ACC 241 -Exam II Practice Q's Ch.
7, 8, 12 with All Correct Solutions
At the breakeven point, contribution margin equals revenue.
True
False - ANSWER - False
If there is little or no relationship between the cost and the volume, the data points
on a scatter plot will appear almost as a straight line.
True
False - ANSWER - False
Operating leverage is the use of fixed cost to extract higher percentage changes in
profits as sales activity changes.
True
False - ANSWER - True
Future costs that differ across alternatives are relevant costs.
True
False - ANSWER - True
In deciding the optimal mix of products that use a constrained resource, it is
important to determine the contribution margin per unit of scarce resource.
True
False - ANSWER - True
The two major categories of capital investment decision models are non-discounting
models and discounting models.
True
False - ANSWER - True
,In order to use the payback period model, the proposed investment must have even
cash inflows.
True
False - ANSWER - False
Both the payback period and the accounting rate of return ignore the time value of
money.
True
False - ANSWER - True
Both the payback period and the accounting rate of return do not consider the
profitability of a project over its life span.
True
False - ANSWER - False
If the net present value of an investment is zero, the investment earns less than the
minimum required rate of return.
True
False - ANSWER - False
Tyler Corporation is a wholesaler that sells a single product. Management has
provided the following cost data for two levels of monthly sales volume. The
company sells the product for $127.20 per unit.
Sales volume (units): 5,000 6,000
Cost of Sales: $419,000 $502,800
Selling and Administrative costs: $186,500 $202,200
The best estimate of the total contribution margin when 5,300 units are sold is:
- $146,810
, - $230,020
- $51,410
- $32,330 - ANSWER - $146,810
VC per unit:[705,000 (502,800 + 202,200) - 605,500(419,000 + 186,500)] / 6,000 -
5,000 = $99.50$127.20 (SP) -$99.50 (VC) = $27.70 (CM) x 5,300 (units) = $146,810
All else being equal, which of the following would not cause the contribution margin
to decrease?
1. An increase in total variable costs.
2. A decrease in the sales price per unit.
3. A decrease in variable costs per unit.
4. A decrease in sales volume. - ANSWER - A decrease in variable costs per unit.
Given breakeven sales in units of 28,000 and a unit contribution margin of $4, how
many units must be sold to reach a target operating income of $4,000?
- 1,000
- 27,000
- 29,000
- 16,000 - ANSWER - 29,000
FC @ BE = CM @ BE
FC = 28,000 x 4 = $112,000
FC + TP / CM = $112,000 + 4,000 / $4 = 29,000
Last month Kelly Company had a $30,000 loss on sales of $250,000. Fixed costs are
$60,000 a month. What sales revenue is needed for Kelly to break even?
- $220,000
- $166,667
- $280,000
- $500,000 - ANSWER - 500,000
7, 8, 12 with All Correct Solutions
At the breakeven point, contribution margin equals revenue.
True
False - ANSWER - False
If there is little or no relationship between the cost and the volume, the data points
on a scatter plot will appear almost as a straight line.
True
False - ANSWER - False
Operating leverage is the use of fixed cost to extract higher percentage changes in
profits as sales activity changes.
True
False - ANSWER - True
Future costs that differ across alternatives are relevant costs.
True
False - ANSWER - True
In deciding the optimal mix of products that use a constrained resource, it is
important to determine the contribution margin per unit of scarce resource.
True
False - ANSWER - True
The two major categories of capital investment decision models are non-discounting
models and discounting models.
True
False - ANSWER - True
,In order to use the payback period model, the proposed investment must have even
cash inflows.
True
False - ANSWER - False
Both the payback period and the accounting rate of return ignore the time value of
money.
True
False - ANSWER - True
Both the payback period and the accounting rate of return do not consider the
profitability of a project over its life span.
True
False - ANSWER - False
If the net present value of an investment is zero, the investment earns less than the
minimum required rate of return.
True
False - ANSWER - False
Tyler Corporation is a wholesaler that sells a single product. Management has
provided the following cost data for two levels of monthly sales volume. The
company sells the product for $127.20 per unit.
Sales volume (units): 5,000 6,000
Cost of Sales: $419,000 $502,800
Selling and Administrative costs: $186,500 $202,200
The best estimate of the total contribution margin when 5,300 units are sold is:
- $146,810
, - $230,020
- $51,410
- $32,330 - ANSWER - $146,810
VC per unit:[705,000 (502,800 + 202,200) - 605,500(419,000 + 186,500)] / 6,000 -
5,000 = $99.50$127.20 (SP) -$99.50 (VC) = $27.70 (CM) x 5,300 (units) = $146,810
All else being equal, which of the following would not cause the contribution margin
to decrease?
1. An increase in total variable costs.
2. A decrease in the sales price per unit.
3. A decrease in variable costs per unit.
4. A decrease in sales volume. - ANSWER - A decrease in variable costs per unit.
Given breakeven sales in units of 28,000 and a unit contribution margin of $4, how
many units must be sold to reach a target operating income of $4,000?
- 1,000
- 27,000
- 29,000
- 16,000 - ANSWER - 29,000
FC @ BE = CM @ BE
FC = 28,000 x 4 = $112,000
FC + TP / CM = $112,000 + 4,000 / $4 = 29,000
Last month Kelly Company had a $30,000 loss on sales of $250,000. Fixed costs are
$60,000 a month. What sales revenue is needed for Kelly to break even?
- $220,000
- $166,667
- $280,000
- $500,000 - ANSWER - 500,000
