Question 1

Walters Corporation sells radios for $50 per unit.The fixed costs are $420,000 and the variable costs are 60% of the selling price.As a result of new automated equipment, it is anticipated that fixed costs will increase by $100,000 and variable costs will be 50% of the selling price.The new break-even point in units is:
A)21,000
B)20,800
C)20,600
D)16,800

Accepted Answer

The answer of Walters Corporation sells radios for $50 per...

Question 2

The CVP income statement
A)is distributed internally and externally.
B)classifies costs by functions.
C)discloses contribution margin in the body of the statement.
D)will reflect a different net income than the traditional income statement.

Accepted Answer

The CVP (Cost-Volume-Profit) income statement discloses contribution margin in the body of the statement, which is a key difference from traditional income statements. This format is specifically designed to aid in decision-making by highlighting the contribution margin, which is sales revenue minus variable costs.

Question 3

O'Malley Company sells 100,000 units for $13 a unit.Fixed costs are $350,000 and net income is $250,000.What should be reported as variable expenses in the CVP income statement?
A)$600,000.
B)$700,000.
C)$950,000.
D)$1,050,000.

Accepted Answer

To calculate variable expenses, we can use the contribution margin formula:

Contribution Margin = Sales - Variable Expenses

Contribution Margin per unit = Selling Price per unit - Variable Expenses per unit

Contribution Margin Ratio = Contribution Margin / Sales

Using the given information:

Sales = 100,000 units x $13 per unit = $1,300,000
Fixed Costs = $350,000
Net Income = $250,000

Contribution Margin = Sales - Fixed Costs - Net Income
Contribution Margin = $1,300,000 - $350,000 - $250,000
Contribution Margin = $700,000

Contribution Margin per unit = Selling Price per unit - Variable Expenses per unit
$13 per unit - Variable Expenses per unit = $7 per unit
Variable Expenses per unit = $6 per unit

Variable Expenses = 100,000 units x $6 per unit = $600,000

Therefore, the best choice is B, $700,000.

Question 4

Pascal, Inc.is planning to sell 800,000 units for $1.50 per unit.The contribution margin ratio is 20%.If Pascal will break even at this level of sales, what are the fixed costs?
A)$240,000.
B)$560,000.
C)$800,000.
D)$960,000.

Accepted Answer

The contribution margin per unit is $1.50 * 20% = $0.30. At break-even, total contribution margin equals fixed costs. Therefore, 800,000 units * $0.30 = $240,000 in fixed costs.

Question 5

The break-even point is where
A)total sales equal total variable costs.
B)contribution margin equals total fixed costs.
C)total variable costs equal total fixed costs.
D)total sales equal total fixed costs.

Accepted Answer

The break-even point is where the contribution margin equals total fixed costs. This is the point where the company is no longer making or losing money, but is just covering its costs. Option A is incorrect because it does not take into account fixed costs. Option C is incorrect because it does not take into account the contribution margin. Option D is incorrect because it does not take into account variable costs.

Question 6

April Industries sells a product with a contribution margin of $12 per unit, fixed costs of $148,800, and sales for the current year of $200,000.How much is April's break-even point?
A)9,200 units
B)$51,200
C)12,400 units
D)4,267 units

Accepted Answer

The break-even point in units is calculated by dividing the fixed costs by the contribution margin per unit. $148,800 / $12 = 12,400 units.

Question 7

Kaplan, Inc.produces flash drives for computers, which it sells for $20 each.The variable cost to make each flash drive is $13.During April, 700 drives were sold.Fixed costs for April were $2 per unit for a total of $1,400 for the month.How much is the monthly break-even level of sales in dollars for Kaplan?
A)$200
B)$4,000
C)$14,000
D)$8,400

Accepted Answer

The answer of Kaplan, Inc.produces flash drives for computers, which...

Question 8

Boswell company reported the following information for the current year: Sales (50,000 units) $1,000,000, direct materials and direct labor $500,000, other variable costs $50,000, and fixed costs $270,000.What is Boswell's break-even point in units?
A)24,546.
B)30,000.
C)38,334.
D)42,188.

Accepted Answer

The answer of Boswell company reported the following information for...

Question 9

Boswell company reported the following information for the current year: Sales (50,000 units) $1,000,000, direct materials and direct labor $500,000, other variable costs $50,000, and fixed costs $270,000.What is Boswell's contribution margin ratio?
A)68%.
B)45%.
C)32%.
D)55%.

Accepted Answer

The answer of Boswell company reported the following information for...

Question 10

A CVP graph does not include a
A)variable cost line.
B)fixed cost line.
C)sales line.
D)total cost line.

Accepted Answer

The answer of A CVP graph does not include a
A)variable...

Question 11

Cunningham, Inc.sells MP3 players for $60 each.Variable costs are $40 per unit, and fixed costs total $90,000.What sales are needed by Cunningham to break even?
A)$120,000.
B)$225,000.
C)$270,000.
D)$360,000.

Accepted Answer

The answer of Cunningham, Inc.sells MP3 players for $60 each.Variable...

Question 12

Fixed costs are $2,400,000 and the contribution margin per unit is $150.What is the break-even point?
A)$6,000,000
B)$16,000,000
C)6,000 units
D)16,000 units

Accepted Answer

The break-even point in units is calculated by dividing the fixed costs by the contribution margin per unit: $2,400,000 / $150 = 16,000 units.

Question 13

Nelson Manufacturing has the following data: Variable costs are 60% of the unit selling price.
The contribution margin ratio is 40%.
The contribution margin per unit is $500.
The fixed costs are $300,000.
Which of the following does not express the break-even point?
A)$300,000 + .60X = X
B)$300,000 + .40X = X
C)$300,000 ÷ $500 = X
D)$300,000 ÷ .40 = X

Accepted Answer

The answer of Nelson Manufacturing has the following data: Variable...

Question 14

The break-even point cannot be determined by
A)computing it from a mathematical equation.
B)computing it using contribution margin.
C)reading the prior year's financial statements.
D)deriving it from a CVP graph.

Accepted Answer

The break-even point cannot be determined by reading the prior year's financial statements as they only show historical data and do not necessarily reflect future performance or changes in the business. The break-even point must be computed using mathematical equations, contribution margin, or CVP graph analysis.

Question 15

Gall Manufacturing sells a product for $50 per unit.The fixed costs are $735,000 and the variable costs are 60% of the selling price.As a result of new automated equipment, it is anticipated that fixed costs will increase by $175,000 and variable costs will be 50% of the selling price.The new break-even point in units is:
A)36,750.
B)36,400.
C)36,050.
D)29,400.

Accepted Answer

The answer of Gall Manufacturing sells a product for $50...

Question 16

Select the correct statement concerning the cost-volume-profit graph at right:

A)The point identified by "B" is the break-even point.
B)Line F is the variable cost line.
C)At point B, profits equal total costs.
D)Line E is the total cost line.

Accepted Answer

The answer of Select the correct statement concerning the cost-volume-profit...

Question 17

Cunningham, Inc.sells MP3 players for $60 each.Variable costs are $40 per unit, and fixed costs total $90,000.How many MP3 players must Cunningham sell to earn net income of $210,000?
A)15,000.
B)5,250.
C)3,750.
D)4,500.

Accepted Answer

To find the number of MP3 players needed to be sold to earn a net income of $210,000, use the formula: (Fixed Costs + Desired Net Income) / (Selling Price per Unit - Variable Cost per Unit). Here, it is ($90,000 + $210,000) / ($60 - $40) = 15,000 units.

Question 18

A company sells a product which has a unit sales price of $5, unit variable cost of $3 and total fixed costs of $180,000.The number of units the company must sell to break even is
A)90,000 units.
B)36,000 units.
C)360,000 units.
D)60,000 units.

Accepted Answer

Break-even point = Fixed costs / (Unit sales price - Unit variable cost)= 180,000 / (5 - 3)= 180,000 / 2= 90,000 units

Question 19

A company has total fixed costs of $200,000 and a contribution margin ratio of 20%.The total sales necessary to break even are
A)$800,000.
B)$1,000,000.
C)$250,000.
D)$240,000.

Accepted Answer

To find the break-even sales, divide the total fixed costs by the contribution margin ratio: $200,000 / 0.20 = $1,000,000.

Question 20

Fixed costs are $600,000 and the variable costs are 75% of the unit selling price.What is the break-even point in dollars?
A)$1,400,000
B)$1,800,000
C)$2,400,000
D)$800,000

Accepted Answer

The answer of Fixed costs are $600,000 and the variable...

Quiz 5: Merchandising Operations and the Multiple-Step Income Statement

The CVP income statement

O'Malley Company sells 100,000 units for $13 a unit.Fixed costs are $350,000 and net income is $250,000.What should be reported as variable expenses in the CVP income statement?

Pascal, Inc.is planning to sell 800,000 units for $1.50 per unit.The contribution margin ratio is 20%.If Pascal will break even at this level of sales, what are the fixed costs?

The break-even point is where

April Industries sells a product with a contribution margin of $12 per unit, fixed costs of $148,800, and sales for the current year of $200,000.How much is April's break-even point?

Boswell company reported the following information for the current year: Sales (50,000 units) $1,000,000, direct materials and direct labor $500,000, other variable costs $50,000, and fixed costs $270,000.What is Boswell's break-even point in units?

Boswell company reported the following information for the current year: Sales (50,000 units) $1,000,000, direct materials and direct labor $500,000, other variable costs $50,000, and fixed costs $270,000.What is Boswell's contribution margin ratio?

A CVP graph does not include a

Cunningham, Inc.sells MP3 players for $60 each.Variable costs are $40 per unit, and fixed costs total $90,000.What sales are needed by Cunningham to break even?

Fixed costs are $2,400,000 and the contribution margin per unit is $150.What is the break-even point?

Nelson Manufacturing has the following data: Variable costs are 60% of the unit selling price. The contribution margin ratio is 40%. The contribution margin per unit is $500. The fixed costs are $300,000. Which of the following does not express the break-even point?

The break-even point cannot be determined by

Select the correct statement concerning the cost-volume-profit graph at right:

Cunningham, Inc.sells MP3 players for $60 each.Variable costs are $40 per unit, and fixed costs total $90,000.How many MP3 players must Cunningham sell to earn net income of $210,000?

A company sells a product which has a unit sales price of $5, unit variable cost of $3 and total fixed costs of $180,000.The number of units the company must sell to break even is

A company has total fixed costs of $200,000 and a contribution margin ratio of 20%.The total sales necessary to break even are

Fixed costs are $600,000 and the variable costs are 75% of the unit selling price.What is the break-even point in dollars?