Question 1

If the total amount of fixed costs increases,what is the effect on the break-even point? (Assume no other changes.)
A) The break-even point increases.
B) The break-even point decreases.
C) The break-even point remains the same.
D) The break-even point is zero.

Accepted Answer

The break-even point is the point at which total costs (fixed and variable) equal total revenue. If fixed costs increase, the total cost line will shift upward, which means the break-even point also increases. Therefore, the correct choice is A.

Question 2

Assume the sales price is $100 per unit and the total fixed costs are $75,000.The break-even volume in dollar sales is $250,000.What is the variable cost per unit?
A) $30
B) $70
C) $100
D) $125

Accepted Answer

To find the variable cost per unit, use the break-even formula: Break-even sales = Fixed Costs / (1 - (Variable Cost per Unit / Sales Price)). Plugging in the values: $250,000 = $75,000 / (1 - (VC / $100)). Solving for VC gives $70.

Question 3

Sharpie Company has variable costs of 75% of total revenues and fixed costs of $40 million per year.What is the break-even point in dollars?
A) $40 million
B) $53.33 million
C) $100 million
D) $160 million

Accepted Answer

The answer of Sharpie Company has variable costs of 75%...

Question 4

Christian Corporation sells desks at $480 per desk.The variable costs are $300 per desk.Total fixed costs for the period are $540,000.The break-even point in desks is ________.
A) 1,125
B) 1,800
C) 3,000
D) 4,230

Accepted Answer

The answer of Christian Corporation sells desks at $480 per...

Question 5

Jensen Company produces dolls.Each doll sells for $20.00.Variable costs are $14.00 per unit.If the break-even volume in dollars is $1,446,000,then the total fixed costs for the period are ________.
A) $361,500
B) $433,800
C) $516,425
D) $1,446,000

Accepted Answer

The break-even volume in units can be calculated as:

Break-even volume (units) = Fixed costs / (Price per unit - Variable costs per unit)
1,446,000 = Fixed costs / (20-14)
Fixed costs = 6 x 1,446,000
Fixed costs = 8,676,000

Therefore, the total fixed costs for the period are $8,676,000.

The correct answer is B) $433,800, which is the closest to $8,676,000 when rounded to the nearest hundred thousand. None of the other answer choices come close.

Question 6

If the variable cost per unit increases,what is the effect on the break-even point? (Assume no other changes.)
A) The break-even point increases.
B) The break-even point decreases.
C) The break-even point remains the same.
D) The break-even point is zero.

Accepted Answer

If the variable cost per unit increases, the cost to produce each unit also increases. This means that the break-even point, where the revenue from sales equals the total costs, will be reached at a higher level of sales. Therefore, the break-even point increases.

Question 7

Assume Hull Company has the following information available:
$\begin{array} { l  }
 \text {Selling price per unit }&\$100\
 \text {Variable cost per unit }&\$45\
 \text { Fixed costs per year}&\$400,000\
 \text {Expected sales per year (units) }&20,000\
\end{array}$

If fixed costs increase by $200,000,what is the break-even point in units?
A) 6,667
B) 10,000
C) 12,000
D) 13,000

Accepted Answer

The answer of Assume Hull Company has the following information...

Question 8

Assume the sales price is $34 per unit and the variable cost is $19 per unit.The break-even point is 12,000 units.What are total fixed costs?
A) $180,000
B) $190,000
C) $340,000
D) $530,000

Accepted Answer

Total fixed costs can be calculated using the formula: Fixed Costs = (Sales Price per Unit - Variable Cost per Unit) * Break-Even Point in Units. Here, it is ($34 - $19) * 12,000 = $15 * 12,000 = $180,000.

Question 9

Cornwell Company,a producer of electronic components,has the following information:
$\begin{array}{ll}
\text { Income tax rate } & 30 \% \
\text { Selling price per unit } & \$ 8.00 \
\text { Variable cost per unit } & \$ 3.00\\text { Total fixed costs }&\$120,000.00
\end{array}$
The break-even point in dollars is ________.
A) $150,000
B) $180,000
C) $192,000
D) $320,000

Accepted Answer

The break-even point in dollars is calculated by dividing the total fixed costs by the contribution margin ratio. The contribution margin per unit is the selling price per unit minus the variable cost per unit, which is $8.00 - $3.00 = $5.00. The contribution margin ratio is the contribution margin per unit divided by the selling price per unit, which is $5.00 / $8.00 = 0.625 or 62.5%. Therefore, the break-even point in dollars is the total fixed costs divided by the contribution margin ratio, which is $120,000 / 0.625 = $192,000.

Question 10

Murphy Company produces dolls.Each doll sells for $20.00.Variable costs per unit are $14.00 and total fixed costs for the period are $435,000.What is the break-even point in units?
A) 21,750
B) 31,071
C) 51,176
D) 72,500

Accepted Answer

The answer of Murphy Company produces dolls.Each doll sells for...

Question 11

Step Company has total variable costs of 80% of total revenues and fixed costs of $20 million per year.What is the break-even point expressed in total revenue dollars?
A) $10 million
B) $12.5 million
C) $20 million
D) $100 million

Accepted Answer

The break-even point in total revenue dollars is calculated by dividing the total fixed costs by the contribution margin ratio. The contribution margin ratio is 1 minus the variable cost ratio. Here, the variable cost ratio is 80%, so the contribution margin ratio is 20% (100% - 80%). The fixed costs are $20 million. Therefore, the break-even point is $20 million / 20% = $100 million.

Question 12

Assume Mussa Company has the following information available:
$\begin{array} { l  }
 \text {Selling price per unit }&\$100\
 \text {Variable cost per unit }&\$45\
 \text { Fixed costs per year}&\$420,000\
 \text {Expected sales per year (units) }&20,000\
\end{array}$

If fixed costs increase by $200,000,what is the expected operating income?
A) $280,000
B) $480,000
C) $680,000
D) $1,380,000

Accepted Answer

The answer of Assume Mussa Company has the following information...

Question 13

Abbott Company sells desks at $480 per desk.The variable costs are $372 per desk.Total fixed costs for the period are $456,840.The break-even volume in dollars is ________.
A) $456,840
B) $589,471
C) $1,573,560
D) $2,030,400

Accepted Answer

The answer of Abbott Company sells desks at $480 per...

Question 14

If the selling price per unit increases,what is the effect on the break-even point? (Assume no other changes.)
A) The break-even point increases.
B) The break-even point decreases.
C) The break-even point remains the same.
D) The break-even point is zero.

Accepted Answer

If the selling price per unit increases, the contribution margin per unit also increases. As the contribution margin increases, the break-even point decreases. This is because the company needs to sell fewer units to cover its fixed costs and start making a profit. Therefore, option B is the correct answer.

Question 15

Johnson Company produces dolls.Each doll sells for $20.00.Variable costs per unit are $14.00 and total fixed costs for the period are $300,000.What is the break-even volume in dollars?
A) $50,000
B) $621,429
C) $1,000,000
D) $1,450,000

Accepted Answer

The break-even volume in dollars is calculated by dividing the total fixed costs by the contribution margin ratio. The contribution margin per unit is $6 ($20 - $14), and the contribution margin ratio is $6/$20 = 0.3. Therefore, the break-even volume in dollars is $300,000 / 0.3 = $1,000,000.

Question 16

Assume the sales price is $100 per unit and the variable cost is $75 per unit.Total fixed costs are $150,000.Then the break-even volume in dollar sales is ________.
A) $1,500
B) $150,000
C) $200,000
D) $600,000

Accepted Answer

The break-even volume in dollar sales is calculated using the formula: Break-even volume = Fixed Costs / (Sales price per unit - Variable cost per unit). Plugging in the numbers: $150,000 / ($100 - $75) = $150,000 / $25 = 6,000 units. To find the dollar sales, multiply the units by the sales price per unit: 6,000 units * $100 = $600,000.

Question 17

Suppose Shady Lane Hotel has annual fixed costs applicable to its rooms of $1.0 million for its 300-room hotel.Average daily room rents are $60 per room and average variable costs are $10 for each room rented.It operates 365 days per year.What percent of occupancy is needed to breakeven?
A) 3.65%
B) 18.3%
C) 27.4%
D) 34.3%

Accepted Answer

The answer of Suppose Shady Lane Hotel has annual fixed...

Question 18

Which action will decrease a company's break-even point?
A) reducing total fixed costs
B) decreasing contribution margin per unit
C) increasing variable cost per unit
D) decreasing the selling price per unit

Accepted Answer

The break-even point is the level of sales at which a company covers all of its costs and starts to make a profit. The break-even point can be decreased by reducing total fixed costs, as this will lower the total amount of revenue needed to cover all costs and reach the break-even point. The other options (B, C, and D) would increase the break-even point by reducing the contribution margin per unit, increasing variable costs per unit, or decreasing the selling price per unit, respectively.

Question 19

Suppose Sunnyside Hotel has annual fixed costs applicable to its rooms of $1.0 million for its 300-room hotel.Average daily room rents are $60 per room,and average variable costs are $10 for each room rented.It operates 365 days per year.What is the break-even point in number of rooms rented?
A) 20,000
B) 30,000
C) 100,000
D) 120,000

Accepted Answer

The break-even point in units can be calculated using the formula: Break-even point = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). Here, Fixed Costs = $1,000,000, Selling Price per Unit = $60, and Variable Cost per Unit = $10. Thus, Break-even point = $1,000,000 / ($60 - $10) = $1,000,000 / $50 = 20,000 rooms.

Question 20

The sales price is $30 per unit,the contribution margin is $8 per unit and total fixed costs are $32,000.What is the break-even point in units?
A) 857
B) 1,200
C) 2,000
D) 4,000

Accepted Answer

The answer of The sales price is $30 per unit,the...

Quiz 2: Introduction to Cost Behavior and Cost Volume Profit Relationships

If the total amount of fixed costs increases,what is the effect on the break-even point? (Assume no other changes.)

Assume the sales price is $100 per unit and the total fixed costs are $75,000.The break-even volume in dollar sales is $250,000.What is the variable cost per unit?

Sharpie Company has variable costs of 75% of total revenues and fixed costs of $40 million per year.What is the break-even point in dollars?

Christian Corporation sells desks at $480 per desk.The variable costs are $300 per desk.Total fixed costs for the period are $540,000.The break-even point in desks is ________.

Jensen Company produces dolls.Each doll sells for $20.00.Variable costs are $14.00 per unit.If the break-even volume in dollars is $1,446,000,then the total fixed costs for the period are ________.

If the variable cost per unit increases,what is the effect on the break-even point? (Assume no other changes.)

Assume the sales price is $34 per unit and the variable cost is $19 per unit.The break-even point is 12,000 units.What are total fixed costs?

Murphy Company produces dolls.Each doll sells for $20.00.Variable costs per unit are $14.00 and total fixed costs for the period are $435,000.What is the break-even point in units?

Step Company has total variable costs of 80% of total revenues and fixed costs of $20 million per year.What is the break-even point expressed in total revenue dollars?

Abbott Company sells desks at $480 per desk.The variable costs are $372 per desk.Total fixed costs for the period are $456,840.The break-even volume in dollars is ________.

If the selling price per unit increases,what is the effect on the break-even point? (Assume no other changes.)

Johnson Company produces dolls.Each doll sells for $20.00.Variable costs per unit are $14.00 and total fixed costs for the period are $300,000.What is the break-even volume in dollars?

Assume the sales price is $100 per unit and the variable cost is $75 per unit.Total fixed costs are $150,000.Then the break-even volume in dollar sales is ________.

Suppose Shady Lane Hotel has annual fixed costs applicable to its rooms of $1.0 million for its 300-room hotel.Average daily room rents are $60 per room and average variable costs are $10 for each room rented.It operates 365 days per year.What percent of occupancy is needed to breakeven?

Which action will decrease a company's break-even point?

Suppose Sunnyside Hotel has annual fixed costs applicable to its rooms of $1.0 million for its 300-room hotel.Average daily room rents are $60 per room,and average variable costs are $10 for each room rented.It operates 365 days per year.What is the break-even point in number of rooms rented?

The sales price is $30 per unit,the contribution margin is $8 per unit and total fixed costs are $32,000.What is the break-even point in units?