Question 1

The formula for calculating units required to meet target operating income is

Accepted Answer

A)  Total fixed costs plus target operating income divided by contribution margin per unit.
B)  Total fixed costs divided by contribution margin plus target operating income.
C)  Contribution margin per unit divided by total fixed costs plus target operating income.
D)  Contribution margin plus target operating income divided by total fixed costs.E) None of the above
F) A) and C)

Question 2

Whereas cost-plus pricing starts with the cost,target costing starts with the price customers are willing to pay.

Accepted Answer

A) True 
 B)False

Question 3

On the breakeven graph,any level of sales to the left of the breakeven point represents a profit.

Accepted Answer

A) True 
 B)False

Question 4

Given that selling price is $200, unit cost is $120, and a profit of $80. What is the company’s markup percentage?

Accepted Answer

A)  50%
B)  66.7%
C)  150%
D)  250% E) B) and D)
F) None of the above

Question 5

Assume a company wishes to maintain a markup of 35% on a product with a unit cost of $25 $14 variable and $11 fixed. What amount will the company set as the selling price?

Accepted Answer

A)   $30.00
B)   $33.75
C)   $38.46
D)   $43.90E) A) and D)
F) B) and D)

Question 6

A company requires $1,360,000 in sales to meet its net income target.Its contribution margin is 30%,and fixed costs are $240,000.What is the target operating income?

Accepted Answer

A)  $408,000
B)  $312,000
C)  $560,000
D)  $168,000E) B) and D)
F) All of the above

Question 7

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

Accepted Answer

A)   $240,000
B)   $560,000
C)   $800,000
D)   $960,000E) B) and D)
F) A) and D)

Question 8

Mandy's Candies' income statement for last month is given below.What is Mandy's degree of operating leverage?

Accepted Answer

A)   1.0
B)   2.0
C)   3.5
D)   7.0E) All of the above
F) B) and C)

Question 9

Barbara's Boutique wants to know what it takes to have $20,000 in operating income.If her selling price is $20,variable cost is $8 and fixed costs total $40,000,how many units must she sell to reach her goal?

Accepted Answer

A)   1,667
B)   2,500
C)   5,000
D)   7,500E) A) and B)
F) C) and D)

Question 10

On the breakeven graph,if sales price and variable cost remain constant and fixed costs decrease,the breakeven point will

Accepted Answer

A)  Shift upward.
B)  Not shift.
C)  Shift to the right.
D)  Shift to the left.E) C) and D)
F) B) and C)

Question 11

On the breakeven graph,the point at which the total sales revenue line and the total cost line intersect is the breakeven point.

Accepted Answer

A) True 
 B)False

Question 12

On the breakeven graph,the fixed cost line

Accepted Answer

A)  Increases with sales volume.
B)  Decreases with sales volume.
C)  Remains the same regardless of sales volume.
D)  Moves to the right as fixed cost increase.E) None of the above
F) A) and D)

Question 13

Assume a sales volume of 6,000 units, unit selling price of $20, unit variable cost of $12, and total fixed costs of $20,000. What is the margin of safety in units?

Accepted Answer

A)  2,500
B)  3,500
C)  6,000
D)  8,000E) A) and B)
F) A) and C)

Question 14

The selling price of a unit is $20 and the variable product cost per unit is $14. In addition, a sales commission of 5% is paid on each sale. If the variable cost per unit   excluding 	extbf{     excluding     } excluding   sales commission increases by 1%, what will be the new contribution margin?

Accepted Answer

A)  $4.86
B)  $5.10
C)  $5.16
D)  $6.00  E) A) and D)
F) All of the above

Question 15

Bonita Corporation produces only one product.Monthly data include: selling price per unit, $42; unit variable expenses, $14; total fixed expenses, $84,000; actual sales for the month of June, 4,000 units. What is the margin of safety?

Accepted Answer

A)  $84,000
B)  $42,000
C)  $126,000
D)  $1,000E) All of the above
F) A) and C)

Question 16

Assume total fixed costs of $160,000,variable costs per unit of $6, and contribution margin per unit of $4. What are the sales dollars required to meet a target operating income of $50,000?

Accepted Answer

A)   $525,000
B)   $315,000
C)   $210,000
D)   $160,000E) C) and D)
F) A) and B)

Question 17

Assume Buddy's Farm Supply wants to make $45,000 in net income.If the tax rate is 25%,how much operating income must Buddy have?

Accepted Answer

A)   $56,250
B)   $60,000
C)   $180,000
D)   $360,000E) A) and B)
F) B) and D)

Question 18

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

Accepted Answer

A)  $1,400,000
B)  $1,800,000
C)  $2,400,000
D)  $800,000E) None of the above
F) B) and C)

Question 19

Changing a company's cost structure affects its operating leverage and may have behavioral implications for the employees.

Accepted Answer

A) True 
 B)False

Question 20

Tammy's Totes sells hand-made tote bags for $10 each.Tammy's variable costs are $6 per bag and her fixed costs total $4,000 per month.If Tammy's tax rate is 20%,how many totes must Tammy sell each month if she wants to earn $5,000 in net income?

Accepted Answer

A)  1,000
B)  1,250
C)  2,563
D)  2,813 E) B) and C)
F) C) and D)

Exam 3: Cost-Volume-Profit Analysis and Pricing Decisions

Tammy's Totes sells hand-made tote bags for $10 each.Tammy's variable costs are $6 per bag and her fixed costs total $4,000 per month.If Tammy's tax rate is 20%,how many totes must Tammy sell each month if she wants to earn $5,000 in net income?

Correct AnswerverifiedShow Answer

Assume total fixed costs of $160,000,variable costs per unit of $6, and contribution margin per unit of $4. What are the sales dollars required to meet a target operating income of $50,000?

Correct AnswerverifiedShow Answer

The formula for calculating units required to meet target operating income is

Correct AnswerverifiedShow Answer

The selling price of a unit is $20 and the variable product cost per unit is $14. In addition, a sales commission of 5% is paid on each sale. If the variable cost per unit excluding \textbf{ excluding } excluding sales commission increases by 1%, what will be the new contribution margin?

Correct AnswerverifiedShow Answer

Barbara's Boutique wants to know what it takes to have $20,000 in operating income.If her selling price is $20,variable cost is $8 and fixed costs total $40,000,how many units must she sell to reach her goal?

Correct AnswerverifiedShow Answer

Given that selling price is $200, unit cost is $120, and a profit of $80. What is the company’s markup percentage?

Correct AnswerverifiedShow Answer

Assume a sales volume of 6,000 units, unit selling price of $20, unit variable cost of $12, and total fixed costs of $20,000. What is the margin of safety in units?

Correct AnswerverifiedShow Answer

Whereas cost-plus pricing starts with the cost,target costing starts with the price customers are willing to pay.

Correct AnswerverifiedShow Answer

Bonita Corporation produces only one product.Monthly data include: selling price per unit, $42; unit variable expenses, $14; total fixed expenses, $84,000; actual sales for the month of June, 4,000 units. What is the margin of safety?

Correct AnswerverifiedShow Answer

On the breakeven graph,the point at which the total sales revenue line and the total cost line intersect is the breakeven point.

Correct AnswerverifiedShow Answer

Mandy's Candies' income statement for last month is given below.What is Mandy's degree of operating leverage?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

On the breakeven graph,any level of sales to the left of the breakeven point represents a profit.

Correct AnswerverifiedShow Answer

Assume Buddy's Farm Supply wants to make $45,000 in net income.If the tax rate is 25%,how much operating income must Buddy have?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

On the breakeven graph,if sales price and variable cost remain constant and fixed costs decrease,the breakeven point will

Correct AnswerverifiedShow Answer

Assume a company wishes to maintain a markup of 35% on a product with a unit cost of $25 $14 variable and $11 fixed. What amount will the company set as the selling price?

Correct AnswerverifiedShow Answer

A company requires $1,360,000 in sales to meet its net income target.Its contribution margin is 30%,and fixed costs are $240,000.What is the target operating income?

Correct AnswerverifiedShow Answer

Changing a company's cost structure affects its operating leverage and may have behavioral implications for the employees.

Correct AnswerverifiedShow Answer

On the breakeven graph,the fixed cost line

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The selling price of a unit is $20 and the variable product cost per unit is $14. In addition, a sales commission of 5% is paid on each sale. If the variable cost per unit $\textbf{ excluding }$ sales commission increases by 1%, what will be the new contribution margin?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified