Question 1

Which of the following would take place if a company increased its variable cost per unit?

Accepted Answer

C

Question 2

The unit contribution margin is calculated as the difference between:

Accepted Answer

The unit contribution margin is the amount of money that remains after subtracting variable costs from the selling price per unit. Therefore, the correct option is B, which subtracts the variable cost per unit from the selling price.

Question 3

At a volume of 20,000 units,Dries reported sales revenues of $1,000,000,variable costs of $300,000,and fixed costs of $260,000.The company's contribution margin per unit is:

Accepted Answer

Contribution margin per unit = (Sales revenues - Variable costs) / Number of units

= ($1,000,000 - $300,000) / 20,000

= $700,000 / 20,000

= $35 per unit

Question 4

The extent to which an organization uses fixed costs in its cost structure is measured by financial leverage.

Accepted Answer

The answer of The extent to which an organization uses...

Question 5

CVP analysis can be used to study the effect of:

Accepted Answer

CVP analysis takes into consideration the impact of changes in selling prices, variable costs, fixed costs, and product sales mix on a company's profitability. Therefore, all the options listed are correct.

Question 6

Assuming no change in sales volume,an increase in company's per-unit contribution margin would:

Accepted Answer

An increase in per-unit contribution margin means that more revenue is being generated per unit sold, which leads to an increase in the company's overall income. However, this assumption is based on no change in sales volume. If sales volume were to decrease or increase as a result of the increase in per-unit contribution margin, then the overall impact on income would depend on the extent of the change in sales volume.

Question 7

Which of the following would produce the largest increase in the contribution margin per unit?

Accepted Answer

A 7% increase in selling price directly increases the contribution margin per unit. This is because the selling price contributes to revenue and any increase in revenue directly contributes to the contribution margin.

Question 8

The difference between budgeted sales revenue and break-even sales revenue is the operating leverage.

Accepted Answer

The operating leverage is a measure of how sensitive a company's operating income is to changes in sales revenue. It is calculated as the ratio of contribution margin (sales revenue minus variable costs) to operating income. The difference between budgeted sales revenue and break-even sales revenue is a measure of a company's profitability and financial stability, but it does not directly relate to operating leverage.

Question 9

The break-even point is that level of activity where:

Accepted Answer

The break-even point is the level of activity where total revenue equals total cost. This means that the company is not making a profit or loss at this point, but rather breaking even. Therefore, choice A is the correct answer.

Question 10

Cost-volume-profit analysis is based on certain general assumptions.One of these assumptions is that product prices will remain constant as volume varies within the relevant range.

Accepted Answer

The assumption that product prices will remain constant within the relevant range is one of the fundamental assumptions of cost-volume-profit analysis. This assumption allows for the calculation of a consistent contribution margin per unit, which is used to determine the breakeven point and other key measures of profitability. However, it is important to note that in reality, product prices may not remain constant and may vary based on a number of different factors such as competition, market conditions, and changes in demand.

Question 11

The contribution-margin ratio is calculated as unit contribution margin divided by the selling price per unit.

Accepted Answer

The contribution-margin ratio is indeed calculated by dividing the unit contribution margin (selling price per unit minus variable cost per unit) by the selling price per unit.

Question 12

A company has fixed costs of $900 and a per-unit contribution margin of $3.Which of the following statement is (are)true?

Accepted Answer

The answer of A company has fixed costs of $900...

Question 13

The break-even point is that level of activity where total revenue equals total cost.

Accepted Answer

The break-even point is defined as the point where total revenue equals total cost, meaning that there is no profit or loss at that level of activity.

Question 14

A company that desires to lower its break-even point should strive to:

Accepted Answer

To lower the break-even point, a company needs to reduce the total cost required to produce and sell its products or services. Variable costs are directly tied to production and sales, so reducing them would be the most effective choice to lower the break-even point. Decreasing selling prices may increase sales volume, but it would also decrease the contribution margin per unit, making it harder to cover fixed costs. Increasing fixed costs may lead to more efficient production, but it does not necessarily reduce the break-even point. Selling more units could also be a viable option if the additional sales come with higher per-unit contribution margins, but it may not be a feasible strategy in all business situations.

Question 15

Sanderson sells a single product for $50 that has a variable cost of $30.Fixed costs amount to $5 per unit when anticipated sales targets are met.If the company sells one unit in excess of its break-even volume,profit will be:

Accepted Answer

To find the break-even volume, we need to use the formula:

Break-even volume = (fixed costs)/(price - variable cost)

In this case, the fixed costs are $5 per unit, the price is $50, and the variable cost is $30.

Break-even volume = ($5) / ($50 - $30) = 0.2 units

So, we need to sell at least 0.2 units to break even.

If we sell one unit in excess of the break-even volume, we will have sold a total of 1.2 units.

Revenue from 1.2 units = ($50/unit) x (1.2 units) = $60

Total variable cost = ($30/unit) x (1.2 units) = $36

Total fixed cost = ($5/unit) x (1.2 units) = $6

Profit = Revenue - Variable cost - Fixed cost

Profit = $60 - $36 - $6 = $18

Therefore, if the company sells one unit in excess of its break-even volume, the profit will be $18, which is closest to choice (B) $20.

Question 16

Which of the following would take place if a company experienced a decrease in fixed costs?

Accepted Answer

A decrease in fixed costs would result in a decrease in the company's break-even point. This means that the company would need to sell fewer units in order to cover its fixed and variable costs and begin to generate a profit. The other options are incorrect: income would not necessarily decrease (it could increase if sales increase), an increase in contribution margin would require an increase in revenue or decrease in variable costs, and a decrease in contribution margin would occur if the company were to decrease its selling price or increase its variable costs.

Question 17

The break-even point is that level of activity where:

Accepted Answer

The break-even point is the level of activity where the contribution margin (sales revenue minus variable costs) equals fixed costs. At this point, the company is neither earning a profit nor incurring a loss. Therefore, option B, where the contribution margin equals fixed cost, is the correct answer.

Question 18

Which of the following would take place if a company experienced an increase in fixed costs?

Accepted Answer

An increase in fixed costs means that the company's total costs have increased, which would cause the break-even point to increase. The break-even point is the level of sales at which total costs equal total revenues, so an increase in fixed costs would mean that the company would need to sell more units to cover its costs and reach the break-even point. Net income and contribution margin are not directly impacted by an increase in fixed costs.

Question 19

A recent income statement of Black Corporation reported the following data: 
If these data are based on the sale of 20,000 units,the contribution margin per unit would be:

Accepted Answer

The contribution margin per unit can be calculated by subtracting the variable costs per unit from the selling price per unit. 
The total revenue based on the sale of 20,000 units is $3,200,000 (20,000 x $160). The total variable costs based on the sale of 20,000 units is $1,200,000 (20,000 x $60). 
So the contribution margin per unit is:
($3,200,000 - $1,200,000) / 20,000 = $100 
Therefore, the best answer choice is B, $150, which is not listed as an option.

Question 20

At a volume of 20,000 units,Dries reported sales revenues of $1,000,000,variable costs of $300,000,and fixed costs of $260,000.The company's break-even point in units is:

Accepted Answer

The answer of At a volume of 20,000 units,Dries reported...

Quiz 7: Cost-Volume-Profit Analysis

Which of the following would take place if a company increased its variable cost per unit?

The unit contribution margin is calculated as the difference between:

At a volume of 20,000 units,Dries reported sales revenues of $1,000,000,variable costs of $300,000,and fixed costs of $260,000.The company's contribution margin per unit is:

The extent to which an organization uses fixed costs in its cost structure is measured by financial leverage.

CVP analysis can be used to study the effect of:

Assuming no change in sales volume,an increase in company's per-unit contribution margin would:

Which of the following would produce the largest increase in the contribution margin per unit?

The difference between budgeted sales revenue and break-even sales revenue is the operating leverage.

The break-even point is that level of activity where:

Cost-volume-profit analysis is based on certain general assumptions.One of these assumptions is that product prices will remain constant as volume varies within the relevant range.

The contribution-margin ratio is calculated as unit contribution margin divided by the selling price per unit.

A company has fixed costs of $900 and a per-unit contribution margin of $3.Which of the following statement is (are) true?

The break-even point is that level of activity where total revenue equals total cost.

A company that desires to lower its break-even point should strive to:

Sanderson sells a single product for $50 that has a variable cost of $30.Fixed costs amount to $5 per unit when anticipated sales targets are met.If the company sells one unit in excess of its break-even volume,profit will be:

Which of the following would take place if a company experienced a decrease in fixed costs?

The break-even point is that level of activity where:

Which of the following would take place if a company experienced an increase in fixed costs?

A recent income statement of Black Corporation reported the following data: If these data are based on the sale of 20,000 units,the contribution margin per unit would be:

At a volume of 20,000 units,Dries reported sales revenues of $1,000,000,variable costs of $300,000,and fixed costs of $260,000.The company's break-even point in units is: