Question 1

Breakeven is the point where the sales revenues are exactly equal to the fixed costs.

Accepted Answer

Breakeven is the point where total sales revenues equal total costs (both fixed and variable), not just fixed costs.

Question 2

Reevis Company has fixed costs of $7,500. Their contribution margin ratio is 20%. What is the break-even point in sales dollars?

Accepted Answer

B) Calculations: $7,500/20% = $37,500

Question 3

Dalian Company provides the following information:  How much is the contribution margin per unit?

Accepted Answer

The answer of Dalian Company provides the following information: ...

Question 4

Breakeven is the point where the sales revenues are exactly equal to the total variable costs plus the total fixed costs.

Accepted Answer

This is correct. Breakeven occurs when there is no profit or loss, meaning that the sales revenues cover all of the costs.

Question 5

Fixed costs divided by the contribution margin per unit equals the breakeven point in unit sales.

Accepted Answer

This is the formula for calculating the breakeven point in units.

Question 6

Arturo Company's model A generator sells for $456 and model B sells for $390. The variable cost of model A is $404 and of model B is $320. If Arturo Company's sales incentives reward sales of the goods with highest contribution margin, the sales force will be motivated to push sales of model A more aggressively than model B.

Accepted Answer

Calculations:
$456 - $404 = $52
$390 - $320 = $70

Question 7

Dalian Company provides the following information:  What is the breakeven point in terms of units sold?

Accepted Answer

The information provided does not include any data that could help calculate the breakeven point.

Question 8

The breakeven point represents the sales volume at which the company's net income is zero.

Accepted Answer

The breakeven point is where the total revenue equals the total costs, including fixed and variable costs. At this point, the company has not generated any profit or loss, so the net income is zero.

Question 9

Paula sells hand-knitted scarves at the flea market. Each scarf sells for $25. Paula pays $30 to rent a vending space for one day. Her variable costs are $15 per scarf. How many scarves does she need to sell to break even?

Accepted Answer

B) Calculations: $30/($25 - $15) = 3

Question 10

If a unit sells for $11.40 and has a variable cost of $3.80, its contribution margin per unit is $7.60.

Accepted Answer

Contribution margin is calculated as the unit selling price minus the variable cost per unit. Thus, in this case, contribution margin per unit is $11.40 - $3.80 = $7.60.

Question 11

Both the income statement approach and the contribution margin approach will yield the same answer for calculating breakeven points.

Accepted Answer

Both the income statement approach and the contribution margin approach use the same formula to calculate the breakeven point, which is fixed costs divided by the contribution margin per unit or contribution margin ratio. Therefore, both approaches will yield the same answer.

Question 12

CVP analysis assumes that the ONLY factor that affects costs is change in volume.

Accepted Answer

The answer of CVP analysis assumes that the ONLY factor...

Question 13

Fixed costs divided by the contribution margin ratio equals the breakeven point in sales dollars.

Accepted Answer

This is the formula for calculating the breakeven point in sales dollars.

Question 14

Some companies use contribution margin rather than sales revenues as the basis of incentives for motivating sales persons because it will lead them to sell more of the higher margin goods.

Accepted Answer

Contribution margin is the difference between sales revenues and variable costs, and represents the amount of money that is available to cover fixed costs and contribute to profits. By focusing on contribution margin rather than sales revenues, salespersons may be more motivated to sell higher margin goods, which will contribute more to overall profits.

Question 15

Contribution margin is defined as the sales revenue minus the fixed costs.

Accepted Answer

Contribution margin is defined as the sales revenue minus the variable costs, not fixed costs.

Question 16

If all other factors are constant, an increase in fixed costs will increase the breakeven point.

Accepted Answer

Fixed costs are costs that do not vary with changes in production or sales levels. Therefore, an increase in fixed costs will cause a higher total cost and result in a higher breakeven point.

Question 17

Paula sells hand-knitted scarves at the flea market. Each scarf sells for $25. Paula pays $30 to rent a vending space for one day. Her variable costs are $15 per scarf. What total revenue amount does she need to earn to break even?

Accepted Answer

To break even, Paula needs to make enough revenue to cover her fixed costs (rent) and variable costs (the cost of making each scarf).

Fixed cost = $30
Variable cost per scarf = $15

Revenue needed to break even = Total cost

Total cost = Fixed Cost + Variable Cost

Total cost = $30 + ($15 x # of scarves sold)

To break even, revenue needs to be equal to total cost.

Revenue needed = $30 + ($15 x # of scarves sold)

Since each scarf sells for $25, we can set up an equation:

Revenue = $25 x # of scarves sold

Set revenue equal to the total cost to find the number of scarves Paula needs to sell to break even:

$25 x # of scarves sold = $30 + ($15 x # of scarves sold)

Simplify the equation:

$25 x # of scarves sold = $30 + $15 x # of scarves sold
$10 x # of scarves sold = $30
# of scarves sold = 3

Therefore, she needs to sell 3 scarves to break even.

Revenue needed = $25 x 3 = $75, so the answer is B.

Question 18

Dalian Company provides the following information:  What is the breakeven point in terms of sales revenues?

Accepted Answer

The answer of Dalian Company provides the following information: ...

Question 19

Arturo Company's model A generator sells for $456, and model B sells for $390. The variable cost of model A is $404 and of model B is $320. If Arturo sells more of model B than model A, it will generate lower revenues, but higher net income.

Accepted Answer

Calculations:
$456 - $404 = $52
$390 - $320 = $70

Question 20

Dalian Company provides the following information:  How much is the contribution margin ratio?

Accepted Answer

The answer of Dalian Company provides the following information: ...

Quiz 19: Cost-Volume-Profit Analysis

Breakeven is the point where the sales revenues are exactly equal to the fixed costs.

Reevis Company has fixed costs of $7,500. Their contribution margin ratio is 20%. What is the break-even point in sales dollars?

Dalian Company provides the following information: How much is the contribution margin per unit?

Breakeven is the point where the sales revenues are exactly equal to the total variable costs plus the total fixed costs.

Fixed costs divided by the contribution margin per unit equals the breakeven point in unit sales.

Dalian Company provides the following information: What is the breakeven point in terms of units sold?

The breakeven point represents the sales volume at which the company's net income is zero.

Paula sells hand-knitted scarves at the flea market. Each scarf sells for $25. Paula pays $30 to rent a vending space for one day. Her variable costs are $15 per scarf. How many scarves does she need to sell to break even?

If a unit sells for $11.40 and has a variable cost of $3.80, its contribution margin per unit is $7.60.

Both the income statement approach and the contribution margin approach will yield the same answer for calculating breakeven points.

CVP analysis assumes that the ONLY factor that affects costs is change in volume.

Fixed costs divided by the contribution margin ratio equals the breakeven point in sales dollars.

Some companies use contribution margin rather than sales revenues as the basis of incentives for motivating sales persons because it will lead them to sell more of the higher margin goods.

Contribution margin is defined as the sales revenue minus the fixed costs.

If all other factors are constant, an increase in fixed costs will increase the breakeven point.

Paula sells hand-knitted scarves at the flea market. Each scarf sells for $25. Paula pays $30 to rent a vending space for one day. Her variable costs are $15 per scarf. What total revenue amount does she need to earn to break even?

Dalian Company provides the following information: What is the breakeven point in terms of sales revenues?

Arturo Company's model A generator sells for $456, and model B sells for $390. The variable cost of model A is $404 and of model B is $320. If Arturo sells more of model B than model A, it will generate lower revenues, but higher net income.

Dalian Company provides the following information: How much is the contribution margin ratio?