31. Cost-volume-profit analysis is the study of the effects of

a. changes in costs and volume on a company’s profit.

b. cost, volume, and profit on the cash budget.

c. cost, volume, and profit on various ratios.

d. changes in costs and volume on a company’s profitability ratios.

32. The CVP income statementclassifies costs

a. as variable or fixed and computes contribution margin.

b. by function and computes a contribution margin.

c. as variable or fixed and computes gross margin.

d. by function and computes a gross margin.

33. Contribution marginis the amount of revenue remaining after deducting

a. cost of goods sold.

b. fixed costs.

c. variable costs.

d. contra-revenue.

34. Moonwalker’s CVP income statement included sales of 4,000 units, a selling price of $100, variable expenses of $60 per unit, and fixed expenses of $88,000. Contribution margin is

a. $400,000.

b. $240,000.

c. $160,000.

d. $72,000.

35. Moonwalker’s CVP income statement included sales of 4,000 units, a selling price of $100, variable expenses of $60 per unit, and fixed expenses of $88,000. Net income is

a. $400,000.

b. $160,000.

c. $152,000.

d. $72,000.

36. For Buffalo Co., at a sales level of 5,000 units, sales is $75,000, variable expenses total $50,000, and fixed expenses are $21,000. What is the contribution margin per unit?

a. $4.20

b. $5.00

c. $10.00

d. $15.00

37. If contribution margin is $120,000, sales is $300,000, and net income is $40,000, then variable and fixed expenses are

Variable Fixed

a. $180,000 $260,000

b. $180,000 $80,000

c. $80,000 $180,000

d. $420,000 $260,000

38. In a CVP income statement, cost of goods sold is generally

a. completely a variable cost.

b. completely a fixed cost.

c. neither a variable cost nor a fixed cost.

d. partly a variable cost and partly a fixed cost.

39. In a CVP income statement, a selling expense is generally

a. completely a variable cost.

b. completely a fixed cost.

c. neither a variable cost nor a fixed cost.

d. partly a variable cost and partly a fixed cost.

40. Hinge Manufacturing’s cost of goods sold is $420,000 variable and $240,000 fixed. The company’s selling and administrative expenses are $300,000 variable and $360,000 fixed. If the company’s sales is $1,480,000, what is its contribution margin?

a. $160,000

b. $760,000

c. $820,000

d. $880,000

41. Hinge Manufacturing’s cost of goods sold is $420,000 variable and $240,000 fixed. The company’s selling and administrative expenses are $300,000 variable and $360,000 fixed. If the company’s sales is $1,480,000, what is its net income?

a. $160,000

b. $760,000

c. $820,000

d. $880,000

42. Woolford’s CVP income statement included sales of 4,000 units, a selling price of $50, variable expenses of $30 per unit, and net income of $25,000. Fixed expenses are

a. $55,000.

b. $80,000.

c. $120,000.

d. $200,000.

43. The contribution margin ratio is

a. sales divided by contribution margin.

b. sales divided by fixed expenses.

c. sales divided by variable expenses.

d. contribution margin divided by sales.

44. For Pierce Company, sales is $500,000, variable expenses are $330,000, and fixed expenses are $140,000. Pierce’s contribution margin ratio is

a. 10%.

b. 28%.

c. 34%.

d. 66%.

45. For Sanborn Co., sales is $1,000,000, fixed expenses are $300,000, and the contribution margin per unit is $48. What is the break-even point?

a. $2,083,334 sales dollars

b. $625,000 sales dollars

c. 20,834 units

d. 6,250 units

46. For Franklin, Inc., sales is $1,500,000, fixed expenses are $450,000, and the contribution margin ratio is 36%. What is net income?

a. $90,000

b. $162,000

c. $378,000

d. $540,000

47. For Franklin, Inc., sales is $1,500,000, fixed expenses are $450,000, and the contribution margin ratio is 36%. What are the total variable expenses?

a. $288,000

b. $540,000

c. $960,000

d. $1,500,000

48. In 2013, Teller Company sold 3,000 units at $400 each. Variable expenses were $280 per unit, and fixed expenses were $160,000. What was Teller’s 2013 net income?

a. $200,000

b. $360,000

c. $840,000

d. $1,200,000

49. In 2012, Teller Company sold 3,000 units at $400 each. Variable expenses were $280 per unit, and fixed expenses were $180,000. The same selling price, variable expenses, and fixed expenses are expected for 2013. What is Teller’s break-even point in sales dollars for 2013?

a. $600,000

b. $1,800,000

c. $1,200,000

d. $1,714,286

50. In 2012, Teller Company sold 3,000 units at $400 each. Variable expenses were $280 per unit, and fixed expenses were $180,000. The same selling price, variable expenses, and fixed expenses are expected for 2013. What is Teller’s break-even point in units for 2013?

a. 1,500

b. 3,375

c. 4,500

d. 7,500

51. The required sales in units to achieve a target net income is

a. (sales + target net income) divided by contribution margin per unit.

b. (sales + target net income) divided by contribution margin ratio.

c. (fixed cost + target net income) divided by contribution margin per unit.

d. (fixed cost + target net income) divided by contribution margin ratio.

52. For Wickham Co., sales is $2,000,000, fixed expenses are $600,000, and the contribution margin ratio is 36%. What is required sales in dollars to earn a target net income of $400,000?

a. $1,111,111

b. $1,666,666

c. $2,777,778

d. $5,555,556

53. Warner Manufacturing reported sales of $2,000,000 last year (100,000 units at $20 each), when the break-even point was 75,000 units. Warner’s margin of safety ratio is

a. 25%.

b. 33%.

c. 75%.

d. 125%.

54. For Wilder Corporation, sales is $1,200,000 (6,000 units), fixed expenses are $360,000, and the contribution margin per unit is $80. What is the margin of safety in dollars?

a. $60,000

b. $300,000

c. $540,000

d. $840,000

55. Margin of safety in dollars is

a. expected sales divided by break-even sales.

b. expected sales less break-even sales.

c. actual sales less expected sales.

d. expected sales less actual sales.

56. The margin of safety ratio is

a. expected sales divided by break-even sales.

b. expected sales less break-even sales.

c. margin of safety in dollars divided by expected sales.

d. margin of safety in dollars divided by break-even sales.

57. In 2012, Hagar Corp. sold 3,000 units at $500 each. Variable expenses were $350 per unit, and fixed expenses were $455,000. The same variable expenses per unit and fixed expenses are expected for 2013. If Hagar cuts selling price by 4%, what is Hagar’s break-even point in units for 2013?

a. 3,033

b. 3,159

c. 3,360

d. 3,500

58. In 2012, Carow sold 3,000 units at $500 each. Variable expenses were $250 per unit, and fixed expenses were $250,000. The same selling price is expected for 2013. Carow is tentatively planning to invest in equipment that would increase fixed costs by 20%, while decreasing variable costs per unit by 20%. What is Carow’s break-even point in units for 2013?

a. 1,000

b. 1,200

c. 1,250

d. 1,500

Ans: a, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Risk Analysis, AICPA PC: Problem Solving/Decision Making, IMA: Business Economics

59. In 2012, Raleigh sold 1,000 units at $500 each, and earned net income of $50,000. Variable expenses were $300 per unit, and fixed expenses were $150,000. The same selling price is expected for 2013. Raleigh’s variable cost per unit will rise by 10% in 2013 due to increasing material costs, so they are tentatively planning to cut fixed costs by $15,000. How many units must Raleigh sell in 2013 to maintain the same income level as 2012?

a. 794

b. 971

c. 1,176

d. 1,088

60. Sales mixis

a. the relative percentage in which a company sells its multiple products.

b. the trend of sales over recent periods.

c. the mix of variable and fixed expenses in relation to sales.

d. a measure of leverage used by the company.

61. In a sales mix situation, at any level of units sold, net income will be higher if

a. more higher contribution margin units are sold than lower contribution margin units.

b. more lower contribution margin units are sold than higher contribution margin units.

c. more fixed expenses are incurred.

d. weighted-average unit contribution margin decreases.

62. Ramirez Corporation sells two types of computer chips. The sales mix is 30% (Q-Chip) and 70% (Q-Chip Plus). Q-Chip has variable costs per unit of $60 and a selling price of $100. Q-Chip Plus has variable costs per unit of $70 and a selling price of $130. The weighted-average unit contribution margin for Ramirez is

a. $46.

b. $50.

c. $54.

d. $100.

63. Capitol Manufacturing sells 3,000 units of Product A annually, and 7,000 units of Product B annually. The sales mix for Product A is

a. 30%.

b. 43%.

c. 70%.

d. Cannot determine from information given.

64. Ramirez Corporation sells two types of computer chips. The sales mix is 30% (Q-Chip) and 70% (Q-Chip Plus). Q-Chip has variable costs per unit of $60 and a selling price of $100. Q-Chip Plus has variable costs per unit of $70 and a selling price of $130. Ramirez’s fixed costs are $540,000. How many units of Q-Chip would be sold at the break-even point?

a. 3,000

b. 3,522

c. 5,000

d. 7,000

65. Roosevelt Corporation has a weighted-average unit contribution margin of $40 for its two products, Standard and Supreme. Expected sales for Roosevelt are 40,000 Standard and 60,000 Supreme. Fixed expenses are $1,800,000. How many Standards would Roosevelt sell at the break-even point?

a. 18,000

b. 27,000

c. 30,000

d. 45,000

66. Roosevelt Corporation has a weighted-average unit contribution margin of $40 for its two products, Standard and Supreme. Expected sales for Roosevelt are 40,000 Standard and 60,000 Supreme. Fixed expenses are $1,800,000. At the expected sales level, Roosevelt’s net income will be

a. $(200,000).

b. $ – 0 -.

c. $2,200,000.

d. $4,000,000.

67. Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Swanson incurs $4,440,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%.The weighted-average contribution margin ratio is

a. 37%.

b. 40%.

c. 43%.

d. 50%.

68. Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Swanson incurs $4,440,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%.The break-even point in dollars is

a. $1,642,800.

b. $10,325,582.

c. $11,100,000.

d. $12,000,000.

69. Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Swanson incurs $4,440,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%.What will sales be for the Sporting Goods Division at the break-even point?

a. $3,600,000

b. $4,200,000

c. $6,711,628

d. $7,800,000

70. Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Swanson incurs $4,440,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%.What will be the total contribution margin at the break-even point?

a. $3,820,466

b. $4,440,000

c. $4,480,000

d. $5,160,000