ACCT-526: Final|Questions With Correct
Answers|Verified
CHAPTER 7- CENGAGE PRACTICE - ✔️
Which of the following is true of the break-even point? - ✔️It is the point where total
revenue equals total cost.
Marc Company sells a product for $20, incurs a variable cost of $12 per unit, and has
total fixed costs of $6,000. What is the per-unit contribution margin? - ✔️$8
20-12=8
*sales- VC= contribution
Whittier Company plans to produce and sell 2,000 units next month. The following data
is given.
Per unit
TotalSelling price $50
Variable cost $24
Total
Fixed costs $28,000
Calculate the break-even point in units. - ✔️1077
28000/26= 1077
* fixed expense/ contribution margin per unit= break even point in units
Paule Company manufactures computers. The budgeted sales are $300,000, budgeted
variable costs are $153,000, and budgeted fixed costs are $270,000. Calculate the
variable cost ratio. - ✔️51%
(153000/ 300000)X 100= 51%
* (variable cost/ sales) X 100= variable cost ratio
Information for Noble Company is as follows:
Sales 400,000
Variable costs 100,000
Fixed costs 150,000
Calculate the break-even point in sales dollars. - ✔️200000
*(contribution margin/ sales) X100= contribution margin ratio
,(300000/ 400000)X100= 75%
*Fixed cost/ contribution margin ratio= Break even point in sales dollars
150000/ 75%= 200000
Which of the following is the mathematical expression for calculating number of units to
earn target income? - ✔️Number of Units to Earn Target Income = (Total Fixed Cost +
Target Income) ÷ Contribution Margin per Unit
Assuming that fixed costs remain the same, the change in operating income from a
change in revenues is calculated by. - ✔️multiplying the contribution margin ratio and
the break-even sales.
In a cost-volume-profit graph, the break-even point lies at the point: - ✔️where the total
revenue line and the total cost line intersect.
Which of the following is an assumption of CVP analysis? - ✔️Linear revenue and cost
functions remain constant over the relevant range.
Which of the following differentiates direct fixed expenses from common fixed
expenses? - ✔️The direct fixed expenses are those fixed costs that can be traced to a
segment, whereas the common fixed expenses are not traceable to the segments.
Which of the following statements is true of sales mix? - ✔️It is the relative combination
of products being sold by a firm.
A company manufactures two products. Information about the two product lines for the
current year is as follows:
Product A
Selling price per unit $90
Variable costs per unit $50
Product B
selling price per unit $120
variable costs per unit $60
The company expects fixed costs to be $70,000. Calculate the break-even quantity of
each product when the sales mix is 2:1. - ✔️1000units, 500 units
40 x 2/3 +60x 2/3= 46.666
70000/ 46.67= 1499.89
1500/3x2= 1000
,1500/3x1= 500
*WACM= contribution margin x split ratio + contribution margin x split ratio
*fixed cost/ WCAM= break even units
The margin of safety in dollars is calculated by. - ✔️subtracting the break-even sales
from the actual sales.
Lauren Company plans to sell 3,000 units of a product at $500 each. For the product,
unit variable cost is $380 and break-even units are 700. Calculate the margin of safety
for Lauren in terms of the number of units. - ✔️2300
3000-700= 2300
*Actual units sold- break even units= Margin of safety in units
Young Manufacturing Company plans to sell 600 units at $500 each in the following
year. The data on costs is as follows:
Variable cost $400
Total fixed cost $30,000
operating Income $30,000
Calculate the degree of operating leverage. - ✔️2
*contribution= sales- variable cost
(600x500)- (600x400)= 60000
*Degree of operation leverage= contribution margin/ operating income
The contribution margin is the difference between sales and variables expenses. T/F -
✔️TRUE
If the variable cost ratio is known, it can be subtracted from 100 to yield the contribution
margin ratio. T/F - ✔️FALSE
If price is $10, unit variable cost is $2.50, and total fixed cost is 3,000, 240 units must be
sold to breakeven. T/F - ✔️FALSE
If price is $10, unit variable cost is $2.50, and total fixed cost is 3,000, the unit
contribution margin is $7.50. T/F - ✔️TRUE
, The breakeven in sales dollars equation is total fixed expenses divided by the
contribution margin ratio. T/F - ✔️TRUE
Tacos-2-Go could reduce their variable costs by shopping at wholesale supplies over
local groceries. T/F - ✔️TRUE
Total fixed costs, price, and unit variable costs all have an impact on the breakeven
point. T/F - ✔️TRUE
Graphically, the breakeven point is where the contribution margin crosses the fixed cost
line. T/F - ✔️TRUE
If the gym's monthly unlimited plan cost $100 and the daily plan cost $12, Lacy would
need to go to the gym at least 10 times per month for the monthly plan to be the better
deal. T/F - ✔️FALSE
If the gym's monthly unlimited plan cost $50 and the daily plan cost $8, Lacy should use
the daily plan if she only intends to go to the gym 6 times per month. T/F - ✔️TRUE
CHAPTER 7- HW - ✔️
Head-First Company plans to sell 5,200 bicycle helmets at $73 each in the coming year.
Unit variable cost is $47 (includes direct materials, direct labor, variable factory
overhead, and variable selling expense). Total fixed cost equals $49,300 (includes fixed
factory overhead and fixed selling and administrative expense).
Calculate the number of helmets Head-First must sell to earn operating income of
$66,140. - ✔️4440
($49,300 + $66,140) ÷ ($73 − $47) = 4,440
*Break-even units = (Total fixed cost + Target income)/ Unit contribution margin
Head-First Company plans to sell 5,800 bicycle helmets at $67 each in the coming year.
Product costs include:
Direct materials per helmet $29
Direct labor per helmet 11.00
Variable factory overhead per helmet 4.25
Total fixed factory overhead 20,000
Variable selling expense is a commission of $3.80 per helmet; fixed selling and
administrative expense totals $29,900.
Answers|Verified
CHAPTER 7- CENGAGE PRACTICE - ✔️
Which of the following is true of the break-even point? - ✔️It is the point where total
revenue equals total cost.
Marc Company sells a product for $20, incurs a variable cost of $12 per unit, and has
total fixed costs of $6,000. What is the per-unit contribution margin? - ✔️$8
20-12=8
*sales- VC= contribution
Whittier Company plans to produce and sell 2,000 units next month. The following data
is given.
Per unit
TotalSelling price $50
Variable cost $24
Total
Fixed costs $28,000
Calculate the break-even point in units. - ✔️1077
28000/26= 1077
* fixed expense/ contribution margin per unit= break even point in units
Paule Company manufactures computers. The budgeted sales are $300,000, budgeted
variable costs are $153,000, and budgeted fixed costs are $270,000. Calculate the
variable cost ratio. - ✔️51%
(153000/ 300000)X 100= 51%
* (variable cost/ sales) X 100= variable cost ratio
Information for Noble Company is as follows:
Sales 400,000
Variable costs 100,000
Fixed costs 150,000
Calculate the break-even point in sales dollars. - ✔️200000
*(contribution margin/ sales) X100= contribution margin ratio
,(300000/ 400000)X100= 75%
*Fixed cost/ contribution margin ratio= Break even point in sales dollars
150000/ 75%= 200000
Which of the following is the mathematical expression for calculating number of units to
earn target income? - ✔️Number of Units to Earn Target Income = (Total Fixed Cost +
Target Income) ÷ Contribution Margin per Unit
Assuming that fixed costs remain the same, the change in operating income from a
change in revenues is calculated by. - ✔️multiplying the contribution margin ratio and
the break-even sales.
In a cost-volume-profit graph, the break-even point lies at the point: - ✔️where the total
revenue line and the total cost line intersect.
Which of the following is an assumption of CVP analysis? - ✔️Linear revenue and cost
functions remain constant over the relevant range.
Which of the following differentiates direct fixed expenses from common fixed
expenses? - ✔️The direct fixed expenses are those fixed costs that can be traced to a
segment, whereas the common fixed expenses are not traceable to the segments.
Which of the following statements is true of sales mix? - ✔️It is the relative combination
of products being sold by a firm.
A company manufactures two products. Information about the two product lines for the
current year is as follows:
Product A
Selling price per unit $90
Variable costs per unit $50
Product B
selling price per unit $120
variable costs per unit $60
The company expects fixed costs to be $70,000. Calculate the break-even quantity of
each product when the sales mix is 2:1. - ✔️1000units, 500 units
40 x 2/3 +60x 2/3= 46.666
70000/ 46.67= 1499.89
1500/3x2= 1000
,1500/3x1= 500
*WACM= contribution margin x split ratio + contribution margin x split ratio
*fixed cost/ WCAM= break even units
The margin of safety in dollars is calculated by. - ✔️subtracting the break-even sales
from the actual sales.
Lauren Company plans to sell 3,000 units of a product at $500 each. For the product,
unit variable cost is $380 and break-even units are 700. Calculate the margin of safety
for Lauren in terms of the number of units. - ✔️2300
3000-700= 2300
*Actual units sold- break even units= Margin of safety in units
Young Manufacturing Company plans to sell 600 units at $500 each in the following
year. The data on costs is as follows:
Variable cost $400
Total fixed cost $30,000
operating Income $30,000
Calculate the degree of operating leverage. - ✔️2
*contribution= sales- variable cost
(600x500)- (600x400)= 60000
*Degree of operation leverage= contribution margin/ operating income
The contribution margin is the difference between sales and variables expenses. T/F -
✔️TRUE
If the variable cost ratio is known, it can be subtracted from 100 to yield the contribution
margin ratio. T/F - ✔️FALSE
If price is $10, unit variable cost is $2.50, and total fixed cost is 3,000, 240 units must be
sold to breakeven. T/F - ✔️FALSE
If price is $10, unit variable cost is $2.50, and total fixed cost is 3,000, the unit
contribution margin is $7.50. T/F - ✔️TRUE
, The breakeven in sales dollars equation is total fixed expenses divided by the
contribution margin ratio. T/F - ✔️TRUE
Tacos-2-Go could reduce their variable costs by shopping at wholesale supplies over
local groceries. T/F - ✔️TRUE
Total fixed costs, price, and unit variable costs all have an impact on the breakeven
point. T/F - ✔️TRUE
Graphically, the breakeven point is where the contribution margin crosses the fixed cost
line. T/F - ✔️TRUE
If the gym's monthly unlimited plan cost $100 and the daily plan cost $12, Lacy would
need to go to the gym at least 10 times per month for the monthly plan to be the better
deal. T/F - ✔️FALSE
If the gym's monthly unlimited plan cost $50 and the daily plan cost $8, Lacy should use
the daily plan if she only intends to go to the gym 6 times per month. T/F - ✔️TRUE
CHAPTER 7- HW - ✔️
Head-First Company plans to sell 5,200 bicycle helmets at $73 each in the coming year.
Unit variable cost is $47 (includes direct materials, direct labor, variable factory
overhead, and variable selling expense). Total fixed cost equals $49,300 (includes fixed
factory overhead and fixed selling and administrative expense).
Calculate the number of helmets Head-First must sell to earn operating income of
$66,140. - ✔️4440
($49,300 + $66,140) ÷ ($73 − $47) = 4,440
*Break-even units = (Total fixed cost + Target income)/ Unit contribution margin
Head-First Company plans to sell 5,800 bicycle helmets at $67 each in the coming year.
Product costs include:
Direct materials per helmet $29
Direct labor per helmet 11.00
Variable factory overhead per helmet 4.25
Total fixed factory overhead 20,000
Variable selling expense is a commission of $3.80 per helmet; fixed selling and
administrative expense totals $29,900.
