Question 1

Ironwood Inc.has a variable cost ratio of 60% and fixed costs of $90,000.What sales revenue is needed to generate a $120,000 profit?

Accepted Answer

A)  $128,572
B)  $225,000
C)  $375,000
D)  $525,000E) A) and C)
F) B) and D)

Question 2

Akron Corp.had a margin of safety of $500,000 last month,with sales revenue of $1,250,000 and fixed costs of $150,000.
a.What are break-even sales?
b.What is the contribution margin ratio?
c.How much profit did Akron earn last month?
d.How much would sales have to be for Akron to earn profit of 500,000?

Accepted Answer

a.$750,000 = $1,250,000 - $500,000
b.20%...

Question 3

Dancer Corp.has a selling price of $20 per unit,and variable costs of $10 per unit.When 12,000 units are sold,profits equaled $35,000.How many units must be sold to break-even?

Accepted Answer

A)  32,300
B)  20,400
C)  24,366
D)  8,500E) A) and C)
F) B) and D)

Question 4

Frontier Corp.has fixed costs of $300,000 and profit of $150,000.What is its degree of operating leverage?

Accepted Answer

A)  0.33
B)  1.67
C)  2.50
D)  3.00E) B) and D)
F) None of the above D

Question 5

Vesper Company has sales of $200,000,variable costs of $8 per unit,fixed costs of $50,000,and a profit of $30,000.How many units were sold?

Accepted Answer

A)  10,000
B)  15,000
C)  20,000
D)  25,000E) All of the above
F) B) and C)

Question 6

Which of the following statements is correct about the break-even point?

Accepted Answer

A)  The break-even point is the point where a company achieves its target profit.
B)  The break-even point is the point where all variable costs are covered (but fixed costs are not) .
C)  The break-even point is the point where all fixed costs are covered (but variable costs are not) .
D)  The break-even point quantifies the number of units that must be sold to cover total costs with zero profit.E) C) and D)
F) B) and D)

Question 7

Roland had revenues of $600,000 in March.Fixed costs in March were $200,000 and profit was $40,000.Answer the following questions:
a.What was the contribution margin percentage?
b.What monthly sales volume (in dollars)would be needed to break-even?
c.What sales volume (in dollars)would be needed to earn $150,000?

Accepted Answer

a.40% = ($200,000 + $40,000)/$600,000
b....

Question 8

Keith Corp.has sales of $200,000,a contribution margin ratio of 35%,and a profit of $40,000.If 10,000 units were sold,what is the variable cost per unit?

Accepted Answer

A)  $13.00
B)  $20.00
C)  $7.00
D)  $3.00E) A) and D)
F) B) and C)

Question 9

Megan,Inc.has fixed costs of $400,000,sales price of $40,and variable cost of $30 per unit.How many units must be sold to earn profit of $80,000?

Accepted Answer

A)  2,000
B)  10,000
C)  40,000
D)  48,000E) B) and C)
F) A) and D)

Question 10

Target units equals fixed costs plus target profit divided by the unit contribution margin.

Accepted Answer

A) True 
 B)False  True

Question 11

Which of the following statements is not correct about cost-volume-profit analysis?

Accepted Answer

A)  CVP analysis is a decision-making tool for managers.
B)  CVP analysis focuses on the relationship among volume and mix of units sold,prices,variable costs,fixed costs,and profit.
C)  CVP analysis works best when all variables are changed concurrently.
D)  Managers use CVP analysis to evaluate how changing one key variable will impact profitability,while holding everything else constant.E) A) and C)
F) A) and D)

Question 12

Cost-volume-profit analysis assumes that all costs can be accurately described as either fixed or variable.

Accepted Answer

A) True 
 B)False

Question 13

Last month Stagecoach Company had a $60,000 loss on sales of $300,000.Fixed costs are $120,000 a month.What sales revenue is needed for Stagecoach to break even?

Accepted Answer

A)  $360,000
B)  $480,000
C)  $600,000
D)  $420,000E) B) and C)
F) C) and D)

Question 14

Maggie Corp.has a selling price of $20 per unit,variable costs of $10 per unit,and fixed costs of $140,000.How many units must be sold to break even?

Accepted Answer

A)  7,000
B)  14,000
C)  3,500
D)  2,334E) B) and C)
F) A) and D) B

Question 15

Degree of operating leverage is used to:

Accepted Answer

A)  calculate change in sales given change in profit.
B)  calculate change in profit given change in sales.
C)  calculate break-even sales given change in sales.
D)  calculate break-even sales given change in profit.E) A) and B)
F) A) and C)

Question 16

Jasmine Inc.sells a product for $50 per unit.Variable costs per unit are $30,and monthly fixed costs are $150,000.Answer the following questions:
a.What is the break-even point in units?
b.What unit sales would be required to earn a target profit of $100,000?
c.Assume they achieve the level of sales required in part b,what is the margin of safety in sales dollars?

Accepted Answer

a.7,500 units = $150,000/($50 - $30)
b.1...

Question 17

Last month Empire Company had a $30,000 profit on sales of $250,000.Fixed costs are $60,000 a month.By how much would sales be able to decrease for Empire to still break even?

Accepted Answer

A)  $90,000
B)  $83,333
C)  $166,667
D)  $280,000E) B) and D)
F) B) and C)

Question 18

Frontier Corp.sells units for $50,has unit variable costs of $20,and fixed costs of $300,000.Frontier sells 15,000 units.If sales increase 20%,by how much will profits increase?

Accepted Answer

A)  20%
B)  30%
C)  60%
D)  90%E) All of the above
F) A) and B)

Question 19

Merlot,Inc.has fixed costs of $200,000,sales price of $50,and variable cost of $30 per unit.How many units must be sold to earn profit of $80,000?

Accepted Answer

A)  2,800
B)  11,200
C)  14,000
D)  202,400E) A) and B)
F) A) and D)

Question 20

Idaho Corp.has fixed costs of $20,000 and a contribution margin ratio of 50%.Currently,sales are $75,000.What is Idaho's margin of safety?

Accepted Answer

A)  $28,000
B)  $35,000
C)  $42,000
D)  $70,000E) All of the above
F) B) and D)

Exam 6: Cost-Volume-Profit Analysis

Ironwood Inc.has a variable cost ratio of 60% and fixed costs of $90,000.What sales revenue is needed to generate a $120,000 profit?

Correct Answer
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Correct Answer
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a.$750,000 = $1,250,000 - $500,000
b.20%...
View Answer

Dancer Corp.has a selling price of $20 per unit,and variable costs of $10 per unit.When 12,000 units are sold,profits equaled $35,000.How many units must be sold to break-even?

Correct Answer
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Frontier Corp.has fixed costs of $300,000 and profit of $150,000.What is its degree of operating leverage?

Correct Answer
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D

Vesper Company has sales of $200,000,variable costs of $8 per unit,fixed costs of $50,000,and a profit of $30,000.How many units were sold?

Correct Answer
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Which of the following statements is correct about the break-even point?

Correct Answer
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Correct Answer
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a.40% = ($200,000 + $40,000)/$600,000
b....
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Keith Corp.has sales of $200,000,a contribution margin ratio of 35%,and a profit of $40,000.If 10,000 units were sold,what is the variable cost per unit?

Correct Answer
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Megan,Inc.has fixed costs of $400,000,sales price of $40,and variable cost of $30 per unit.How many units must be sold to earn profit of $80,000?

Correct Answer
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Target units equals fixed costs plus target profit divided by the unit contribution margin.

Correct Answer
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True

Which of the following statements is not correct about cost-volume-profit analysis?

Correct Answer
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Cost-volume-profit analysis assumes that all costs can be accurately described as either fixed or variable.

Correct Answer
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Last month Stagecoach Company had a $60,000 loss on sales of $300,000.Fixed costs are $120,000 a month.What sales revenue is needed for Stagecoach to break even?

Correct Answer
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Maggie Corp.has a selling price of $20 per unit,variable costs of $10 per unit,and fixed costs of $140,000.How many units must be sold to break even?

Correct Answer
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B

Degree of operating leverage is used to:

Correct Answer
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Correct Answer
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a.7,500 units = $150,000/($50 - $30)
b.1...
View Answer

Last month Empire Company had a $30,000 profit on sales of $250,000.Fixed costs are $60,000 a month.By how much would sales be able to decrease for Empire to still break even?

Correct Answer
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Frontier Corp.sells units for $50,has unit variable costs of $20,and fixed costs of $300,000.Frontier sells 15,000 units.If sales increase 20%,by how much will profits increase?

Correct Answer
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Merlot,Inc.has fixed costs of $200,000,sales price of $50,and variable cost of $30 per unit.How many units must be sold to earn profit of $80,000?

Correct Answer
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Idaho Corp.has fixed costs of $20,000 and a contribution margin ratio of 50%.Currently,sales are $75,000.What is Idaho's margin of safety?

Correct Answer
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Exam 6: Cost-Volume-Profit Analysis

Ironwood Inc.has a variable cost ratio of 60% and fixed costs of $90,000.What sales revenue is needed to generate a $120,000 profit?

Correct AnswerverifiedShow Answer

Correct Answerverifieda.$750,000 = $1,250,000 - $500,000b.20%...View AnswerShow Answer

Dancer Corp.has a selling price of $20 per unit,and variable costs of $10 per unit.When 12,000 units are sold,profits equaled $35,000.How many units must be sold to break-even?

Correct AnswerverifiedShow Answer

Frontier Corp.has fixed costs of $300,000 and profit of $150,000.What is its degree of operating leverage?

Correct AnswerverifiedD

Vesper Company has sales of $200,000,variable costs of $8 per unit,fixed costs of $50,000,and a profit of $30,000.How many units were sold?

Correct AnswerverifiedShow Answer

Which of the following statements is correct about the break-even point?

Correct AnswerverifiedShow Answer

Correct Answerverifieda.40% = ($200,000 + $40,000)/$600,000b....View AnswerShow Answer

Keith Corp.has sales of $200,000,a contribution margin ratio of 35%,and a profit of $40,000.If 10,000 units were sold,what is the variable cost per unit?

Correct AnswerverifiedShow Answer

Megan,Inc.has fixed costs of $400,000,sales price of $40,and variable cost of $30 per unit.How many units must be sold to earn profit of $80,000?

Correct AnswerverifiedShow Answer

Target units equals fixed costs plus target profit divided by the unit contribution margin.

Correct AnswerverifiedTrue

Which of the following statements is not correct about cost-volume-profit analysis?

Correct AnswerverifiedShow Answer

Cost-volume-profit analysis assumes that all costs can be accurately described as either fixed or variable.

Correct AnswerverifiedShow Answer

Last month Stagecoach Company had a $60,000 loss on sales of $300,000.Fixed costs are $120,000 a month.What sales revenue is needed for Stagecoach to break even?

Correct AnswerverifiedShow Answer

Maggie Corp.has a selling price of $20 per unit,variable costs of $10 per unit,and fixed costs of $140,000.How many units must be sold to break even?

Correct AnswerverifiedB

Degree of operating leverage is used to:

Correct AnswerverifiedShow Answer

Correct Answerverifieda.7,500 units = $150,000/($50 - $30)b.1...View AnswerShow Answer

Last month Empire Company had a $30,000 profit on sales of $250,000.Fixed costs are $60,000 a month.By how much would sales be able to decrease for Empire to still break even?

Correct AnswerverifiedShow Answer

Frontier Corp.sells units for $50,has unit variable costs of $20,and fixed costs of $300,000.Frontier sells 15,000 units.If sales increase 20%,by how much will profits increase?

Correct AnswerverifiedShow Answer

Merlot,Inc.has fixed costs of $200,000,sales price of $50,and variable cost of $30 per unit.How many units must be sold to earn profit of $80,000?

Correct AnswerverifiedShow Answer

Idaho Corp.has fixed costs of $20,000 and a contribution margin ratio of 50%.Currently,sales are $75,000.What is Idaho's margin of safety?

Correct AnswerverifiedShow Answer

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a.$750,000 = $1,250,000 - $500,000
b.20%...
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D

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a.40% = ($200,000 + $40,000)/$600,000
b....
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True

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B

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a.7,500 units = $150,000/($50 - $30)
b.1...
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Correct Answer
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