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#2 | Cost-Volume-Profit Analysis

A. needed for determining product information

B. irrelevant in marginal analysis

C. independent cost system

D. relevant for cost-volume-profit analysis

(CPAR Reviewer, 2018)

2. The rate or amount that sales may decline before losses are incurred is called:

A. residual income rate

B. variable sales ratio

C. sensitive level of income

D. margin of safety

(CPAR Reviewer, 2018)

3. In a multi-product company, as the mix of the products being sold changes, the other

overall contribution margin ratio will also change. If the shift in mix is toward less

profitable products, then the contribution margin ratio will

A. rise

B. change in direction to break-even point

C. not change

D. fall

(CPAR Reviewer, 2018)

4. For a profitable company, the amount by which sales can decline before losses occur is

known as the:

A. Variable sales ratio

B. Margin of safety

C. Sales volume variance

D. Marginal income tax

(CPAR Reviewer, 2018)

5. To reduce the break-even point, the company may

A. decrease both fixed cost and the contribution margin

B. increase both fixed cost and the contribution margin

C. decrease the fixed cost and increase the contribution margin

D. increase the fixed cost and decrease the contribution margin

(CPAR Reviewer, 2018)

6. The Childless Company sells widgets. The company breaks even at an annual sales

volume of 75,000 units. Actual annual sales volume was 100,000 units, and the company

reported a profit of P200,000.

A. P800,000

B. P600,000

C. P200,000

D. P150,000

(Bobadilla, 2011)

7. The costs to produce 24,000 units at 70% capacity are:

P 36,000

Direct materials

Direct labor 54,000

Factory overhead, all fixed 29,000

Selling expense (35% variable, 65% fixed) 24,000

What unit price would the company have to charge to make P2,250 on a sale of 1,500

additional units that would be shipped out of the normal market area?

A. P5.10

B. P5.60

C. P4.10

D. P5.00

(Bobadilla, 2011)

sale of Product Y. Product X’s contribution margin is 60 percent and Product Y is 40

percent of sales. Total fixed costs amount to P505,880. Product Y’s sale at breakeven

point should amount to:

A. P640,000

B. P720,000

C. P529,488

D. P470,600

(Bobadilla, 2011)

9. Levi’s Company has revenues of P500,000, variable costs of P300,000, and pretax profit

of P150,000. If the company increases the sales price per unit by 10%, reduces fixed

costs by 20%, and leaves variable cost per unit unchanged, what would be the new

breakeven point in pesos?

A. P88,000

B. P80,000

C. P100,000

D. P125,000

(Bobadilla, 2011)

10. Food From Heaven, Inc. (FFHI) sells loose biscuits for P5 per unit. The fixed costs are

210,000 and the variable costs are P45% of the selling price. What would be the amount

of sales if FFHI were to realize a profit of 15% of sales?

A. P700,000

B. P472,500

C. P525,000

D. P420,000

(Bobadilla, 2011)

ALMODOVAR, Marco Layug (11-20)

21. It involves a systematic examination of the relationships among cost, cost driver, and

profit.

A. Financial statement analysis

B. Cost-volume-profit analysis

C. Cost-benefit analysis

D. Profit planning

(Roque 2016)

A. All costs are classifiable as either direct of indirect costs

B. Cost and revenue relations are predictable and linear over any range of activity

C. Selling prices per unit and market conditions remain unchanged

D. Total fixed costs are constant over the relevant range, but fixed costs per unit

vary directly with the cost driver or volume.

(Roque 2016)

23. Management may use CVP analysis to determine the relative profitability of a product

by

A. determining the unit contribution margin and the projected profits at various

levels of production

B. Controlling the physical production of the products

C. Assigning costs to a product in such a way that the contribution margin is

maximized

D. Keeping all costs to an absolute minimum

(Roque 2016)

A. Costs are classified as to function

B. Fixed and variable manufacturing costs are combined as one level item

C. Fixed costs are shown separately from variable costs

D. Fixed manufacturing costs are shown separately from variable manufacturing

costs, but fixed and variable operating costs are combined as one line item

(Roque 2016)

25. It is the excess of sales price over the related variable cost, contributing to the recovery

of fixed expenses

A. Gross margin

B. Margin of safety

C. Contribution Margin

D. Gross profit

(Roque 2016)

Genevieve Co. and Odessa Co. sell the same product in a competitive industry. Thus, the selling

price of the product for each company is the same. Other data about the two companies are as

follows:

Genevieve Co. Odessa Co.

Fixed Costs P 50,000 P 70,000

Contribution margin ratio 40% 52%

Genevieve Co. Odessa Co.

A. P 125,000 P 134,615.38

B. 125,000 units 134,615.38 units

C. P 20,000 P 36,400

D. 20,000 units 36,400 units

(Roque 2016)

27. The indifference point in terms of peso sales volume where the peso profits of the two

companies are equal is

A. P 125,000

B. P 134,615.38

C. P 166,666.67

D. P 129,807.69

A. 0

B. P 666,666.67

C. P P86,666.67

D. P 16,666.67

(Roque 2016)

For Items #29-30 refer to the problem below:

Medilab, Inc. is a medical laboratory that perform test for physicians. On the average, fee per

test P500, and the variable cost per test is P200. Medilab anticipates performing between 200 to

5000 tests during the month of November. Fixed costs are estimated as follows:

High range of activity (2000-5000 tests performed) 660,000

price, costs and breakeven point with industry averages. The study showed the following :

Compared to industry average

Selling price lower the same

Variable cost lower

Fixed Cost higher the same

Break-even point the same

29. What is the break-even point in number of tests at the low activity range?

A. 2200

B. 1600

C. 1000

D. 3200

30. How much revenue is required to break-even point at the high range activity level?

A. P 1,100,000

B. P 800,000

C. P 500,000

D. P 1,600,000

(Roque 2016)

31. CVP analysis may be used by managers in planning and decision-making, which may

involve the following, except

A. Choosing the type of product to produce and sell

B. Choosing the pricing policy to follow

C. Choosing the type of productive facilities to acquire

D. Choosing the analytical technique to use

(Roque, 2016)

32. The type of costing system that will provide the best information for CVP and BE

analyses if inventories are expected to change is

A. Process costing

B. Job-order costing

C. Absorption (full) costing

D. Variable (direct) costing

(Roque, 2016)

33. The conventional break-even chart adopted by businessmen and accountants does not

take for granted that

A. Some costs are semi-variable

B. Production is not equal to sales

C. There is a significant amount of change in inventories

D. The sales mix ratio of the products being sold changes within the relevant range

(Roque, 2016)

34. It is the level of output or sales at which total revenues equal total costs, that is, the point

at which operating income is zero

A. Indifference point

B. Break-even point

C. Sangley point

D. Order point

(Roque, 2016)

35. Sensitivity analysis, when used in CVP,

A. Is done through various possible scenarios and computes the impact on profit of

various predictions of future events

B. Is done through various possible scenarios and determines the effect of the cost

accounting systems used in each scenario

C. Allows the decision-maker to introduce probabilities in the evaluation of

decision alternatives

D. Allows managers to study how total fixed costs vary with cost drivers

(Roque, 2016)

36. Dianice Corp. has sales of P300,000, a variable cost ratio of 80% and a margin of safety

of P120,000. What is Dianice’s fixed cost?

A. P144,000

B. P24,000

C. P60,000

D. P36,000

(Roque, 2016)

37. Jing, Inc. has sales of P500,000, a break-even sales ratio of 60%, and a variable cost

ratio of 70%. How much is Jing’s profit?

A. P90,000

B. P60,000

C. P150,000

D. Cannot be determined

(Roque, 2016)

38. Amado Co. manufactures and sells Product A. During the previous month, 77,500 units

of Product A were sold. Total fixed costs amounted to P189,100. Its margin of safety was

15,500 units or P65,875. The variable cost per unit of Product A is

A. P1.20

B. P4.25

C. P0.96

D. P2.44

(Roque, 2016)

For numbers 39 to 40 refer to the problem below:

Consult, Inc. is a domestic corporation that offers, among others, business seminars. These

seminars help update the knowledge of corporate officers and employees. Consult, Inc. caters to

participants who are sponsored by their employers.

At present, the company is very busy preparing for a seminar to be held next month. This is one

big event, since this is the company’s first seminar where the resources speaker is a foreign

national.

Consult, Inc.’s president, Mr. Phensitpa Labok, got the idea for this seminar from a close friend,

the president of another company who just came from a business convention in Singapore.

According to him, he was so lucky he attended such convention because one of the speakers

was Mr. Lum Pyang Shanghai, a business systems expert and author of the internationally

known book on Business Systems. The convention, he said, was a big success.

Mr. Labok picked up from there. He contacted Mr. Shanghai and inquired about the possibility

of the latter’s coming to manila and be the corporation’s guest speaker. Mr. Shanghai accepted

the invitation.

Consult, Inc., then sent letters’ brochures about the seminar to the officers of the top 1,000

corporations in the Philippines. As of today, Consult, Inc. has received confirmation from 150

sponsored participants. Deadline for payment of the seminar fee is on the first day of the

seminar month.

The seminar will be held for two (2) days. The seminar fee is P15,000 per participant. Seminar-

related expenses are estimated as follows:

Accommodations - guest speaker and his accompanying staff 24,000

Plane ticket and other transportation costs - guest speaker and party 60,000

Other fixed costs for the seminar 36,000

Expenses for each participant:

Seminar kit 1,000

Hotel accommodations for the duration of the seminar, including

meals and snacks 5,000

Other variable costs 2,000

Mr. Labok is very excited. He said that Consult, Inc. will earn a big amount of profit if all

confirmed participants will pay and attend the seminar. He also said that even if some of the 150

confirmed participants would back out, the company would not incur a loss. This, according to

him, is based on the break-even analysis prepared by the company’s accountant.

The accountant, whose favorite subject is Management Advisory Services, showed in his report:

(Roque, 2016)

39. A break-even point for the seminar of

A. 150 participants

B. 60 participants

C. 90 participants

D. 28 participants

40. If all confirmed 150 participants would pay and attend, the margin of safety would be

A. 60 participants

B. 60%

C. 90%

D. 150 participant

The owners of Kelsey’s Daily Mart have been looking for ways to improve sales at the store.

One of the proposals is to have a weekly raffle with a total price of P10,000 per week. For every

P50 worth of goods purchased, the customer shall receive a numbered ticket for the raffle. The

variable cost to print and distribute the tickets has been estimated at P5.00. Promotions and

other fixed costs in connection with the raffle likewise, have been estimated at P15,000 per

week. The current weekly operating results of Kelsey are given below:

Sales - P1,000,000

Variable Costs - P700,000

Fixed Costs for the week - P120,000

(Roque, 2016)

41. Whats is the sales revenue required to break even without the raffle?

A. 180,000

B. 171,428

C. 300,000

D. 400,000

42. What is the sales revenue required to break even with the raffle?

A. 725,000

B. 483,333

C. 675,000

D. 580,000

43. If the raffle ticket can increase sales by 50% per week, profit will:

A. Increase by 155,000

B. Increase by 25,000

C. Decrease by 25,000

D. Remain Unchanged

44. If the company’s objective in conducting the weekly raffle is to double its present profit,

how much sales must be generated to attain this profit objective?

A. 2,525,000

B. 1,625,000

C. 2,000,000

D. 1,683,333

45. A company sells two products A & B. the sales mix consists of a composite unit of 5

units of A for every 3 units of B (5:3). Fixed costs amounts to 202,500. The unit

contribution margins are P4.80 for A and P10 for B.

If sales mix ratio is changed from 5:3 to 3:5, only one of the following statements is not

true and that is:

A. The WaUCM will increase to P8.05

B. The BEP will decrease to 25,155.28 composite units

C. Total Fixed Costs will remain the same

D. The WaUCM will not change

(Online Handouts)

46. Basic Illustration Corp. produces and sells a single product. The selling price is P25 and

the variable costs is 15 per unit. The corporation’s fixed costs is 100,000 per month.

Average monthly sales is 11,000 units. What is the corporation’s operating leverage

factor at the present average monthly sales of 11,000?

A. 6

B. 11

C. 9.09

D. 90.09

(Online Handouts)

47. If Variable costs per unit will go up by P5, the peso break even sales will increase

(decrease) to

A. 500,000

B. 250,000

C. (500,000)

D. (250,000)

(Online Handouts)

48. The alternative that would increase the contribution margin per unit the most is a

A. 10% decrease in unit variable cost

B. 10% increase in selling price

C. 10% decrease in fixed cost

D. 10% decrease in selling price

(Online Handouts)

49. Which of the following changes in CVP factors will reduce the break even point?

A. A decrease in total fixed costs

B. A decrease in selling price

C. An increase in unit variable cost

D. An increase in total fixed costs

(Online Handouts)

50. CVP analysis is most essential in the determination of the

A. Relationship between revenues and costs at various levels of operations

B. Volume of operation in order to break even

C. Variable costs necessary to equal fixed costs

D. Production Level that is equal to sales

(Online Handouts)

51. In planning product mix for maximum profit, CVP analysis would stimulate sales of the

product by increasing the:

A. sales price

B. variable cost per unit

C. contribution margin

D. emphasis on customer priority

(Bobabilla, 2014)

52. A relatively low margin of safety ratio for a product is usually an indication that the

product:

A. is losing money

B. has a high contribution margin

C. is riskier than higher margin of safety product

D. is less risky than higher margin of safety products

(Bobabilla, 2014)

53. Within the relevant range, total revenues and total costs

A. increase, but at a decreasing rate.

B. decrease.

C. remain constant.

D. can be graphed as straight lines.

(Bobabilla, 2014)

54. An assumption in a CVP analysis is that a change in costs is caused by a change in

A. unit direct material cost

B. the number of units

C. sales commission per unit

D. efficiency due to learning curve effect

(Bobabilla, 2014)

55. Which of the following would not affect the breakeven point?

A. Number of units sold.

B. Variable cost per unit.

C. Total fixed costs.

D. Sales price per unit.

(Bobabilla, 2014)

56. The ff. is the Lux Corporation's contribution format income statement for last month:

Sales P2,000,000

Less variable expenses 1,400,000

Contribution margin 600,000

Less fixed expenses 360,000

Net income P 240,000

The company has no beginning or ending inventories. A total of 40,000 units were

produced and sold last month. What is the company's degree of operating leverage?

A. 0.12

B. 0.40

C. 2.50

D. 3.30

(Bobabilla, 2014)

57. Delmar Company has the opportunity to increase its annual sales by P125,000 by selling

to a new, riskier group of customers. The uncollectible expense is expected to be 10%,

and collection costs will be 10%. The company’s manufacturing and selling expenses

are 70% of sales, and its effective tax rate is 40%. If Delmar were to accept this

opportunity, the company’s after tax profits would increase by

A. P 7,500

B. P 6,000

C. P12,500

D. P15,000

(Bobabilla, 2014)

58. Albatross Company has fixed costs of P90,300. At a sales volume of P360,000, return

on sales is 10%; at a P600,000 volume, return on sales is 20%. What is the break-even

volume?

A. P225,000

B. P258,000

C. P301,000

D. P240,000

(Bobabilla, 2014)

59. The sales price per unit will increase from P32 to P40. The variable cost per unit will

remain at P24, and the fixed costs will remain unchanged at P400,000. How many fewer

units must be sold to break-even at the new sales price of P40 per unit?

A. 25,000

B. 2,500

C. 10,000

D. 12,500

(Bobabilla, 2014)

60. Galactica Company has fixed costs of P100,000 and breakeven sales of P800,000.

Based on this relationship, what is its projected profit at P1,200,000 sales?

A. P 50,000

B. P200,000

C. P150,000

D. P400,000

(Bobabilla, 2014)

All other things remaining the same,

A. equal percentage increases in both the selling price and variable cost per unit will

cause the break-even point in sales pesos to remain unchanged.

B. equal percentage increases in both the selling price and variable cost per unit will

cause the contribution margin ratio to remain unchanged.

C. equal peso increases in both the selling price and variable cost per unit will cause

break-even point in units to remain unchanged.

D. equal peso increases in both the selling price and variable cost per unit will cause

the break-even point in pesos to remain unchanged.

(Roque, 2016)

62. The margin of safety is a key concept of CVP analysis. Which of the following is not a

correct description of margin of safety?

A. It is the amount of sales which may be reduced without resulting into a loss.

B. It is the difference between budgeted sales and break-even sales.

C. It may be expressed in terms of units or in pesos.

D. Its presence means that the company earns profit.

(Roque, 2016)

A. If Product 1 has a higher unit contribution margin than Product 2, then Product 1

will always have a higher CM ratio than Product 2.

B. If the product mix changes, the break-even point may change.

C. For a given increase in peso sales, a high CM ratio will result in a greater

increase in profits than will a low CM ratio

D. If a company’s cost structure shifts toward greater fixed costs and lower variable

costs, one would expect the company’s CM ratio to rise.

(Roque, 2016)

64. As a company’s sales move farther from its break-even point, one would expect the

degree of operating leverage to

A. increase.

B. decrease.

C. remain unchanged.

D. vary in direct proportion to changes in the activity level.

(Roque, 2016)

Basic Illustration Corp. produces and sells a single product. The selling price is P25 and the

variable costs is P15 per unit. The corporation’s fixed costs is P100,000 per month. Average

monthly sales is 11,000 units.

65. How much sales (in pesos) must be generated to earn profit that is 8% of such sales?

A. P270,000

B. P312,500

C. P208,333.33

D. P230,000

66. How many units must be sold to earn profit of P2 per unit?

A. 8,333.33

B. 10,000

C. 12,500

D. 312,500

67. With an average monthly sales of P11,000 units, the corporation’s margin of safety is

A. 1,000 units or P25,000.

B. 11,000 units or P275,000.

C. 10,000 units or P250,000.

D. P10,000.

68. If fixed costs will increase by P20,000, the break-even point in units will increase

(decrease) by

A. 12,000

B. 10,000

C. 50,000

D. 2,000

69. If selling price will increase to P30, the break-even point in units will

A. remain unchanged.

B. decrease by 166,666.75.

C. decrease to 6,666.67.

D. decrease by 6,666.67.

(Roque, 2016)

70. A company has fixed costs of P150,000, a variable cost ratio of 60%, and margin of

safety ratio of 25%. Considering the given data, which of the following is not correct?

A. The company’s profit ratio is 10%.

B. Sales amounted to P375,000.

C. Profit amounts to P50,000.

D. The contribution margin amounts to P200,000.

(Roque, 2016)

A. Costs cannot be properly classified into fixed and variable costs.

B. The per unit variable costs change.

C. The total fixed costs change.

D. Per unit sales prices change.

(Bobadilla, 2014)

72. The most useful information derived from a breakeven chart is the

A. Amount of sales revenue needed to cover enterprise variable costs.

B. Amount of sales revenue needed to cover enterprise fixed costs.

C. Relationship among revenues, variable costs, and fixed costs at various levels of

activity.

D. Volume or output level at which the enterprise breaks even.

(Bobadilla, 2014)

A. Levels of production

B. Fixed costs

C. Variable costs

D. All of these

(Bobadilla, 2014)

A. Less than the contribution margin

B. More than the contribution margin

C. Equal to the contribution margin.

D. More than the variable cost

(Bobadilla, 2014)

A. net income will increase by the unit contribution margin for each additional item

sold above break-even.

B. the total contribution margin changes from negative to positive

C. fixed costs are greater than contribution margin

D. the contribution margin ratio begins to increase

(Bobadilla, 2014)

76. In 2006 Lucia Company had a net loss of P8,000. The company sells one product with a

selling price of P80 and a variable cost per unit of P60. In 2007, the company would

like to earn a before-tax profit of P40,000. How many additional units must the

company sell in 2007 than it sold in 2006? Assume that the tax rate is 40 percent.

A. 1,600

B. 2,000

C. 2,400

D. 5,400

(Bobadilla, 2014)

77. Bulusan Company has sales of P400,000 with variable costs of P300,000, fixed costs of

P120,000, and an operating loss of P20,000. How much increase in sales would Bulusan

need to make in order to achieve a target operating income of 10% of sales?

A. P400,000

B. P500,000

C. P462,000

D. P800,000

(Bobadilla, 2014)

78. The following data apply to Diva Corporation for the year 2006:

Contribution margin/sales 30%

Breakeven sales (present volume) P1,000,000

Diva wants to sell an additional 50,000 units at the same selling price and contribution

margin per unit. By how much can fixed costs increase to generate a gross margin equal

to 10% of the sales value of the additional 50,000 units to be sold?

A. P50,000

B. P67,500

C. P57,500

D. P125,000

(Bobadilla, 2014)

79. Marsman Company had a margin of safety ratio of 20%, variable costs of 60% of sales,

fixed costs of P240,000, a break-even point of P600,000, and an operating income of

P60,000 for the current year. What are the current year's sales?

A. P 500,000

B. P 750,000

C. P 600,000

D. P 900,000

(Bobadilla, 2014)

80. Regal, Inc. sells Product M for P5 per unit. The fixed costs are P210,000 and the

variable costs are 60% of the selling price. What would be the amount of sales if Regal

is to realize a profit of 10% of sales?

A. P700,000

B. P525,000

C. P472,500

D. P420,000

(Bobadilla, 2014)

A. Strategic plan

B. Actual financial results

C. Projected financial statements

D. Variance analysis

(Wiley, 2016)

82. The master budget

A. Shows forecasted and actual results

B. Reflects controllable costs only

C. Can be used to determine manufacturing costs variances

D. Contains the operating budget

(Wiley, 2016)

A. Responsibility budgeting

B. Activity- based budgeting

C. Operational budgeting

D. Kaizen budgeting

(Wiley, 2016)

84. The diagram below is a cost-volume-profit chart.

Y

D

o

l

l B

a

A

r

s

X

Activity Level

A. Greater Greater

B. Greater The same

C. The same The same

D. The same Greater

A. Variable costing complies with the US Internal Revenue Code

B. Variable costing complies with generally accepted accounting principles

C. Variable costing makes cost-volume relationships more easily apparent

D. Variable costing is most relevant to long-run pricing strategies

(Wiley, 2016)

86. Mien Co. is budgeting sales of 53,000 units of product Nous for October 2014. The

manufacture of one unit of Nous requires four kilos of chemical Loire. During October

2014, Mien plans to reduce the inventory of Nous by 6,000 units. There is no Nous work

in process inventory. How many kilos of Loire is Mien budgeting to purchase in October

2014?

A. 138,000

B. 162,000

C. 186,000

D. 238,000

(Wiley, 2014)

87. Assume that as an investor, you are planning to enter the construction industry as a

panel formwork supplier. The potential number of forthcoming projects, you forecasted

that within two years, your fixed cost for producing formworks is P300,000. The

variable unit cost for making one panel is P15. The sale price for each panel will be P25.

If you charge P25 for each panel, how many panels do you need to sell in total in order

to start making money?

A. 20,000

B. 25,000

C. 30,000

D. 35,000

(Cabrera,2009)

88. A manufacturing company supplies its products to construction job sites. The average

monthly fixed cost per site is P4,500, while each unit cost P35 to produce and selling

price is P50 per unit. Determine the monthly breakeven volume.

A. 200

B. 300

C. 250

D. 350

(Cabrera, 2009)

For items #89-90:

A store sells t-shirts. Average selling price of the t-shirts are P150 and the average variable cost

is P90. Thus, every time the store sells a shirt ithas P60 remaining after it pays the manufacturer.

Suppose fixed costs of operating the store is P1,000,000 per year. Find the break-even in units.

89. Find the break-even in units.

A. 16,667

B. 23,333

C. 15,000

D. 20,000

90. If the average selling price rose to P160, break even volume would fall to?

A. 13,333

B. 14,286

C. 14,667

D. 15,163

(Cabrera, 2009)

91. With the aid of computer software, managers can vary assumptions regarding selling

prices, costs, and volume and can immediately see the effects of each change on the

break-even point and profit. Such an analysis is called

A. What if or sensitivity analysis

B. Vary the data analysis

C. Computer aided analysis

D. Data gathering

(Bobadilla, 2015)

92. Target costing is

A. a substitute for CVP analysis

B. used by companies that cannot classify their costs by behavior

C. Inappropriate if a company has already established a target profit

D. Used in decisions to offer a new product or enter a new market

(Bobadilla, 2015)

93. A cost-volume profit graph reflects relationships

A. That are expected to hold over the relevant range

B. Of results over the past few years

C. That the company’s managers would like to have happen

D. Likely to prevail for the industry

(Bobadilla, 2015)

94. In CVP analysis, when the number of units changes, which one of the following will

remain the same?

A. Total sales revenues

B. Total variable costs

C. Total fixed costs

D. Total contribution margin

(Bobadilla, 2015)

95. As the company sells more of higher-contribution margin product in relation to other

products, the

A. Breakeven in units declines

B. Margin of safety stays constant

C. Break-even point goes up

D. Weighted-average contribution margin ratio remains unchanged

(Bobadilla, 2015)

A. Raises the break-even point

B. Lowers the break-even point

C. Decreases sales required to earn a particular after-tax profit

D. Increases sales required to earn a particular after-tax profit

(Bobadilla, 2015)

A. Raises the break-even point

B. Lowers the break-even point

C. Increases unit sales needed to earn a particular target profit

D. Decreases the contribution margin percentage

(Bobadilla, 2015)

For Items #98-100, refer to the problem below:

Anilao Ski Company recently expanded in manufacturing capacity to allow it to produce up to

15,000 pairs of cross-counter skis of either he mountaineering model or the touring model. The

sales department assures management that it can sell between 9,000 and 13,000 pairs (units) of

either product this year. The following data were compiled by the accounting department.

Mountaineering Touring

Selling price per unit P88.00 P80.00

Variable cost per unit 52.8 52.8

Fixed cost will total P 369,800 if the touring model is produced. Anilao Ski Company is

subject to a 40% income tax rate.

98. If Anilao Ski Company desies an after-tax net income of P24,000, how many pairs of

touring model skis will the company have to sell?

A. 13, 118

B. 12,529

C. 13,853

D. 4,460

99. The total sales revenue at which Anilao Ski Company would make the same profit or

loss regardless of the ski model it decided to produce is

A. P880,000

B. 442,400

C. 924,000

D. 686,400

100. How much would the variable cost per unit of the touring model have to change

before it had the same breakeven point in units as the mountaineering model?

A. P2.68/unit increase

B. P4.53/unit increase

C. P5.03/unit decrease

D. P2.97/unit decrease

(Bobadilla, 2015

The following information should be used to answer Question Nos. 101 through 107:

Due to erratic sales of its sole product a high capacity battery for laptop computers, Salcedo

Company has been experiencing difficulty for some time. The company’s income statement for

the most recent month is given below:

Less variable expenses (4,095,000)

Contribution margin 1,755,000

Less fixed expenses 1,800,000

Net loss P (45,000)

101. The president believes that a P160,000 increase in the monthly advertising

budget, combined with an intensified effort by the sales staff, will result in an P800,000

increase in monthly sales. If the president is right, what will be the effect on the

company’s monthly net income or loss?

A. P 120,000 increase C. P 120,000 decrease

B. P 80,000 increase D. P 80,000 decrease

102. Refer to the original data. The sales manager is convinced that a 10% reduction

in the selling price, combined with an increase of P600,000 in the monthly advertising

budget, will cause unit sales to double. What will the new profit or loss if these changes

are adopted?

A. P 60,000 C. P 45,000

B. P(60,000) D. P (45,000)

103. Refer to the original data. The Marketing Department thinks that a fancy new

package for the laptop computer battery would help sales. The new package would

increase packaging costs by P7.50 per unit. Assuming no other changes, how many units

would have to be sold each month to earn a profit of P97,500?

A. 21,818 C. 25,450

B. 23,000 D. 28,000

104. Refer to the original data. By automating certain operations, the company could

reduce variable costs by P30 per unit. However, fixed costs would increase by P72,000

each month. How would the breakeven point in units change if the company automated

the operations?

B. 1,000 units decrease D. 3,000 units decrease

105. Which of the two methods (the present or the automated) has higher income at

the level of sales of 26,000 units?

A. Manual, P60,000 C. Manual, P240,000

B. Automated, P60,000 D. Automated, P240,000

106. At what level of production would the automation of the production process be

indifferent to the present process?

A. 18,000 C. 24,000

B. 21,000 D. 28,000

107. The break even in peso sales for Salcedo Company is:

A. P 6,000,000 C. P 5,852,756

B. P 2,571,429 D. P 7,500,000

(Bobadilla, 2017)

108. With respect to fixed costs, C-V-P analysis assumes total fixed costs

A. per unit remains constant as volume changes

B. remain constant from one period to the next

C. vary directly with volume

D. remain constant across changes in volume

(Bobadilla, 2017)

A. Fixed costs are irrelevant for decision making.

B. Fixed costs are mandatory for CVP decision making.

C. Differentiation between the patterns of variable costs and fixed costs is critical.

D. Fixed costs are necessary to calculate inventory valuations.

(Bobadilla, 2017)

110. The CVP model assumes that over the relevant range of activity:

A. only revenues are linear C. unit variable cost is not constant

B. total fixed cost changes D. revenues and total costs are linear

(Bobadilla, 2017)

111. Which of the ff. is correct? The break-even point occurs on the CVP graph

where:

A. total profit equals total expenses.

B. total profit equals total fixed expenses.

C. total contribution margin equals total fixed expenses.

D. total variable expenses equal total contribution margin.

(GARRISON)

112. If a company decreases its total fixed expenses while increasing the variable

expense

per unit, the total expense line relative to its previous position on a cost-volume-profit

graph will:

A. shift upward and have a steeper slope.

B. shift upward and have a flatter slope.

C. shift downward and have a steeper slope.

D. shift downward and have a flatter slope.

(GARRISON)

113. East Company manufactures and sells a single product with a positive

contribution margin. If the selling price and the variable expense per unit both increase

5% and fixed expenses do not change, what is the effect on the contribution margin per

unit and the contribution margin ratio?

Contribution Contribution

margin per unit margin ratio

A. No change No change

B. Increase Increase

C. Increase No change

D. Increase Decrease

(GARRISON)

114. Mossfeet Shoe Company is a single product firm. Mossfeet is predicting that a

price

increase next year will not cause unit sales to decrease. What effect would this price

increase have on the following items for next year?

Contribution Break-even

Margin Ratio Point

A. Increase Decrease

B. Decrease Decrease

C. Increase No effect

D. Decrease No effect

(GARRISON)

A. Total manufacturing expenses/Sales.

B. (Sales - Variable expenses)/Sales.

C. 1 - (Gross Margin/Sales).

D. 1 - (Contribution Margin/Sales).

(GARRISON)

(Problems #116-120, no solutions submitted)

A. The behavior of total revenue is linear.

B. Unit variable expenses remain unchanged as activity varies.

C. Inventory levels at the beginning and end of the period are the same.

D. The number of units produced exceeds the number of units sold.

(Bobadilla)

A. per unit, as the volume of activity changes.

B. in total, as the volume of activity changes.

C. both A and B are correct.

D. none of the above.

(Bobadilla)

Profitability” Which of the following best explains the difference between the two points

on the graph?

A. The area of loss represents the difference between Sales and Variable Cost.

B. The area of loss begins with the concept that fixed costs have to be recovered

prior to sales contributing to profit.

C. The area of profit represents the difference between Sales and Variable Cost.

D. The area of profit begins with the concept that no company would have any level

of sales below the break-even point.

(Bobadilla)

124. Seal Yard Ornaments sells lawn ornaments for P15 each. Seal’s contribution

margin ratio is 40%. Fixed costs are P32,000. Should fixed costs increase 30%, how

many additional units will Seal have to produce and sell in order to generate the same

net profit as under the current conditions?

A. 1,600.

B. 5,333.

C. 6,933.

D. 1,067.

(Bobadilla)

P78,750 upon moving their place of business to the downtown area. The company

anticipates that the selling price per unit and the variable expenses will not change. At

present, the sales volume necessary to breakeven is P750,000 but with the expected

increase in fixed costs, the sales volume necessary to breakeven would go up to

P975,000.

Based on these projections, what were the total fixed costs before the increase of

P78,750?

A. P341,250

B. P262,500

C. P183,750

D. P300,000

(Bobadilla)

126. Alexandra Co. provides two products, Velvet and Cotton. Velvet accounts for 60

percent of total sales. The variable costs as a percentage of selling prices are 60% for

Velvet and 85% for Cotton. Total fixed costs are P225,000. If fixed costs will increase by

30 percent, what amount of peso sales would be necessary to generate an operating

profit of P48,000?

A. P1,350,000

B. P 486,425

C. P1,135,000

D. P 910,000

(Bobadilla)

127. Last month, Zamora Company had an income of P0.75 per unit with sales of

60,000 units. During the current month when the unit sales are expected to be only

45,000, there is a loss of P1.25 per unit. Both the variable cost per unit and total fixed

costs remain constant. The fixed costs amounted to

A. P 80,000

B. P247,500

C. P360,000

D. P210,000

(Bobadilla)

128. During the month of June, Armani Corporation produced 12,000 units and sold

them for P20 per unit. Total fixed costs for the period were P154,000, and the operating

profit was P26,000. The variable cost per unit for June was

A. P4.50

B. P5.00

C . P6.00

D. P7.17

(Bobadilla)

129. Stone Company plans to sell 400,000 laundry hangers. The fixed costs are

P600,000, and the variable cost is 60% of the selling price. If the company wants to

realize a profit of P120,000, the selling price of each laundry hanger must be

A. P2.50

B. P3.75

C. P4.50

D. P5.00

(Bobadilla)

130. An organization’s break-even point is 4,000 units at a sales price of P50 per unit,

variable cost of P30 per unit, and total fixed costs of P80,000. If the company sells 500

additional units, by how much will its profit increase?

A. P25,000

B. P15,000

C. P10,000

D. P12,000

(Bobadilla)

Following information pertains to X Company’s two products:

Digicam Videocam

Break-even point-units 360 240

Selling price P 4,500 P14,250

Variable costs 2,250 5,000

A. P11,500

B. P5,050

C. P19.17

D. P25,250

A. P3,030,000

B. P5,040,000

C. P2,010,000

D. P5,050,000

133. How many units of each product should be sold if the company desires to earn

profit before tax of P15,000?

Digicam Webcam

A. 900 900

B. 360 240

C. 360 540

D. 540 360

(Roque, 2016)

134. A company is making plans for next year, using cost-volume-profit analysis as its

planning tool.

Next year’s sales data about its product are as follows

Selling price P60

Variable manufacturing costs per unit 22.50

Variable selling and administrative costs 4.5

Fixed operating costs (60% is manufacturing costs) P148,500

Income tax rate 30%

How much should sales be next year if the company wants to earn profit after tax of

P23,100, the same amount that it earned last year?

A. P310,800

B. P397,500

C. P330,000

D. P222,000

(Roque, 2016)

Assume that the company’s management learned that a new technology that will increase the

quality of its product is available

a. The selling price of the product will increase to P75 per unit

b. Fixed manufacturing costs will increase by 20%

c. Additional advertising costs will be incurred to promote the higher quality

product. This will increase fixed non-manufacturing cost by 10%

d. The improved product will require a new material that will increase direct

materials cost by P4.50

135. If the new technology is adapted, how much sales should the company make to

earn a pre-tax profit of 10% on sales ?

A. P336,130

B. P358,875

C. P253,324

D. 353,897

136. If the sales required in item no.136 is realized, the company will have a margin

of safety of

A. P297,000

B. 61,875 units

C. P825

D. 17.24%

137. If the sales required in Item no 136 is realized, the company will have an

operating leverage factor of

A. 8.53

B. 5.80

C. 17.24%

D. 5.50

(Roque, 2016)

138. Contribution per unit is £1. Fixed costs are £5,000. Production and sales are

7,500 units. Profit is

A. 2,500

B. 3,500

C. 1,500

D. 2,000

(Roque, 2016)

139. Break-even analysis is based upon several simplifying assumptions. For a multi-

product company, such assumptions are as follows, except

A. Production volume always exceed sales volume

B. A given sales mix is maintained for all volume changes

C. Variable costs are constant per unit

D. Total fixed costs are constant regardless of volume changes within the relevant

range.

(Roque, 2016)

140. The break-even point is 10,000 units, sales are 12,000 units. The margin of safety

expressed as a percentage of the break-even point is therefore:

A. 25%

B. 80%

C. 120%

D. 20%

(Roque, 2016)

141. A product has a selling price of P20 and unit variable cost of P14. the effect of a

P2 per unit increase in variable cost is to increase the break-even level capacity by

A. 33 ⅓%

B. 50%

C. P2 per unit

D. 66.67%

(Roque,2016)

142. Amoroso Corp. sells a single product for P180 per unit. Last year, it sold 120,000

units and earned profit before tax of P300,000. Fixed costs amounted to P1,500,000.

Next year, fixed costs is expected to increase by 40%. What should the selling price be

next year to make the same amount of profit before tax of P300,000?

A. P180

B. P252

C. P5

D. P185

(Roque,2016)

143. Antiporda, Inc. sells three products, A, B, and C. The company sells three (3)

units of C. Total fixed costs amount to P760,000. Product A’s contribution margin per

unit is P2, Product B’s is 150% of A’s, and Product C’s is twice as much as B’s. How

many units of each product must be sold to break-even?

A. 2,000 12,000 6,000

B. 20,000 120,000 60,000

C. 29,231 58,462 87,692

D. 69,091 414,546 207,273

(Roque,2016)

144. A company has fixed costs of P150,000, a variable cost ratio of 60%, and a

margin of safety ratio of 25%. Considering the given data, which of the following

statements is not correct?

B. Sales amounted to P375,000

C. Profit amounts to P50,000

D. The contribution margin amounts to P200,000

(Roque,2016)

ITEMS #145-148, refer to the problem below:

In 200A, the company’s sales was P500,000. Its fixed costs amounts to P100,000 per year. In

200B, sales was 20% higher, while profit was P30,000 higher than 200A figures. For 200C, the

company expects to have sales that is twice as much as the 200A sales. The expected increase in

production to meet the sales demand in 200C will not require the company to exceed its normal

capacity.

A. 70%

B. 30%

C. 10%

D. 60%

146. How much profit does the company expect to earn in 200C?

A. P200,000

B. P160,000

C. P100,000

D. P150,000

A. P333,333.33

B. 333,333.33 units

C. 500,000

D. Cannot be determined from that given information

(Roque,2016)

148. A company’s break-even sales (BES) is P600,000. If fixed costs would increase

10% of this BES, such BES would increase by 40%. What is the variable cost ratio?

A. 25%

B. 75%

C. 40%

D. 10%

A. P450,000

B. P150,000

C. P630,000

D. P210,000

(Roque,2016)

150. A company’s product is sold for P60. The variable cost per unit is P28.80 and

fixed costs amounts to P216,000. The company is considering to acquire a new

equipment that would increase fixed costs to P240,000 and decrease variable cost per

unit by P4.80.

Considering the given data, which of the following is not correct?

B. The indifference point between the two cost structures is equal to 5,000 units

C. If expected sales will be above the indifference point, it is better not to acquire

the new equipment

D. If the expected sales will be lower than the indifference point, the company

should not acquire the new equipment.

(Roque,2016)

A. Planning

B. Organizing

C. Directing

D. Controlling

(Bobadilla, 2015)

152. The term contribution margin is best defined as the:

A. Difference between fixed costs and variable costs.

B. Difference between revenue and fixed costs.

C. Amount available to cover fixed costs and profit.

D. Amount available to cover variable costs.

(Bobadilla, 2015)

153. As the projected net income increases the

A. Degree of operating leverage declines

B. Margin of safety stays constant

C. Break-even point goes down

D. Contribution margin ratio goes up

(Bobadilla, 2015)

154. If a company raises its target peso profit, its

A. Break-even point rises

B. Fixed costs increase

C. Required total contribution margin increases

D. Selling price rises

(Bobadilla, 2015)

A. Fixed costs are greater than sales

B. Selling price is lower than the variable cost per unit

C. Selling price is less than the average total cost per unit.

D. Fixed cost per unit is greater than variable cost per unit.

(Bobadilla, 2015)

Carribean Company produces a product that sells for P60. the variable manufacturing costs are

P30 per unit. The fixed manufacturing cost is P10 per unit based on the current level of activity,

and fixed selling and administrative costs are P8 per unit. A selling commission of 10% of the

selling price is paid on each unit sold.

A. 24

B. 36

C. 30

D. 54

(Bobadilla, 2015)

Fixed expenses P78,000

Unit contribution margin 12

Target net profit P42,000

157. How many unit sales are required to earn the target net profit?

A. 15,000 units

B. 10,000 units

C. 12,800 units

D. 20,000 units

(Bobadilla, 2015)

For Item #158, consider the following information

Mercado, Inc. had the following economic data for 2010:

Net sales P400,000

Contribution margin 160,000

Margin of safety 40,0000

A. 360,000

B. 288,000

C. 320,000

D. 80,000

(Bobadilla, 2015)

Below is the income statement for Blender Co. for 2010:

Sales P 400,000

Variable costs (125,000)

Contribution margin P 275,000

Fixed costs (200,000)

Profit before tax P 75,000

159. What is the degree of operating leverage for Blender Company for 2010?

A. 3.67

B. 1.45

C. 5.33

D. 1.67

(Bobadilla. 2015)

For Item #160 consider the following information

The following information pertains to Hennin Corporation for the year ending Dec 31, 2009:

Budgeted sales P1,000,000

Breakeven sales 700,000

Budgeted contribution margin 600,000

Cash flow breakeven 200,000

A. 300,000

B. 400,000

C. 500,000

D. 800,000

(Bobadilla, 2015)

161. Harry Manufacturing incurs annual fixed costs of P250,000 in producing and

selling a single product. Estimated unit sales are 125,000. An after-tax income of

P75,000 is desired by management. The company projects its income tax rate at 40

percent. What is the maximum amount that Harry can expend for variable costs per unit

and still meet its profit objective if the sales price per unit is estimated at P6?

A. P3.37

B. P3.59

C. P3.00

D. P3.70

(CPAR Reviewer, 2017)

162. For its most recent fiscal year, a firm reported that its contribution margin was

equal to 40 percent of sales and that its net income amounted to 10 percent of sales. If its

fixed costs for the year were P60,000, how much was the margin of safety?

A. P150,000

B. P200,000

C. P600,000

D. P 50,000

(CPAR Reviewer, 2017)

163. Sam Company manufactures a single product. In the prior year, the company had

sales of P90,000, variable costs of P50,000, and fixed costs of P30,000. Sam expects its

cost structure and sales price per unit to remain the same in the current year, however

total sales are expected to increase by 20 percent. If the current year projections are

realized, net income should exceed the prior year’s net income by:

A. 100 percent

B. 80 percent

C. 20 percent

D. 50 percent

(CPAR Reviewer, 2017)

For Items #164-165, refer to the problem below:

A company is making plans for next year, using cost-volume-profit analysis as its planning tool.

Selling price P60.00

Variable manufacturing costs per unit 22.50

Variable selling and administrative costs 4.50

Fixed operating costs (60% is manufacturing cost) P148,500

Income tax rate 32%

164. How much should sales be next year if the company wants to earn profit after tax

of P22,440, the same amount that it earned last year?

A. P310,800

B. P397,500

C. P330,000

D. P222,000

165. Assume that the company’s management learned that a new technology that will

increase the quality of its product is available. If implemented, its projections for next

year will be changed:

I. I. The selling price of the product will increase to P75 per unit.

II. Fixed manufacturing costs will increase by 20%.

III. Additional advertising costs will be incurred to promote the higher-

quality product. This will increase fixed non-manufacturing cost by 10%.

IV. The improved product will require a new material that will increase direct

materials cost by P4.50

If the new technology is adapted, how much sales should the company make to earn a

pre-tax profit of 10% on sales?

A. P366,130

B. P358,875

C. P253,324

D. P353,897

(CPAR Reviewer, 2017)

166. Yamyam Company is considering introducing a new product that will require a

P250,000 investment of capital. The necessary funds would be raised through a bank

loan at an interest rate of 8%. The fixed operating costs associated with the product

would be P122,500 while the variable cost ratio would be 58%. Assuming a selling price

of P15 per unit, determine the number of units (rounded to the nearest whole unit)

Yamyam would have to sell to generate earnings before interest and taxes (EBIT) of

32% of the amount of capital invested in the new product.

A. 35,318 units

B. 25,575 units

C. 32,143 units

D. 23,276 units

(CPAR Reviewer, 2017)

167. The following information relates to Hera Corporation for last year:

Sales P500,000

Net operating income P25,000

Degree of operating leverage 5

Sales at Hera are expected to be P600,000 next year. Assuming no change in cost

structure, this means that net operating income for next year should be:

A. 30,000

B. 45,000

C. 50,000

D. 125,000

(CPAR Reviewer, 2018)

For Items #168-169, consider the following information:

Total Cost Unit Cost

Sales (40,000 units) P1,000,000 P25

Raw materials 160,000 4

Direct labor 280,000 7

Factory overhead:

Variable 80,000 2

Fixed 360,000

Selling and general expenses:

Variable 120,000 3

Fixed 225,000

168. How many units does the company need to produce and sell to make a before-tax

profit of 10% of sales?

A. 65,000 units

B. 36,562 units

C. 90,000 units

D. 29,250 units

169. Assuming that the company sells 80,000 units, what is the maximum that can be

paid for an advertising campaign while still breaking even?

A. 135,000

B. 1,015,000

C. 535,000

D. 695,000

(CPAR Reviewer, 2018)

170. As projected net income increases the

A. degree of operating leverage declines.

B. margin of safety stays constant.

C. break-even point goes down.

D. contribution margin ratio goes up.

(CPAR Reviewer, 2017)

ORTEGA, Norman Dotollo (171-180)

PAGUNSAN, Kevin Michael Madres (181-190)

191. Wheel and Tire Manufacturing currently produces 1,000 tires per month. The

following per unit data apply for sales to regular customers:

Direct manufacturing labor 3

Variable manufacturing overhead 6

Fixed manufacturing overhead 10

Total manufacturing costs $39

The plant has capacity for 3,000 tires and is considering expanding production to 2,000

tires. What is the total cost of producing 2,000 tires?

A. $39,000

B. $78,000

C. $68,000

D. $62,000

(Horngren Testbank, 2013)

192. Tire and Spoke Manufacturing currently produces 1,000 bicycles per month. The

following per unit data apply for sales to regular customers:

Direct manufacturing labor 5

Variable manufacturing overhead 14

Fixed manufacturing overhead 10

Total manufacturing costs $79

The plant has capacity for 3,000 bicycles and is considering expanding production to

2,000 bicycles.

What is the per unit cost of producing 2,000 bicycles?

A. $79 per unit

B. $158 per unit

C. $74 per unit

D. $134 per unit

(Horngren Testbank, 2013)

Manufacturing costs $2,000,000

Units manufactured 50,000

Units sold 47,000 units sold for $75 per unit

Beginning inventory 0 units

What is the amount of gross margin?

A. $1,750,000

B. $3,525,000

C. $5,405,000

D. $1,645,000

(Horngren Testbank, 2013)

Beginning work-in-process inventory $ 50,000

Ending work-in-process inventory 48,000

Beginning finished goods inventory 180,000

Ending finished goods inventory 195,000

Cost of goods manufactured 1,220,000

What is cost of goods sold?

A. $1,235,000

B. $1,205,000

C. $1,218,000

D. $1,222,000

(Horngren Testbank, 2013)

Beginning work-in-process inventory $ 20,000

Ending work-in-process inventory 23,000

Beginning finished goods inventory 36,000

Ending finished goods inventory 34,000

Cost of goods manufactured 246,000

What is cost of goods sold?

A. $244,000

B. $248,000

C. $243,000

D. $249,000

(Horngren Testbank, 2013)

For Items #196-198, use the information below:

Beginning finished goods, 1/1/20X3 $ 90,000

Ending finished goods, 12/31/20X3 77,000

Cost of goods sold 270,000

Sales revenue 500,000

Operating expenses 155,000

A. $230,000

B. $257,000

C. $283,000

D. $355,000

A. $283,000

B. $355,000

C. $230,000

D. $257,000

A. $75,000

B. $112,000

C. $62,000

D. $230,000

(Horngren Testbank, 2013)

For Items #199-200, use the information below:

The Singer Company manufactures several different products. Unit costs associated with

Product ICT101 are as follows:

Direct materials $ 60

Direct manufacturing labor 10

Variable manufacturing overhead 18

Fixed manufacturing overhead 32

Sales commissions (2% of sales) 4

Administrative salaries 16

Total $140

199. What are the inventoriable costs per unit associated with Product ICT101?

A. $120

B. $140

C. $50

D. $88

200. What are the period costs per unit associated with Product ICT101?

A. $4

B. $16

C. $20

D. $52

(Horngren Testbank, 2013)

A. break-even point increases.

B. break-even point decreases.

C. variable expenses as a percentage of net sales decrease.

D. variable expenses as a percentage of net sales increase.

(Garrison)

202. Salinas Corporation has a degree of operating leverage of 8. This means that a

1% change in sales dollars at Salinas will generate an 8% change in:

A. variable expenses.

B. fixed expenses.

C. contribution margin.

D. net operating income.

203. A $2.00 increase in a product's variable expense per unit accompanied by a $2.00

increase in its selling price per unit will:

A. decrease the degree of operating leverage.

B. decrease the contribution margin.

C. have no effect on the break-even volume.

D. have no effect on the contribution margin ratio.

(Garrison)

204. To obtain the dollar sales volume necessary to attain a given target profit, which

of the following formulas should be used?

A. (Fixed expenses + Target net profit)/Total contribution margin

B. (Fixed expenses + Target net profit)/Contribution margin ratio

C. Fixed expenses/Contribution margin per unit

D. Target net profit/Contribution margin ratio

(Garrison)

205. The contribution approach income statement:

A. organizes costs on a functional basis.

B. provides owners with more cash flows.

C. is particularly helpful to the manager in planning and decision making.

D. provides a gross margin figure from which selling and administrative expenses

are deducted.

E. none of these.

(Garrison)

206. Green Corporation expects to sell 3,000 plants a month. Its operations manager

estimated the following monthly costs:

Fixed costs 15,000

What sales price per plant does she need to achieve to begin making a profit if she sells

the estimated number of plants per month?

A. P7.51

B. P7.50

C. P5.00

D. P2.50

(Bobadilla, 2014)

207. Information concerning the 2007 financial projections of the Silver Company is

as follows:

Net sales of P3,000,000.

Fixed costs of P800,000.

P0.65 increase in cost of sales for each peso increase in net sales.

A. P950,000

B. P2,750,000

C. P1,050,000

D. P1,850,000

(Bobadilla, 2014)

Product A: 12 units @ P5.25 sales price; P4.85 variable cost per unit.

Product B: 10 units @ P7.50 sales price; P6.95 variable cost per unit.

Product C: 6 units @ P12.25 sales price; P10.35 variable cost per unit.

Dial Enterprise's fixed costs are P75,950.

What are the composite break-even point?

A. 98,000

B. 2,000

C. 3,500

D. 4,000

(Bobadilla, 2014)

209. Adventurous Co. is considering dropping a product. Variable costs are P60.00

per unit. Fixed overhead costs, exclusive of depreciation, have been allocated at a rate

of P3.50 per unit and will continue whether or not production ceases. Depreciation on

the equipment is P60,000 a year. If production is stopped, the equipment can be sold for

P270,000, if production continues, however, it will be useless at the end of 1 year and

will have no salvage value. The selling price is P100 a unit. Ignoring taxes, the

minimum number of units to be sold in the current year to break even on a cash flow

basis is

A. 1,500 units.

B. 6,750 units.

C. 8,250 units.

D. 9,750 units

(Bobadilla, 2014)

210. BM Motors, Inc. employs 40 sales personnel to market its line of economy

automobiles. The average car sells for P1,200,000 and a 6% commission is paid to the

salesperson. BM Motors is considering a change to a commission arrangement that

would pay each salesperson a salary of P24,000 per month plus a commission of 2% of

the sales made by that salesperson.

The amount of total car sales at which the two expense structures would be indifferent is

A. P22,500,000

B. P24,000,000

C. P30,000,000

D. P12,000,000

(Bobadilla, 2014)

costs and sales prices are made. Which of the following is one of those assumptions?

B. The variable cost per unit will decrease as volume increases

C. The sales price per unit will remain constant as volume increases

D. Fixed cost per unit will remain the same as volume increases

(Bobadilla, 2014)

212. Cost-volume-profit analysis is a technique available to management to

understand better the interrelationships of several factors that affect a firm's profit. As

with many such techniques, the accountant oversimplifies the real world by making

assumptions. Which of the following is not a major assumption underlying CVP

analysis?

A. All costs incurred by a firm can be separated into their fixed and variable

components.

B. The product’s selling price per unit is constant at all volume levels within a

relevant range.

C. Operating efficiency and employee productivity is constant at all volume levels.

D. For multi-product situations, the sales mix can vary at different volume levels.

(Bobadilla, 2014)

213. Broadway Company sells three products: A, B and C. Product A's unit

contribution margin is higher than Product B's which is higher than Products C's. Which

one of the following events is most likely to increase the company's overall break-even

point?

A. The installation of new automated equipment and subsequent lay-off of factory

workers.

B. A decrease in Product C's selling price.

C. An increase in the overall market demand for Product B.

D. A change in the relative market demand for the products, with the increase

favoring Product A relative to Product B and Product C.

(Bobadilla, 2014)

214. A company’s breakeven point in peso sales may be affected by equal percentage

increases in both selling price and variable cost per unit (assume all other factors are

equal within the relevant range). The equal percentage changes in selling price and

variable cost per unit will cause the breakeven point in peso sales to

B. Decrease by more than the percentage increase in the selling price.

C. Increase by less than the percentage increase in selling price.

D. Remain unchanged.

(Bobadilla, 2014)

The Harper Corporation manufactures and sells T-shirts imprinted with college names

and slogans. Last year, the shirts sold for P7.50 each, and the variable cost to

manufacture them was P2.25 per unit. The company needed to sell 20,000 shirts to

break even. The net income last year was P5,040. Harper’s expectations for the coming

year include the following:

2.Variable cost to manufacture will increase by one-third

3.Fixed costs will increase by 10%

4.The income tax rate of 40% will be unchanged

215. The selling price that would maintain the same contribution margin rate as last

year is

A. P 9.00

B. P10.00

C. P 8.25

D. P 9.75

(Bobadilla, 2014)

San Carlos operates a general hospital but rents space and beds to separate entities for

specialized treatment such as pediatrics, maternity, psychiatric, etc. San Carlos charges each

separate entity for common services to its patients like meals and laundry and for all

administrative services such as billings, collections, etc. All uncollectible accounts are charged

directly to the entity. Space and bed rentals are fixed for the year.

For the entire year ended June 30, the Pediatrics Department at San Carlos Hospital charged

each patient an average of P650 per day, had a capacity of 60 beds, operated 24 hours per day

for 365 days, and had revenue of P10,676,250.

Expenses charged by the hospital to the Pediatrics Department for the year ended June 30 were:

Basis of Allocation

Patient Days Bed Capacity

Dietary P 328,500

Janitorial P 118,400

Laundry 197,100

Lab, other than direct charges to patients

410,625

Pharmacy 410,625

Repairs and maintenance 65,700 66,045

General administrative services 1,218,780

Rent 2,546,710

Billings and collections 689,850

Bad debt expense 246,375

Others 114,975 240,315

Total P2,463,750 P4,190,250

The only personnel directly employed by the Pediatrics Department are supervising nurses,

nurses, and aides. The hospital has minimum personnel requirements based on total annual

patient days.

10,000 – 14,000 21 11 4

14,001 – 17,000 22 12 4

17,001 – 23,725 22 13 4

23,726 – 25,550 25 14 5

25,551 – 27,375 26 14 5

27,376 – 29,200 29 16 6

The staffing levels above represent full-time equivalents, and it should be assumed that the

Pediatrics Department always employs only the minimum number of required full-time

equivalent personnel.

Annual salaries for each class of employee follow: supervising nurses, P180,000; nurses,

P130,000; and aides, P50,000. Salary expense for the year ended June 30 for supervising

nurses, nurses, and aides was P720,000, P1,560,000, and P1,100,000, respectively.

The Pediatrics Department operated at 100% capacity during 111 days of the past year. It is

estimated that during 90 of these capacity days, the demand average 17 patients more than

capacity and even went as high as 20 patients more on some days. The hospital has an

additional 20 beds available for rent for the coming fiscal year.

216. The contribution margin per patient day is

A. P 400.00

B. P 450.00

C. P 500.00

D. P 525.00

217. How many patient days are necessary to cover fixed costs for bed capacity and

for supervisory nurses?

A. 9,500

B. 9,820

C. 10,250

D. 12,000

A. 14,780

B. 15,140

C. 15,820

D. 16,080

219. If the Pediatrics Department rented an additional 20 beds and all other factors

remain the same as in the past year, what would be the increase in revenue?

A. P 994,500

B. P 877,500

C. P 1,054,500

D. P 897,500

220. What is the increase in fixed cost applied for bed capacity, given the increase in

number of beds?

A. P 1,396,667

B. P 1,470,000

C. P 1,187,238

D. P 1,520,000

(Bobadilla, 2014)

A. Variable costs.

B. Sales revenue.

C. Selling and administrative costs.

D. Fixed costs.

(Wiley, 2014)

222. The most likely strategy to reduce the breakeven point would be to

A. Increase both the fixed costs and the contribution margin.

B. Decrease both the fixed costs and the contribution margin.

C. Decrease the fixed costs and increase the contribution margin.

D. Increase the fixed costs and decrease the contribution margin.

(Wiley, 2014)

223. In calculating the breakeven point for a multi-product company, which of the

following assumptions are commonly made when variable costing is used?

I. Sales volume equals production volume.

II. Variable costs are constant per unit.

III. A given sales mix is maintained for all volume changes.

A. I and II.

B. I and III.

C. II and III.

D. I, II, and III.

(Wiley, 2014)

A. Total fixed costs.

B. Unit variable cost.

C. Volume or number of units.

D. Relevant costs.

(Roque, 2016)

A. Gross margin and contribution margin are the same.

B. Contribution margin is the excess of sales over variable costs, and this is the

amount available for the recovery of fixed assets and generation of profit.

C. One inherent, simplifying assumption in CVP analysis is that production equals

sales.

D. Unit variable costs change directly with the cost driver or activity level.

(Roque, 2016)

A. costs are classified as to function.

B. fixed and variable manufacturing costs are combined as one level item.

C. fixed costs are shown separately from variable costs.

D. fixed manufacturing costs are shown separately from variable manufacturing

costs, but fixed and variable operating costs are combined as one line item.

(Roque, 2016)

(ITEMS 227 TO 229 ARE BASED ON THE FOLLOWING INFORMATION)

A company sells two products, Product 1 and Product 2. Three units of Product are sold for

every two units of Product 2. Fixed costs is P234,000 per year.

Product 1 is sold for P20 per unit and the variable costs identified with the production and sale

of each unit of the product amounts to P14. Product 2 is sold for P24 per unit, and the variable

costs identified with the production and sale of each unit of the product amounts to P20.

A. P26

B. P10

C. P50

D. P5.20

A. Product 1 45,000 units; Product 2 45,000 units

B. Product 1 27,000 units; Product 2 18,000 units

C. Product 1 135,000 units; Product 2 90,000 units

D. Product 1 3 units; Product 2 2 units

A. 24%

B. 46.67%

C. 9.33%

D. 11.82%

(Roque, 2016)

A. profit equals zero.

B. gross profit equals zero.

C. sales equals total costs.

D. fixed costs equals contribution margin.

(Roque, 2016)

231. The difference between total sales in dollars and total variable expenses is called:

A. net operating income.

B. net profit.

C. the gross margin.

D. the contribution margin.

(Garrison 9/e)

232. The total contribution margin decreases if sales volume remains the same and:

A. fixed expenses increase.

B. fixed expenses decrease.

C. variable expense per unit increases.

D. variable expense per unit decreases.

(Garrison 9/e)

233. The break-even in units sold will decrease if there is an increase in:

A. unit sales volume.

B. total fixed expenses.

C. unit variable expenses.

D. selling price.

(Garrison 9/e)

234. The ratio of fixed expenses to the unit contribution margin is the:

A. break-even point in unit sales.

B. profit margin.

C. contribution margin ratio.

D. margin of safety.

(Garrison 9/e)

235. A company increased the selling price for its product from $1.00 to $1.10 a unit

when total fixed expenses increased from $400,000 to $480,000 and variable expense

per unit remained unchanged. How would these changes affect the break-even point?

A. The break-even point in units would increase.

B. The break-even point in units would decrease.

C. The break-even point in units would remain unchanged.

D. The effect cannot be determined from the information given.

(Garrison 9/e)

A. Sales - Net income.

B. Sales - (Variable expenses/Contribution margin).

C. Sales - (Fixed expenses/Contribution margin ratio).

D. Sales - (Variable expenses + Fixed expenses).

(Garrison 9/e)

237. The break-even point in unit sales increases when variable expenses:

A. increase and the selling price remains unchanged.

B. decrease and the selling price remains unchanged.

C. decrease and the selling price increases.

D. remain unchanged and the selling price increases.

(Garrison 9/e)

238. North Company sells a single product. The product has a selling price of $30 per

unit and variable expenses of 70% of sales. If the company's fixed expenses total

$60,000 per year, then it will have a break-even of:

A. $60,000.

B. $85,714.

C. $42,000.

D. $200,000

(Garrison 9/e)

239. Carver Company produces a product which sells for $30. Variable manufacturing

costs are $15 per unit. Fixed manufacturing costs are $5 per unit based on the current

level of activity, and fixed selling and administrative costs are $4 per unit. A selling

commission of 10% of the selling price is paid on each unit sold. The contribution

margin per unit is:

A. $ 3.

B. $15.

C. $ 8.

D. $12.

(Garrison 9/e)

Sales (8,000 units) ................ $800,000

Less variable expenses .............. 500,000

Contribution margin .................. 300,000

Less fixed expenses ................... 200,000

Net income ................................. $100,000

What is the company's degree of operating leverage?

A. 0.125

B. 8.0

C. 3.0

D. 0.333

(Garrison 9/e)

241. Cost-volume-profit relationships that are curvilinear may be analyzed linearly by

considering only

A. A relevant range of activity.

B. The variable costs.

C. The fixed costs.

D. The relevant costs.

(Roque, 2016)

242. The assumptions under which CVP analysis operates primarily hinge on

certainty. However, when uncertainty enters the situation, the results may not be so clear.

In this case, the MAS consultant should

A. Use a sample from the entire population of data to generate a decision model and

make the decision for management.

B. Do nothing. It is not the MAS consultant’s responsibility to be concerned with

the uncertainty of the results and/or assumptions.

C. Ascertain the probabilities of various outcomes and work with management on

understanding those probabilities in reference to the CVP decision.

D. Refer the case to another consultant who is an expert in making accurate

predictions.

(Roque, 2016)

243. A calculation used in CVP analysis is the break-even point. At this point, total

revenue equals total costs. Beyond the break-even point, operating income will increase

by the

A. Variable cost per unit for each additional unit.

B. Selling price per unit for each additional unit.

C. Contribution margin per unit for each additional unit.

D. Gross profit per unit for each additional unit.

(Roque, 2016)

244. One of the major assumptions limiting the reliability of break-even analysis is

that

A. Unit variable costs and total fixed costs will vary directly with the change in

units sold.

B. There is a relevant range in which the various relationships are true for a given

period of time.

C. Productive efficiency will increase as more units are produced.

D. Changes in inventory are significant in amount. (Roque, 2016)

245. Which of the following statements is not correct?

A. All other factors remaining constant, a 10% decrease in the selling price of a

given product will have the same effect on profit as a 10% increase in the unit

variable cost of such product.

B. Other things as they are, a P10,000 decrease in fixed costs will increase

operating profit by the same amount.

C. A change in the amount of fixed costs will not affect the ratio of variable costs to

sales.

D. A change in fixed costs has no effect on the contribution margin.

(Roque, 2016)

Basic Illustration Corp. produces and sells a single product. The selling price is P25 and the

variable costs is P15 per unit. The corporation’s fixed costs is P100,000 per month. Average

monthly sales is 11,000 units.

246. The corporation’s contribution margin per unit and as a percent of sales (CMR) is

A. P10 per unit; 40%

B. P40 per unit; 160%

C. 10 units; 40%

D. P10 per unit; 60%

A. P10,000

B. 250, 000 units

C. 10,000 units or P250,000

D. 250,000 units or P10,000

248. If the corporation desires to earn profit of P20,000 before tax, it must generate

sales of

A. P12,000

B. 300,000 units

C. 10,000 units or P250,000

D. 12,000 units or P300,000

249. If the corporation pays corporate income tax at the rate of 30%, and it desires to

earn after-tax profit og P21,000, it must generate sales of

A. P325,000 or 13,000 units

B. P13,000 or 325,000 units

C. 12,040 units or P301,000

D. 16,375 units or P409,375

250. How much sales (in pesos) must be generated to earn profit that is 8% of such

sales?

A. P270,000

B. P312,500

C. P208,333.33

D. P230,000

(Roque, 2016)

251. Harry Manufacturing incurs annual fixed costs of P250,000 in producing and

selling a single product. Estimated unit sales are 125,000. An after-tax income of

P75,000 is desired by management. The company projects its income tax rate at 40

percent. What is the maximum amount that Harry can expend for variable costs per unit

and still meet its profit objective if the sales price per unit is estimated at P6?

A. P3.37

B. P3.59

C. P3.00

D. P3.70

(CPAR Special Handouts, 2016)

252. For its most recent fiscal year, a firm reported that its contribution margin was

equal to 40 percent of sales and that its net income amounted to 10 percent of sales. If its

fixed costs for the year were P60,000, how much was the margin of safety?

A. P150,000

B. P200,000

C. P600,000

D. P50,000

(CPAR Special Handouts, 2016)

253. Sam Company manufactures a single product. In the prior year, the company had

sales of P90,000, variable costs of P50,000, and fixed costs of P30,000. Sam expects its

cost structure and sales price per unit to remain the same in the current year, however

total sales are expected to increase by 20 percent. If the current year projections are

realized, net income should exceed the prior year’s net income by:

A. 100 percent

B. 80 percent

C. 20 percent

D. 50 percent

(CPAR Special Handouts, 2016)

254. Edil Company produces and sells a single product. The costs and selling prices

on a per-unit basis are as follows:

Selling Price P120

Materials 35

Labor 15

Variable overhead 10

Fixed overhead 10

Variable selling and administrative 20

Fixed selling and administrative 5

The above per-unit figures are computed based on the company’s normal capacity of

20,000 units.

The company’s expected margin of safety is

A. 7,500 units

B. P2,400,000

C. 62.5%

D. P12,500

(CPAR Special Handouts, 2016)

A company is making plans for next year, using cost-volume-profit analysis as its planning

tool.

Selling price P60.00

Variable manufacturing costs per unit 22.50

Variable selling and administrative costs 4.50

Fixed operating costs (60% is manufacturing cost) P148,500

Income tax rate 32%

255. How much should sales be next year if the company wants to earn profit after tax

of P22,440, the same amount that it earned last year?

A. P310,800

B. P397,500

C. P330,000

D. P222,000

(CPAR Special Handouts, 2016)

256. Assume that the company’s management learned that a new technology that will

increase the quality of its product is available. If implemented, its projections for next

year will be changed:

■ The selling price of the product will increase to P75 per unit.

■ Fixed manufacturing costs will increase by 20%.

■ Additional advertising costs will be incurred to promote the higher-quality

product. This will increase fixed non-manufacturing cost by 10%.

■ The improved product will require a new material that will increase direct

materials cost by P4.50

If the new technology is adapted, how much sales should the company make to earn a

pre-tax profit of 10% on sales?

A. P366,130

B. P358,875

C. P253,324

D. P353,897

(CPAR Special Handouts, 2016)

A. degree of operating leverage declines

B. margin of safety stays constant.

C. break-even point goes down.

D. contribution margin ratio goes up.

(CPAR Special Handouts, 2016)

258. Yamyam Company is considering introducing a new product that will require a

P250,000 investment of capital. The necessary funds would be raised through a bank

loan at an interest rate of 8%. The fixed operating costs associated with the product

would be P122,500 while the variable cost ratio would be 58%. Assuming a selling price

of P15 per unit, determine the number of units (rounded to the nearest whole unit)

Yamyam would have to sell to generate earnings before interest and taxes (EBIT) of

32% of the amount of capital invested in the new product.

A. 35,318 units

B. 25,575 units

C. 32,143 units

D. 23,276 units

(CPAR Special Handouts, 2016)

259. Which of the ff. changes in cost-volume-profit factors will reduce break-even

point?

A. A decrease in total fixed cost

B. A decrease in selling price

C. An increase in unit variable cost

D. An increase in total fixed cost

(Roque, 2016)

A. Relationship between revenues and costs at various levels of operations

B. Volume of operation in order to break-even

C. Variable costs necessary to equal fixed costs

D. Production level that is equal to sales

(Roque, 2016)

A. a decrease in total fixed expenses.

B. a decrease in the ratio of variable expenses to sales.

C. an increase in the contribution margin ratio.

D. none of these.

(Garrison- Test bank 13th ed)

262. Which of the following strategies could be used to reduce the break-even point

Fixed expenses Contribution margin

A. Increase Increase

B. Decrease Decrease

C. Decrease Increase

D. Increase Decrease

(Garrison- Test bank 13th ed)

A. Total revenue is constant.

B. Unit variable expense is constant.

C. Unit fixed expense is constant.

D. Selling prices must fall in order to generate more revenue.

(Garrison- Test bank 13th ed)

264. Target profit analysis is used to answer which of the following questions?

A. What sales volume is needed to cover all expenses?

B. What sales volume is needed to cover fixed expenses?

C. What sales volume is needed to earn a specific amount of net operating income?

D. What sales volume is needed to avoid a loss?

(Garrison- Test bank 13th ed)

A. Sales − (Fixed expenses/Contribution margin ratio).

B. Sales − (Fixed expenses/Variable expense per unit).

C. Sales − (Fixed expenses + Variable expenses).

D. Sales − Net operating income.

(Garrison- Test bank 13th ed)

266. Hopi Corporation expects the following operating results for next year:

Sales $400,000

Margin of safety $100,000

Contribution margin ratio 75%

Degree of operating leverage 4

A. $75,000

B. $100,000

C. $200,000

D. $225,000

(Garrison- Test bank 13th ed)

267. Escareno Corporation has provided its contribution format income statement for

June. The company produces and sells a single product.

Sales (8,400 units) $764,400

Variable expenses 445,200

Contribution margin 319,200

Fixed expenses 250,900

Net operating income $ 68,300

If the company sells 8,200 units, its total contribution margin should be closest to:

A. $301,000

B. $311,600

C. $319,200

D. $66,674

(Garrison- Test bank 13th ed)

268. Rovinsky Corporation, a company that produces and sells a single product, has

provided its contribution format income statement for November.

Variable expenses 188,100

Contribution margin 131,100

Fixed expenses 106,500

Net operating income $ 24,600

If the company sells 5,300 units, its net operating income should be closest to:

A. $24,600

B. $2,200

C. $22,874

D. $15,400

(Garrison- Test bank 13th ed)

269. Sorin Inc., a company that produces and sells a single product, has provided its

contribution format income statement for January.

Variable expenses 100,800

Contribution margin 54,600

Fixed expenses 42,400

Net operating income $ 12,200

If the company sells 4,600 units, its total contribution margin should be closest to:

A. $54,600

B. $59,800

C. $69,400

D. $13,362

(Garrison- Test bank 13th ed)

270. Decaprio Inc. produces and sells a single product. The company has provided its

contribution format income statement for June.

Variable expenses 290,400

Contribution margin 237,600

Fixed expenses 211,700

Net operating income $ 25,900

If the company sells 9,200 units, its net operating income should be closest to:

A. $27,077

B. $49,900

C. $36,700

D. $25,900

(Garrison- Test bank 13th ed)

A. Variable costs

B. Sales revenues

C. Selling and administrative costs

D. Fixed costs

(Wiley 2016)

272. The most likely strategy to reduce the breakeven point would be to

A. Increase both the fixed costs and the contribution margin

B. Decrease both the fixed costs and the contribution margin

C. Decrease the fixed costs and increase the contribution margin

D. Increase the fixed costs and decrease the contribution margin

(Wiley 2016)

273. Del Co. has fixed costs of $100,000 and break-even sales of $800,000. What is

its projected profit at $1,200,000 sales?

A. $ 50,000

B. $150,000

C. $200,000

D. $400,000

(Wiley 2016)

274. Associated Supply, Inc. is considering introducing a new product that will

require a $250,000 investment of capital. The necessary funds would be raised through a

bank loan at an interest rate of 8%. The fixed operating costs associated with the product

would be $122,500 while the contribution margin percentage would be 42%. Assuming

a selling price of $15 per unit, determine the number of units (rounded to the nearest

whole unit) Associated would have to sell to generate earnings before interest and taxes

(EBIT) of 32% of the amount of capital invested in the new product.

A. 35,318 units

B. 32,143 units

C. 25,575 units

D. 23,276 units

(Wiley 2016)

275. During 2013, Thor Lab supplied hospitals with a comprehensive diagnostic kit

for $120. At a volume of 80,000 kits, Thor had fixed costs of $1,000,000 and a profit

before income taxes of $200,000. Due to an adverse legal decision, Thor’s 2014 liability

insurance increased by $1,200,000 over 2013. Assuming the volume and other costs are

unchanged, what should the 2014 price be if Thor is to make the same $200,000 profit

before income taxes?

A. $120.00

B. $135.00

C. $150.00

D. $240.00

(Wiley 2016)

A. Unit revenues are nonlinear

B. Unit variable costs are unchanged

C. Total costs are unchanged

D. Total fixed costs are nonlinear.

(Wiley 2016)

277. Product Cott has sales of $200,000, a contribution margin of 20%, and a margin

of safety of $80,000. What is Cott’s fixed cost?

A. $16,000

B. $24,000

C. $80,000

D. $96,000

(Wiley 2016)

278. On January 1, 2014, Lake Co. increased its direct manufacturing labor wage

rates. All other budgeted costs and revenues were unchanged. How did this increase

affect Lake’s budgeted break-even point and budgeted margin of safety?

Budgeted breakeven point Budgeted margin of safety

A. Increase Increase

B. Increase Decrease

C. Decrease Decrease

D. Decrease Increase

(Wiley 2016)

279. Thomas Company sells products X, Y, and Z. Thomas sells three units of X for

each unit of Z, and two units of Y for each unit of X. The contribution margins are $1.00

per unit of X, $1.50 per unit of Y, and $3.00 per unit of Z. Fixed costs are $600,000.

How many units of X would Thomas sell at the breakeven point?

A. 40,000

B. 120,000

C. 360,000

D. 400,000

(Wiley 2016)

280. In calculating the breakeven point for a multiproduct company, which of the

following assumptions are commonly made?

II. Variable costs are constant per unit.

III. A given sales mix is maintained for all volume changes.

A. I and II.

B. I and III.

C. II and III.

D. I, II, and II

(Wiley 2016)

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