Question 1

A company's mix of fixed costs relative to variable costs is referred to as its _______________.

Accepted Answer

The answer of A company's mix of fixed costs relative...

Question 2

_____________________ is the use of fixed costs to extract higher percentage changes in profits as sales activity changes.

Accepted Answer

The answer of _____________________ is the use of fixed costs...

Question 3

Assume the following information:  What volume of sales dollars is needed to break even?

Accepted Answer

The answer of Assume the following information:  What volume...

Question 4

If variable costs per unit decrease, sales volume at the break-even point will

Accepted Answer

When variable costs per unit decrease, the contribution margin per unit increases, which means fewer units need to be sold to cover fixed costs, thus decreasing the break-even sales volume.

Question 5

Contribution margin ratio can be calculated in all of the following ways except

Accepted Answer

The contribution margin ratio is calculated as (Contribution Margin per Unit / Price per Unit) or (Total Contribution Margin / Total Sales), not as fixed costs / Contribution margin per unit.

Question 6

Clean Company sells its product for $80. In addition, it has a variable cost ratio of 60% and total fixed costs of $8,000. What is the break-even point in sales dollars for Baker Company?

Accepted Answer

To find the break-even point, we need to use the formula:
Break-even point = Total fixed costs / (1 - Variable cost ratio)
Substituting the given values, we get:
Break-even point = 8,000 / (1 - 0.60)
Break-even point = 8,000 / 0.40
Break-even point = 20,000
Therefore, the break-even point in sales dollars for Clean Company is $20,000. The correct answer is option C.

Question 7

Patricia Company produces two products, X and Y, which account for 60% and 40%, respectively, of total sales dollars. Contribution margin ratios are 50% for X and 25% for Y. Total fixed costs are $120,000. What is Patricia's break-even point in sales dollars?

Accepted Answer

The break-even point in sales dollars can be calculated using the weighted average contribution margin ratio. First, find the weighted average contribution margin ratio: (60% * 50%) + (40% * 25%) = 30% + 10% = 40%. Then, divide the total fixed costs by this ratio: $120,000 / 40% = $300,000.

Question 8

The quantity at which two systems produce the same operating income is referred to as the ___________________.

Accepted Answer

The answer of The quantity at which two systems produce...

Question 9

Total contribution margin divided by total sales is the

Accepted Answer

Total contribution margin divided by total sales is called the contribution margin ratio. This ratio expresses the percentage of each sales dollar that is available to cover fixed expenses and contribute to profit.

Question 10

The ratio of fixed expenses to the contribution margin ratio is the

Accepted Answer

The ratio of fixed expenses to the contribution margin ratio is used to calculate the break-even point in sales. This is because the break-even point is the point where the total sales revenue equals the total variable and fixed expenses. By using this ratio, we can determine how much sales revenue is needed to cover the fixed expenses and reach the break-even point.

Question 11

The _________________________________ can be measured for a given level of sales by taking the ratio of contribution margin to operating income.

Accepted Answer

The answer of The _________________________________ can be measured for a...

Question 12

Sarah Smith, a sole proprietor, has the following projected figures for next year:  What is the contribution margin ratio?

Accepted Answer

The answer of Sarah Smith, a sole proprietor, has the...

Question 13

The break-even point is when

Accepted Answer

The break-even point is the point where total revenue equals total cost, meaning the company is not making a profit or a loss.

Question 14

If the break-even volume for a company is 600 units and the company is currently selling 1,000 units than the 400 units would represent the company's ____________________.

Accepted Answer

The answer of If the break-even volume for a company...

Question 15

If the selling price per unit increases, the break-even point in units will

Accepted Answer

If the selling price per unit increases, the contribution margin per unit also increases, which means that the number of units required to break even will decrease. Therefore, the break-even point in units will decrease.

Question 16

The income statement for Thomas Manufacturing Company for 2011 is as follows:  What is the contribution margin per unit?

Accepted Answer

Contribution margin per unit = Selling price per unit - Variable cost per unit 
= $28 - $23.20 
= $4.80

Question 17

Which of the following equations is true?

Accepted Answer

The correct equation for the contribution margin ratio is the ratio of the contribution margin to sales revenue, which is equivalent to 1 minus the variable cost ratio. This is because the contribution margin ratio measures the percentage of sales revenue that exceeds variable costs, thus contributing to covering fixed costs and generating profit.

Question 18

If the contribution margin per unit decreases, the break-even point in units

Accepted Answer

The break-even point in units is calculated as fixed costs divided by the contribution margin per unit. If the contribution margin per unit decreases, the denominator in this calculation decreases, and thus the break-even point in units increases.

Question 19

At the break-even point,

Accepted Answer

The break-even point is where the company's total revenue equals its total costs. At this point, there will be no profit or loss. The total contribution margin equals the difference between total revenue and total variable costs, and at the break-even point, this amount will be exactly equal to the total fixed costs. Therefore, choice C (total contribution margin equals total fixed cost) is the correct answer.

Question 20

The "what-if" process of altering certain key variables to assess the effect on the original outcome is also called a __________________.

Accepted Answer

The answer of The "what-if" process of altering certain key...

Quiz 4: Cost-Volume-Profit Analysis: a Managerial Planning Tool