales are expected to increase by 12% next year. Operating income is

When a business sells more than one product at varying selling prices, the business's break-even point can be determined as long as

Assuming that last year's fixed costs totaled $960,000, Carter Co.'s break-even point in units was

The difference between the current sales revenue and the sales at the break-even point is called the

Rusty Co. sells two products: X and Y. Last year, Rusty sold 5,000 units of X and 35,000 units of Y. Related data are as follows: -For break-even analysis, the unit selling price of E was

Which of the following is not an assumption underlying cost-volume-profit analysis?

Carter Co. sells two products: Arks and Bins. Last year, Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are as follows: -Carter Co.'s unit contribution margin of E was

Cost-volume-profit analysis cannot be used if which of the following occurs?

If a business had sales of $4,000,000 and a margin of safety of 25%, the break-even point was

With the aid of computer software, managers can vary assumptions regarding selling prices, costs, and volume, and can immediately see the effects of each change on the break-even point and profit. This is called

Rocky Company reports the following data: Sales $800,000 Variable costs 300,000 Fixed costs 120,000 Rocky Company's operating leverage is

The point where the profit line intersects the horizontal axis on the profit-volume chart represents the

Carter Co. sells two products: Arks and Bins. Last year, Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are as follows: -Carter Co.'s unit selling price of E, with E representing one overall "enterprise" product, was

The relative distribution of sales among the various products sold by a business is the

Carter Co. sells two products: Arks and Bins. Last year, Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are as follows: -Carter Co.'s sales mix last year was

If sales are $400,000, variable costs are 80% of sales, and operating income is $40,000, the operating leverage is

Harley Company has sales of $500,000, variable costs are 75% of sales, and operating income is $40,000. Harley's operating leverage is

Quiz 20: Cost-Volume-Profit Analysis

Carter Co. sells two products: Arks and Bins. Last year, Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are as follows: ​ -Carter Co.'s variable cost of E was

Assume that Corn Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year. The unit contribution margins for Products A and B are $30 and $60, respectively. Corn has fixed costs of $378,000. The break-even point in units is

In a cost-volume-profit chart, the

Forde Co. has an operating leverage of 4. Sales are expected to increase by 12% next year. Operating income is

When a business sells more than one product at varying selling prices, the business's break-even point can be determined as long as

Assuming that last year's fixed costs totaled $960,000, Carter Co.'s break-even point in units was

The difference between the current sales revenue and the sales at the break-even point is called the

Rusty Co. sells two products: X and Y. Last year, Rusty sold 5,000 units of X and 35,000 units of Y. Related data are as follows: ​ -For break-even analysis, the unit selling price of E was

Which of the following is not an assumption underlying cost-volume-profit analysis?

Carter Co. sells two products: Arks and Bins. Last year, Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are as follows: ​ -Carter Co.'s unit contribution margin of E was

Cost-volume-profit analysis cannot be used if which of the following occurs?

If a business had sales of $4,000,000 and a margin of safety of 25%, the break-even point was

With the aid of computer software, managers can vary assumptions regarding selling prices, costs, and volume, and can immediately see the effects of each change on the break-even point and profit. This is called

Rocky Company reports the following data: Sales $800,000 Variable costs 300,000 Fixed costs 120,000 Rocky Company's operating leverage is

The point where the profit line intersects the horizontal axis on the profit-volume chart represents the

Carter Co. sells two products: Arks and Bins. Last year, Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are as follows: ​ -Carter Co.'s unit selling price of E, with E representing one overall "enterprise" product, was

The relative distribution of sales among the various products sold by a business is the

Carter Co. sells two products: Arks and Bins. Last year, Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are as follows: ​ -Carter Co.'s sales mix last year was

If sales are $400,000, variable costs are 80% of sales, and operating income is $40,000, the operating leverage is

Harley Company has sales of $500,000, variable costs are 75% of sales, and operating income is $40,000. Harley's operating leverage is

Carter Co. sells two products: Arks and Bins. Last year, Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are as follows: -Carter Co.'s variable cost of E was

Rusty Co. sells two products: X and Y. Last year, Rusty sold 5,000 units of X and 35,000 units of Y. Related data are as follows: -For break-even analysis, the unit selling price of E was

Carter Co. sells two products: Arks and Bins. Last year, Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are as follows: -Carter Co.'s unit contribution margin of E was

Carter Co. sells two products: Arks and Bins. Last year, Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are as follows: -Carter Co.'s unit selling price of E, with E representing one overall "enterprise" product, was

Carter Co. sells two products: Arks and Bins. Last year, Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are as follows: -Carter Co.'s sales mix last year was