Question 1

The only numbers that change from selling different quantities of packages are total revenues.

Accepted Answer

The only numbers that change from selling different quantities of packages are total revenues and total variable costs.

Question 2

In the equation method,revenues in each column are calculated as:

Accepted Answer

In the equation method, revenues are calculated by multiplying the selling price (SP) by the quantity of units sold (Q). Therefore, the correct choice is D.

Question 3

The Bluebird Factory reported $1,000,000 in total revenues and $60,000 total variable costs during the previous year.
Required:
Compute the contribution margin.

Accepted Answer

C)[($1,000,000 - $60,000)] = $940,000

Question 4

The difference between total revenues and total variable costs is:

Accepted Answer

The difference between total revenues and total variable costs is the contribution margin. This represents the amount of revenue that exceeds variable costs and is available to cover fixed costs and provide profit.

Question 5

Which of the following is not an assumption of cost-volume-profit (CVP)analysis?

Accepted Answer

Option (E) states that the total costs are never separated into components in CVP analysis, which is not correct. In fact, Option (B) states that total costs can be separated into two components (variable and fixed costs). Therefore, option (E) is not an assumption of CVP analysis.

Question 6

The graph method is useful to managers because it helps them visualize the relationships between total revenues and total costs.

Accepted Answer

The graph method is a common tool used in managerial accounting to create a visual representation of the relationship between total revenues and total costs. By plotting these two data sets on the same graph, managers can quickly see where their expenses are highest and how changes in revenue affect their overall profitability. This information is vital for making informed decisions about pricing, production levels, and marketing strategies, among other things.

Question 7

A company reported a contribution margin per unit of $75 and it reported that the managers sold a total of 40 units.
Required:
Compute the contribution margin.

Accepted Answer

C)[($75 × 40)] = $3,000

Question 8

A manager at the Food Pantry reported contribution margin of $3,000 and revenues at the store were $8,500.
Required:
Compute the contribution margin percentage.

Accepted Answer

A)[($3,000 / $8,500)] = .3529% or 35.29% contribution margin percentage

Question 9

Contribution margin indicates why operating income changes as the number of units sold changes.

Accepted Answer

Contribution margin is defined as the amount of revenue left over after subtracting all variable expenses directly related to the production of goods or services. It helps explain how changes in sales volume affect operating income, since as sales increase or decrease, the contribution margin per unit remains constant and the total contribution margin changes proportionally. Therefore, contribution margin is essential in determining the breakeven point and assessing the profitability of a business.

Question 10

The contribution margin per unit is useful because it provides a second way to calculate the contribution margin.

Accepted Answer

The contribution margin per unit is calculated by subtracting the variable cost per unit from the selling price per unit. It is useful because it provides a different way to calculate the contribution margin, which is the amount that goes towards covering fixed costs and generating profits. By knowing the contribution margin per unit, a business can determine how many units it needs to sell in order to break even or reach its desired profit level.

Question 11

A shelter sells products and it contributes proceeds to needy people in the community.The selling price of a product is $80.00 and the manager at the shelter reported that the variable cost per unit is $25.00.
Required:
Compute the contribution margin per unit.

Accepted Answer

D)[($80 - $25)] = $55 contribution margin per unit.

Question 12

The equation method and the contribution margin method are most useful when managers want to determine operating income at a few specific levels of sales.

Accepted Answer

The equation method and the contribution margin method are both used for calculating operating income at specific levels of sales.

Question 13

Just as a cost driver is any factor that affects costs,a ________ ________ is a variable,such as volume,that casually affects revenues.

Accepted Answer

A revenue driver is a variable that has a causal effect on a company's revenue. Examples could include the volume of sales or the number of customers. This is similar to how a cost driver affects a company's costs. The other choices are not as relevant to this concept.

Question 14

Managers use contribution margin analysis as a quick and handy way to evaluate the effect of changes in ________ on operating income.

Accepted Answer

The answer of Managers use contribution margin analysis as a...

Question 15

Contribution margin percentage is not a useful tool to calculate the effect of a change in revenues on contribution margin.

Accepted Answer

The contribution margin is in fact a useful tool to calculate the effect of a change in revenues on the contribution margin.

Question 16

The Factory Shoppe reported the following:
  
Review the following contribution income statement for different quantities of packages sold at the Factory Shoppe.Discuss the effect of the contribution margin as operating income increases.

Accepted Answer

The answer of The Factory Shoppe reported the following:
 ...

Question 17

The manager at Mary's Floral Service reported the sale of 600 units of a single product that resulted in $75,000 of sales revenue,$15,000 in variable costs,and $8,000 of fixed costs.
Required:
Compute the contribution margin percentage.

Accepted Answer

C)($75,000 - $15,000)= $60,000 / $75,000] = 80%

Question 18

The term(s)used to describe the behavior and relationship among elements as changes occur in units sold,selling price,variable cost per unit,or fixed costs of product is:

Accepted Answer

The behavior and relationship among elements as changes occur in units sold, selling price, variable cost per unit, or fixed costs of a product is referred to as cost volume profit analysis (CVP). CVP is a vital tool in management accounting, and it helps in analyzing the relationship between the sales volume, costs, and profit of a business.

Question 19

A manager at the Film Shoppe at the mall reported that the company had a contribution margin of $3,000 and total variable costs were $25.00.
Required:
Compute the operating income.

Accepted Answer

C)[($3,000 - $25)] = $2,750 total operating income.

Question 20

The tool useful for calculating contribution margin and operating income is:

Accepted Answer

The tool useful for calculating contribution margin and operating income is contribution margin per unit. This is because contribution margin per unit indicates the amount by which sales exceed variable costs per unit. By multiplying the contribution margin per unit by the number of units sold, we can calculate the total contribution margin, which is then subtracted from total fixed costs to arrive at operating income. Therefore, option D is the correct answer.

Quiz 3: Cost-Volume-Profit Analysis

The only numbers that change from selling different quantities of packages are total revenues.

In the equation method,revenues in each column are calculated as:

The Bluebird Factory reported $1,000,000 in total revenues and $60,000 total variable costs during the previous year. Required: Compute the contribution margin.

The difference between total revenues and total variable costs is:

Which of the following is not an assumption of cost-volume-profit (CVP) analysis?

The graph method is useful to managers because it helps them visualize the relationships between total revenues and total costs.

A company reported a contribution margin per unit of $75 and it reported that the managers sold a total of 40 units. Required: Compute the contribution margin.

A manager at the Food Pantry reported contribution margin of $3,000 and revenues at the store were $8,500. Required: Compute the contribution margin percentage.

Contribution margin indicates why operating income changes as the number of units sold changes.

The contribution margin per unit is useful because it provides a second way to calculate the contribution margin.

A shelter sells products and it contributes proceeds to needy people in the community.The selling price of a product is $80.00 and the manager at the shelter reported that the variable cost per unit is $25.00. Required: Compute the contribution margin per unit.

The equation method and the contribution margin method are most useful when managers want to determine operating income at a few specific levels of sales.

Just as a cost driver is any factor that affects costs,a is a variable,such as volume,that casually affects revenues.

Managers use contribution margin analysis as a quick and handy way to evaluate the effect of changes in ________ on operating income.

Contribution margin percentage is not a useful tool to calculate the effect of a change in revenues on contribution margin.

The Factory Shoppe reported the following: Review the following contribution income statement for different quantities of packages sold at the Factory Shoppe.Discuss the effect of the contribution margin as operating income increases.

The manager at Mary's Floral Service reported the sale of 600 units of a single product that resulted in $75,000 of sales revenue,$15,000 in variable costs,and $8,000 of fixed costs. Required: Compute the contribution margin percentage.

The term(s) used to describe the behavior and relationship among elements as changes occur in units sold,selling price,variable cost per unit,or fixed costs of product is:

A manager at the Film Shoppe at the mall reported that the company had a contribution margin of $3,000 and total variable costs were $25.00. Required: Compute the operating income.

The tool useful for calculating contribution margin and operating income is: