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Acct 004-n7337 Chapter 5 Exam

A product sells for $200 per unit, and its variable costs per unit are $130. The fixed costs are $420,000. If the firm wants to earn $35,000 pretax income, how many units must be sold?

a.            6,500.

 b.           6,000.

 c.            500.

 d.           5,000.

 e.           5,500.



Question 22

 The excess of expected sales over the sales level at the break-even point is known as the:

a.            Sales turnover.

b.            Profit margin.

c.             Contribution margin.

d.            Relevant range.

e.            Margin of safety.


Question 23

 Cost-volume-profit analysis provides approximate, but not precise, answers to questions about the relations among costs, volume, and profits.

a.            True

b.            False


Question 24

 If a firms margin of safety is 15% on sales of $420,000, what will be its margin of safety on sales of $375,000 (assume fixed costs, the variable cost per unit, and the sales price per unit do not change)?

a.            $ 45,000

b.            $ 18,000

c.             $ 56,250

d.            $ 63,000

e.            None of the above



Question 25

 A cost that can be separated into fixed and variable components is called a:

a.            Mixed cost.

b.            Step-variable cost.

c.             Composite cost.

d.            Composite cost.

e.            Differential cost.


Question 26

If the margin of safety is 31% of sales, which are $570,000, what is the break-even point?

a.            Cannot be determined

b.            $176,700

c.             Less than $393,300

d.            Greater than $393,300

e.            $393,300



Question 27

 One of the benefits of CVP analysis is that it is possible to estimate the dollar amount of sales required to achieve a target income, after taxes.

a.            True

 b.           False


Question 28

 When the variable costs are 60% of sales dollars, the contribution ratio is also 60%.

a.            True

b.            False


Question 29

 A firm pays the same amount for its basic phone service each month as well as a per minute fee for the number of minutes of long distance calls made. This is an example of a mixed cost.

a.            True

b.            False


Question 30

 On a cost-volume-profit chart (break-even graph), where are the total fixed costs shown?

a.            As the point where the sales line intersects the vertical axis (dollars)

b.            As the point where the sales line crosses the total cost line

c.             As the point where the sales line crosses the horizontal axis (volume)

d.            As the point where the total cost line intersects the horizontal axis (volume)

e.            As the point where the total cost line intersects the vertical axis (dollars)

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