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Exam 16: Cost-Volume-Profit Analysis

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Question 31

True/False

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Increased sales of high contribution margin products increase the break-even point.

A) True
B) False

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Question 32

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Using cost-volume-profit analysis, we can conclude that a 20 percent reduction in variable costs will

A) reduce the break-even sales volume by 20 percent.
B) reduce total costs by 20 percent.
C) reduce the slope of the total cost line by 20 percent.
D) not affect the break-even sales volume if there is an offsetting 20 percent increase in fixed costs.

E) A) and D)
F) A) and B)

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Question 33

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Jamie Quinn, a sole proprietor, has the following projected figures for next year: $\begin{array} { l } \text { Selling price per unit}&\$150.00\\ \text { Contribution margin per unit}&\$45.00\\ \text {Total fixed costs }&\$630,000\\\end{array}$ What is the break-even point in dollars?

Alloy has annual fixed operating costs of $200,000 and variable costs of $400 per camper. Total fees charged to campers amount to $600 each. The camp expects 400 campers next summer. Projected government grants are $100,000. How much must Alloy raise from other sources to break even?

Multiple-product break-even analysis requires a constant sales mix, which is difficult to predict with certainty.

The income statement for Symbiosis Manufacturing Company for the current year is as follows: $\begin{array}{lr}\text { Sales }(10,000 \text { units }) & \$ 120,000 \\\text { Variable expenses } & 72,000\\\text { Contribution margin } & \$ 48,000 \\\text { Fixed expenses } & 36,000\\ \text { Operating income}&\$12,000\end{array}$ What is the contribution margin per unit?

Assume the following information: $\begin{array}{ll}\text { Variable cost ratio } & 80 \% \\\text { Total fixed costs } & \$ 60,000\end{array}$ What volume of sales dollars is needed to break even?

Victoria Company produces two products, X and Y, which account for 60 percent and 40 percent, respectively, of total sales dollars. Contribution margin ratios are 50 percent for X and 25 percent for Y. Total fixed costs are $120,000. What is Patricia's break-even point in sales dollars?

Which of the following is true of the assumptions made in a cost-volume-profit analysis?

To earn a target profit, total costs plus the amount of target profit must equal total sales revenue.

When using either the equation or the contribution margin approach, the after-tax profit must be converted to a before-tax profit target.

In multiple-product analysis, direct fixed costs can be __________ to each segment.

The point of zero profit is called the:

In a cost-volume-profit graph,

In a cost-volume-profit graph, the slope of the total revenue line represents

The income statement for Symbiosis Manufacturing Company for 2018 is as follows: $\begin{array}{lr}\text { Sales (10,000 units) } & \$ 120,000 \\\text { Variable expenses } &72,000\\\text { Contribution margin } & \$ 48,000 \\\text { Fixed expenses } & 36,000\\\text { Operating income } & \$12,000\end{array}$ If sales increase by $60,000, what will happen to profit?

In a profit-volume graph, the slope of the profit line represents

Which of the following is a TRUE statement about sales mix?

The profit-volume graph depicts the relationship among cost, volume, and profit.

In the cost-volume-profit analysis, income taxes