Question 1

Managers only use the breakeven point to discover how much product they need to sell to avoid a loss.

Accepted Answer

While the breakeven point tells managers how much they must sell to avoid a loss,managers are equally interested in how they will achieve the operating income targets underlying their strategies and plans.

Question 2

Management accountants usually calculate the breakeven point directly in terms of revenues using the contribution margin percentages.

Accepted Answer

Management accountants typically use the contribution margin ratio to calculate the breakeven point in terms of revenue, as it allows for a direct calculation of the sales needed to cover all costs and reach the breakeven point.

Question 3

Write a brief essay and discuss why managers want to know their target operating income.How do they calculate the target operating income?

Accepted Answer

The answer of Write a brief essay and discuss why...

Question 4

What are the benefits to managers that use CVP analysis?

Accepted Answer

The answer of What are the benefits to managers that...

Question 5

The store has a contribution margin per unit of $90 and the products sells for $225.The manager needs to know the contribution margin percentage.
Required:
Compute the contribution margin percentage.

Accepted Answer

B)[($90 / $225)] = .40% or 40%

Question 6

Sunny Pastures reported the following information:

Required:
Compute the quantity of units required to be sold to have an operating income of $5,000.

Accepted Answer

D)[($3,000 + $5,000)/ $90] = 88.88 units

Question 7

The term that is used to identify the quantity of output sold at which total revenues equal total costs and that quantity of output sold that results in $0 operating income is:

Accepted Answer

Breakeven point (BEP) is the quantity of output sold at which total revenues equal total costs and the operating income is zero. This is a critical point for businesses to understand because it shows the level of production (or sales) needed to cover all costs, and anything beyond that point represents profit. Choice A, C, D, and E all relate to contribution margin, which is important for calculating the breakeven point, but it is not the term used to identify the breakeven point itself.

Question 8

Write a short essay and define the profit-volume (PV)graph.What are the benefits of the PV graph to managers?

Accepted Answer

The answer of Write a short essay and define the...

Question 9

Managers can use profit volume analysis to understand how profits change with sales volume and to target levels of sales needed to achieve profit goals.

Accepted Answer

Profit volume analysis is a useful tool for managers to understand the relationship between sales volume and profits, and to determine the level of sales needed to achieve a specific profit goal. Therefore, the statement is true.

Question 10

Managers use ________ ________ ________ to understand how profits change with sales volume.

Accepted Answer

Profit volume analysis is the technique used by managers to understand the relationship between sales volume and profits. It helps in determining the breakeven point and the level of sales required to achieve a desired level of profit. Unit volume analysis, credit volume analysis, debit volume analysis and sales volume analysis are not appropriate terms to describe this technique.

Question 11

Management accountants calculate the breakeven point directly in terms of revenues using contribution margin percentages.

Accepted Answer

Management accountants can use contribution margin percentages to calculate the breakeven point directly in terms of revenues. The breakeven point is the point at which the total revenue equals total costs, and the contribution margin is the amount of revenue that exceeds variable costs. By dividing fixed costs by the contribution margin percentage, management accountants can determine the amount of revenue needed to cover all costs and achieve a breakeven point.

Question 12

The term that represents operating income plus nonoperating revenues minus nonoperating costs minus income taxes is:

Accepted Answer

Net income is the correct term because it includes all revenues and costs, both operating and nonoperating, minus income taxes.

Question 13

The Vitamin Store reported the following information:

Required:
Compute the revenues needed to earn operating income of $1,800.

Accepted Answer

D)[($3,000 + $1,800)/ .50] = $9,600

Question 14

List and discuss the steps that managers take when they make profitable decisions in the organization.

Accepted Answer

The answer of List and discuss the steps that managers...

Question 15

Which of the following is true about net income?

Accepted Answer

Income targets are usually expressed in terms of net income, which is the amount of revenue left after deducting expenses, taxes, and other costs. Net income is a key financial indicator used to evaluate a company's profitability and value. Managers do consider the effect of net income on income taxes, as decisions that increase net income can also result in favorable tax consequences. Therefore, option A, C, D, and E are all incorrect.

Question 16

Managers must meet target goals to achieve target operating income.Write a brief essay and define the breakeven point (BEP).What information do the managers obtain from this analysis?

Accepted Answer

The answer of Managers must meet target goals to achieve...

Question 17

The Clock Store's manager reported that there were 25 breakeven quantities in units and a selling price of $10 per unit.The manager needs to determine the breakeven revenues.
Required:
Compute the breakeven revenues.

Accepted Answer

E)[(25 × $10)] = $250

Question 18

Managers use PV graphs because it shows how changes in the quantity of units sold affect operating income.

Accepted Answer

PV (profit volume) graph shows the relationship between the quantity of units sold and the operating income which helps managers to understand the impact of changes in sales volume on profitability.

Question 19

The store has fixed costs of $25,000 and a contribution margin per unit of $90 per unit.
Compute the breakeven quantity in units.

Accepted Answer

C)[($25,000 / $90)] = 277.77 units

Question 20

The manager at the store needs to determine the breakeven revenues associated with the new and dynamic power blender.The fixed costs associated with the blender are $3,000 and the contribution margin is 50%.
Required:
Compute the breakeven revenue.

Accepted Answer

C)[($3,000 / 50%)] = $6,000

Quiz 3: Cost-Volume-Profit Analysis

Managers only use the breakeven point to discover how much product they need to sell to avoid a loss.

Management accountants usually calculate the breakeven point directly in terms of revenues using the contribution margin percentages.

Write a brief essay and discuss why managers want to know their target operating income.How do they calculate the target operating income?

What are the benefits to managers that use CVP analysis?

The store has a contribution margin per unit of $90 and the products sells for $225.The manager needs to know the contribution margin percentage. Required: Compute the contribution margin percentage.

Sunny Pastures reported the following information: Required: Compute the quantity of units required to be sold to have an operating income of $5,000.

The term that is used to identify the quantity of output sold at which total revenues equal total costs and that quantity of output sold that results in $0 operating income is:

Write a short essay and define the profit-volume (PV)graph.What are the benefits of the PV graph to managers?

Managers can use profit volume analysis to understand how profits change with sales volume and to target levels of sales needed to achieve profit goals.

Managers use to understand how profits change with sales volume.

Management accountants calculate the breakeven point directly in terms of revenues using contribution margin percentages.

The term that represents operating income plus nonoperating revenues minus nonoperating costs minus income taxes is:

The Vitamin Store reported the following information: Required: Compute the revenues needed to earn operating income of $1,800.

List and discuss the steps that managers take when they make profitable decisions in the organization.

Which of the following is true about net income?

Managers must meet target goals to achieve target operating income.Write a brief essay and define the breakeven point (BEP).What information do the managers obtain from this analysis?

The Clock Store's manager reported that there were 25 breakeven quantities in units and a selling price of $10 per unit.The manager needs to determine the breakeven revenues. Required: Compute the breakeven revenues.

Managers use PV graphs because it shows how changes in the quantity of units sold affect operating income.

The store has fixed costs of $25,000 and a contribution margin per unit of $90 per unit. Compute the breakeven quantity in units.

The manager at the store needs to determine the breakeven revenues associated with the new and dynamic power blender.The fixed costs associated with the blender are $3,000 and the contribution margin is 50%. Required: Compute the breakeven revenue.