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
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
Contribution margin ratio is ($60,000 - $30,000)/$250,000 = 12%. Break-even sales
is $60,000/0.12 = $500,000.
Last year, Danielle Company reported $750,000 in sales (25,000 units) and a net
operating income of $25,000. At the break-even point, the company's total
contribution margin equals $500,000. Based on this information, the company's:
- variables expenses are 60% of sales
- break-even point is 24,000
- contribution margin is 40%
- variable expense per unit is $9 - ANSWER - variable expense per unit is $9
Solve backwards for contribution margin and then variable costs:
Sales .................................................. $750,000
- Variable expenses ............... $225,000
= Contribution margin .......... $525,000
- Fixed expenses ...................... $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
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
Contribution margin ratio is ($60,000 - $30,000)/$250,000 = 12%. Break-even sales
is $60,000/0.12 = $500,000.
Last year, Danielle Company reported $750,000 in sales (25,000 units) and a net
operating income of $25,000. At the break-even point, the company's total
contribution margin equals $500,000. Based on this information, the company's:
- variables expenses are 60% of sales
- break-even point is 24,000
- contribution margin is 40%
- variable expense per unit is $9 - ANSWER - variable expense per unit is $9
Solve backwards for contribution margin and then variable costs:
Sales .................................................. $750,000
- Variable expenses ............... $225,000
= Contribution margin .......... $525,000
- Fixed expenses ...................... $500,000
