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Frontier Corp has a contribution margin of $450,000 and profit of $150,000.If sales increase 20%,by how much will profits increase?


A) 20%
B) 30%
C) 60%
D) 90%

E) None of the above
F) All of the above

Correct Answer

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Quail,Inc,has a contribution margin of 40% and fixed costs of $130,000.What is the break-even point?


A) $52,000
B) $325,000
C) $225,000
D) $78,000

E) A) and B)
F) None of the above

Correct Answer

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Degree of operating leverage is calculated as


A) profit divided by contribution margin.
B) break-even sales divided by profit.
C) profit divided by break-even sales.
D) contribution margin divided by profit.

E) C) and D)
F) B) and D)

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In multiproduct cost-volume-profit analysis,an assumption made in addition to those used in single-product CVP analysis is that


A) the sales mix remains constant.
B) all costs can be classified as fixed or variable.
C) costs are linear in the relevant range.
D) production and sales are equal.

E) None of the above
F) A) and B)

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The margin of safety is a positive number at the break-even point.The margin of safety will be zero at the break-even point.

A) True
B) False

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Pecan,Inc,has a contribution margin of 50% and fixed costs of $220,000.What sales revenue is needed to attain a $60,000 profit?


A) $70,400
B) $440,000
C) $560,000
D) $240,000

E) B) and C)
F) C) and D)

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Which of the following is not a key assumption of cost-volume-profit?


A) Costs may be fixed,variable,mixed,or step.
B) Production and sales are equal.
C) Changes in total cost are strictly due to changes in activity.
D) Total costs and revenues can be depicted with a straight line.

E) C) and D)
F) All of the above

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Payton Corp has sales of $200,000,a contribution margin ratio of 35%,and a target profit of $40,000.If 10,000 units were sold,what are total variable costs?


A) $200,000
B) $130,000
C) $240,000
D) $160,000

E) A) and D)
F) C) and D)

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Fontaine Corp has a selling price of $15 and variable costs of $10 per unit.When 10,000 units are sold,profits equaled $25,000.What is the margin of safety?


A) $75,000
B) $25,000
C) $105,000
D) $50,000

E) A) and B)
F) A) and C)

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Paint Corp has sales of $600,000,a contribution margin ratio of 30%,and a profit of $40,000.If 20,000 units were sold,what is the variable cost per unit?


A) $9.00
B) $30.00
C) $21.00
D) $3.00

E) A) and B)
F) A) and C)

Correct Answer

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Mustang Corp has a selling price of $15,variable costs of $10 per unit,and fixed costs of $35,000.How many units must be sold to break-even?


A) 7,000
B) 14,000
C) 3,500
D) 2,334

E) A) and C)
F) None of the above

Correct Answer

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In multiproduct cost-volume-profit analysis,a break-even point must be calculated separately for each product.A combined break-even point can be calculated using a weighted average contribution margin.

A) True
B) False

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The formula for target sales is


A) (Total fixed costs + Target profit) /Contribution margin ratio
B) (Total variable costs + Total fixed costs) /Contribution margin ratio
C) (Total fixed costs + Target profit) /Unit contribution margin
D) (Total variable costs + Total fixed costs) /Unit contribution margin

E) B) and C)
F) None of the above

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Munoz Inc.has a contribution margin ratio of 30% and fixed costs of $90,000.What sales revenue is needed to generate a $60,000 profit?


A) $45,000
B) $200,000
C) $500,000
D) $214,286

E) C) and D)
F) None of the above

Correct Answer

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Plymouth Corp sells units for $100 each.Variable costs are $75 per unit,and fixed costs are $200,000.If Plymouth leases a new machine,fixed costs will increase by $60,000 a year,but production will be more efficient,saving $5 per unit.At what level of production will Plymouth be indifferent between leasing and not leasing the new machine?


A) 5,000
B) 10,000
C) 10,400
D) 12,000

E) B) and D)
F) B) and C)

Correct Answer

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Cost structure refers to


A) a company's break-even point.
B) whether fixed costs are covered by contribution margin.
C) how a company uses variable versus fixed costs.
D) where funds are storeD.This is the definition of cost structure.

E) A) and D)
F) C) and D)

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Jasper Corp has a selling price of $30,and variable costs of $20 per unit.When 12,000 units are sold,profits equaled $70,000.How many units must be sold to break-even?


A) 19,000
B) 12,000
C) 14,333
D) 5,000

E) B) and C)
F) A) and C)

Correct Answer

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Indigo Corp has a selling price of $45 and variable costs of $30 per unit.When 10,000 units are sold,profits equaled $25,000.What is the margin of safety?


A) $75,000
B) $25,000
C) $80,000
D) $150,000

E) A) and B)
F) B) and C)

Correct Answer

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The formula for target units is


A) (Total fixed costs + Target profit) /Contribution margin ratio
B) (Total variable costs + Total fixed costs) /Contribution margin ratio
C) (Total fixed costs + Target profit) /Unit contribution margin
D) (Total variable costs + Total fixed costs) /Unit contribution margin

E) All of the above
F) None of the above

Correct Answer

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Cost-volume-profit analysis assumes that total costs behave in a curvilinear fashion.Cost-volume-profit analysis assumes that total costs behave in a linear fashion.

A) True
B) False

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