Question 1

Chase Company's new product is expected to have a sales price of $15 and variable unit price of $7.Fixed costs are expected to be $560,000.What is the break-even point in sales dollars?
A)$840,000
B)$1,050,000
C)$560,000
D)$1,200,000

Accepted Answer

The break-even point in sales dollars can be calculated using the following formula:

Break-even point = Fixed costs / (Sales price per unit - Variable cost per unit)

In this case, the sales price per unit is $15 and the variable cost per unit is $7. Therefore:

Break-even point = $560,000 / ($15 - $7)
Break-even point = $560,000 / $8
Break-even point = $70,000 units

To find the break-even point in sales dollars, we need to multiply the break-even point in units by the sales price per unit:

Break-even point in sales dollars = $70,000 x $15
Break-even point in sales dollars = $1,050,000

Therefore, the best choice is B.

Question 2

A technique that uses the degrees of cost variability to measure the effect of changes in volume on resulting profits is:
A)Standard costing.
B)Variance analysis.
C)Cost-volume-profit analysis.
D)Segment profitability analysis.

Accepted Answer

Cost-volume-profit analysis (CVP) is a technique that helps in understanding the impact of changes in volume, sales mix, and selling price on the profits of a business. It uses the degrees of cost variability to measure the effect of changes in volume on resulting profits. It is a commonly used tool for making decisions related to pricing, product mix, and sales volume.

Question 3

Kehler Corporation wished to market a new product for $2.00 a unit.Fixed costs to manufacture this product are $100,000.The contribution margin is 40 percent.How many units must be sold to realize net income of $100,000 from this product?
A)200,000
B)250,000
C)300,000
D)350,000

Accepted Answer

First, we need to calculate the unit contribution margin, which is 40% of the selling price:

Unit Contribution Margin = $2.00 x 40% = $0.80

Next, we need to calculate the number of units required to cover the fixed costs and earn the desired net income:

Net Income = Sales - Variable Costs - Fixed Costs

$100,000 = (Units Sold x $2.00 x 40%) - (Units Sold x $0.80) - $100,000

$100,000 = Units Sold x ($0.80)

Units Sold = $100,000 / ($0.80) = 125,000

Therefore, Kehler Corporation must sell 125,000 units to earn a net income of $100,000.

Question 4

Nolan Company has two segments: Audio and Video.Sales for the Audio Segment were $500,000,and variable costs were 40% of sales.The Video Segment also had sales of $500,000,but variable costs were 60% of sales.Fixed costs directly traceable to the Audio and Video segments were $150,000 and $120,000,respectively.Common fixed costs of $200,000 were arbitrarily allocated equally to each segment. ​
What was the segment margin of the Video Segment?
A)$200,000
B)$ 80,000
C)$(20,000)
D)$ 150,000

Accepted Answer

Segment Margin = Sales - Variable Costs - Direct Fixed Costs
For the Audio Segment:
Segment Margin = $500,000 - ($500,000 * 40%) - $150,000 = $200,000

For the Video Segment:
Segment Margin = $500,000 - ($500,000 * 60%) - $120,000 = $80,000

Therefore, the segment margin of the Video Segment is $80,000, which is option B.

Question 5

Consider the Marshall Company's segment analysis:  Common costs are allocated based on sales dollars.If Marshall eliminates Segment B,what is the impact on the operating loss of the company?
A)The loss decreases by $40,000.
B)The loss increases by $20,000.
C)The loss decreases by $60,000.
D)The loss increases by $40,000.

Accepted Answer

The answer of Consider the Marshall Company's segment analysis: ...

Question 6

The Blue Saints Band is holding a concert in Toronto.Fixed costs relating to staging a concert are $350,000.Variable costs per patron are $10.00.The selling price for a tickets $30.00.The Blue Saints Band has sold 23,000 tickets so far. ​
How many tickets does the Blue Saints Band need to sell to break even?
A)23,000
B)20,000
C)14,000
D)17,500

Accepted Answer

To break even, the revenue earned must be equal to the total cost.

Total Cost = Fixed Cost + Variable Cost

Fixed Cost = $350,000

Variable Cost per patron = $10.00

Selling Price per ticket = $30.00

Let x be the number of tickets the Blue Saints Band needs to sell to break even.

Total Revenue = Selling Price x Number of Tickets = $30x

Total Cost = Fixed Cost + Variable Cost = $350,000 + $10x

Equating the two, we get:

$30x = $350,000 + $10x

$20x = $350,000

x = 17,500

Therefore, the Blue Saints Band needs to sell 17,500 tickets to break even.

Question 7

Each of the following would affect the break-even point except a change in the:
A)Variable cost per unit.
B)Total fixed costs.
C)Sales price per unit.
D)Number of units sold.

Accepted Answer

Changes in variable cost per unit, total fixed costs, and sales price per unit would all directly impact the calculation of the break-even point. However, the number of units sold is already a component within the break-even point formula and would not impact it as a separate factor.

Question 8

Consider the following information for the Cornwall Company:  How many units must Cornwall sell to break even?
A)7,000
B)16,800
C)12,000
D)8,400

Accepted Answer

The answer of Consider the following information for the Cornwall...

Question 9

Consider the following information for the Dehning Company:  What are Dehning's variable costs at the break-even point?
A)$490,000
B)$1,344,000
C)$840,000
D)$588,000

Accepted Answer

The answer of Consider the following information for the Dehning...

Question 10

Franklin Company is a medium-sized manufacturer of bicycles.During the year a new line called "Radical" was made available to Franklin's customers.The break-even point for sales of Radical is $250,000 with a contribution margin ratio of 40 percent.Assuming that the profit for the Radical line during the year amounted to $80,000,total sales during the year would have amounted to:
A)$450,000.
B)$420,000.
C)$400,000.
D)$475,000.

Accepted Answer

Contribution margin = Sales - Variable costsContribution margin ratio = Contribution margin / SalesBreak-even point = Fixed costs / Contribution margin ratioSales = Fixed costs / (1 - Contribution margin ratio)Sales = $250,000 / (1 - 0.40) = $416,666.67Profit = Sales - Variable costs - Fixed costsProfit = Sales - (1 - Contribution margin ratio) * Sales - Fixed costsProfit = Sales * Contribution margin ratio - Fixed costs$80,000 = $416,666.67 * 0.40 - Fixed costsFixed costs = $120,000Sales = Fixed costs / (1 - Contribution margin ratio)Sales = $120,000 / (1 - 0.40) = $200,000Total sales during the year would have amounted to $416,666.67 + $200,000 = $616,666.67

Question 11

The Company is planning to sell Product Z for $20 a unit.Variable costs are $12 a unit and fixed costs are $100,000.What must total sales be to break even?
A)$266,667
B)$250,000
C)$200,000
D)$166,667

Accepted Answer

The break-even point is when total revenue equals total costs.
Total costs = fixed costs + variable costs
Total costs = $100,000 + ($12 x units sold)

To find the break-even point, we set total revenue equal to total costs:
$20 x units sold = $100,000 + ($12 x units sold)

Simplifying the equation:
$8 x units sold = $100,000
Units sold = $100,000 / $8 = 12,500

Total sales = $20 x 12,500 = $250,000

Therefore, the answer is B) $250,000.

Question 12

The Blue Saints Band is holding a concert in Toronto.Fixed costs relating to staging a concert are $350,000.Variable costs per patron are $5.00.The selling price for a tickets $25.00.The Blue Saints Band has sold 23,000 tickets so far. How many tickets does the Blue Saints Band need to sell to achieve net income of $75,000.
A)21,250
B)14,000
C)17,500
D)17,000

Accepted Answer

The answer of The Blue Saints Band is holding a...

Question 13

If the selling price and the variable cost per unit both increase 10 percent and fixed costs do not change,what is the effect on the contribution margin per unit and the contribution margin ratio?
A)Contribution margin per unit and the contribution margin ratio both remain unchanged.
B)Contribution margin per unit and the contribution margin ratio both increase.
C)Contribution margin per unit increases and the contribution margin ratio decreases.
D)Contribution margin per unit increases and the contribution ratio remains unchanged.

Accepted Answer

When the selling price and the variable cost per unit both increase by 10 percent while fixed costs remain unchanged, the contribution margin per unit increases. This is because a higher selling price generates more revenue, while a higher variable cost reduces the expenses associated with producing one unit. Therefore, the contribution margin per unit increases by the difference between the new selling price and the new variable cost per unit. However, the contribution margin ratio, which is the contribution margin per unit divided by the selling price, remains unchanged since both numerator and denominator increase by the same percentage.

Question 14

Consider the income statement for Bayless Company:  What is the break-even point in sales dollars (rounded to the nearest dollar)?
A)$264,063
B)$92,308
C)$160,000
D)$240,000

Accepted Answer

The break-even point in sales dollars can be calculated using the formula: 
Break-even point = Fixed costs / (1 - (Variable costs / Sales))
In this case, the fixed costs are $80,000, and the variable costs are $0.60 per dollar of sales (60% of sales). 
Substituting these values into the formula: 
Break-even point = $80,000 / (1 - (0.60)) = $160,000 
Therefore, the break-even point in sales dollars is $160,000.

Question 15

Tennenholtz Company's break-even graph is depicted below.Which area indicates the break-even point?  ​
A)E.
B)G.
C)A.
D)H.

Accepted Answer

The break-even point is where the total cost curve intersects the total revenue curve. In this graph, it occurs at point A, where the total cost and total revenue lines intersect. Therefore, the answer is C.

Question 16

Consider the income statement for Pickbury Farm:  ​ At what sales level does Pickbury achieve net income of $200,000?
A)$700,000
B)$933,333
C)$300,000
D)$666,666

Accepted Answer

To find the answer, we need to use the following formula: Net Income = Sales Revenue - Cost of Goods Sold - Operating Expenses. Plugging in the given values, we get: 200,000 = X - 460,000 - 240,000. Solving for X, we get X = 700,000. Therefore, Pickbury achieves a net income of $200,000 at a sales level of $700,000.

Question 17

Break-even sales volume in units is determined by:
A)Dividing the fixed cost by the difference between the unit selling price and unit variable costs.
B)Subtracting the fixed cost from the contribution margin.
C)Dividing the fixed cost by the unit selling price.
D)Subtracting the variable cost per unit from the unit selling price.

Accepted Answer

Break-even sales volume in units is determined by dividing the fixed cost by the difference between the unit selling price and unit variable costs. This formula calculates the number of units that must be sold in order to cover the total fixed costs of the business.

Question 18

Tennenholtz Company's break-even graph is depicted below.The line labeled "C" is:  ​
A)The sales line.
B)The contribution margin line.
C)The total cost line.
D)The variable cost line.

Accepted Answer

The answer of Tennenholtz Company's break-even graph is depicted below.The...

Question 19

Queen,Ltd.has one product.Its sales price and variable cost per unit are $25 and $20,respectively.Last year,Queen sold 25,000 units,which was 5,000 more than the break-even point.What were Queen's fixed expenses?
A)$100,000
B)$125,000
C)$300,000
D)There is not enough information to answer the question.

Accepted Answer

Fixed expenses can be calculated using the formula: Fixed Expenses = (Sales Price per Unit - Variable Cost per Unit) * Break-even Quantity. Given that the break-even point was 5,000 units less than 25,000 units sold, it was 20,000 units. Therefore, Fixed Expenses = ($25 - $20) * 20,000 = $5 * 20,000 = $100,000.

Question 20

Chase Company's new product is expected to have a sales price of $16 and variable unit price of $8.Fixed costs are expected to be $560,000.What is the break-even point in units?
A)56,000
B)70,000
C)37,333
D)80,000

Accepted Answer

The break-even point in units can be calculated using the formula: Break-even point in units = Fixed Costs / (Sales price per unit - Variable cost per unit). Plugging in the given values: $560,000 / ($16 - $8) = $560,000 / $8 = 70,000 units.

Quiz 10: Cost Analysis for Management Decision Making

Chase Company's new product is expected to have a sales price of $15 and variable unit price of $7.Fixed costs are expected to be $560,000.What is the break-even point in sales dollars?

A technique that uses the degrees of cost variability to measure the effect of changes in volume on resulting profits is:

Kehler Corporation wished to market a new product for $2.00 a unit.Fixed costs to manufacture this product are $100,000.The contribution margin is 40 percent.How many units must be sold to realize net income of $100,000 from this product?

Consider the Marshall Company's segment analysis: Common costs are allocated based on sales dollars.If Marshall eliminates Segment B,what is the impact on the operating loss of the company?

Each of the following would affect the break-even point except a change in the:

Consider the following information for the Cornwall Company: How many units must Cornwall sell to break even?

Consider the following information for the Dehning Company: What are Dehning's variable costs at the break-even point?

The Company is planning to sell Product Z for $20 a unit.Variable costs are $12 a unit and fixed costs are $100,000.What must total sales be to break even?

If the selling price and the variable cost per unit both increase 10 percent and fixed costs do not change,what is the effect on the contribution margin per unit and the contribution margin ratio?

Consider the income statement for Bayless Company: What is the break-even point in sales dollars (rounded to the nearest dollar) ?

Tennenholtz Company's break-even graph is depicted below.Which area indicates the break-even point?

Consider the income statement for Pickbury Farm: At what sales level does Pickbury achieve net income of $200,000?

Break-even sales volume in units is determined by:

Tennenholtz Company's break-even graph is depicted below.The line labeled "C" is:

Queen,Ltd.has one product.Its sales price and variable cost per unit are $25 and $20,respectively.Last year,Queen sold 25,000 units,which was 5,000 more than the break-even point.What were Queen's fixed expenses?

Chase Company's new product is expected to have a sales price of $16 and variable unit price of $8.Fixed costs are expected to be $560,000.What is the break-even point in units?