Unit price unit variable costs total fixed costs profit

Chapter 06

Cost-Volume-Profit Analysis

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

True False

True False

5. Break-even units can be found by dividing fixed costs by unit contribution margin.

margin.

True False

True False
10. The margin of safety is the difference between actual sales and budgeted sales.

True False
11. The margin of safety is the point where zero profit is earned.

True False
16. The degree of operating leverage can be multiplied by a change in sales to determine change in profit.

True False
17. A firm with a higher degree of operating leverage would be considered less risky than a comparable firm with a lower degree of operating leverage.

True False

Multiple Choice Questions

D. Total costs and revenues can be depicted with a straight line.

22. If production does not equal sales,

23. Profit is indicated on a cost-volume-profit graph by

A. the profit
line.

A. Total sales
revenue
B. Total variable
costs
C. Total fixed
costs
D. Profi
t

25. The break-even point is

26. The profit equation is

A. (Unit price × Q) - (Unit variable costs × Q) - Total fixed costs = Profit
B. (Unit price × Q) - (Unit variable costs × Q) + Total fixed costs = Profit
C. (Unit price - Unit variable costs - Total fixed costs) × Q = Profit
D. (Unit price × Q) + (Unit variable costs × Q) + Total fixed costs = Profit

29. 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. 7,00
0
B. 14,00
0
C. 3,50
0
D. 2,33
4

D. 2,33

31. Maggie Corp has a selling price of $20 per unit, variable costs of $10 per unit, and fixed costs of $140,000. How many units must be sold to break even?

A. $100,00
0
B. $250,00
0
C. $375,00
0
D. $625,00
0

34. Mira Corp has a selling price of $50 per unit, variable costs of $40 per unit, and fixed costs of $90,000. How many units must be sold to break-even?

A. 12,00
0
B. 8,00
0
C. 20,00
0
D. 15,00
0

37. Last month Peggy Company had a $30,000 profit on sales of $250,000. Fixed costs are $60,000 a month. What sales revenue is needed for Peggy to break even?

A. $100,00

B. $5,00

41. Belle Corp has a selling price of $50 per unit, variable costs of $40 per unit, and fixed costs of $100,000. What sales revenue is needed to break-even?

A. $500,00
0
B. $125,00
0
C. $5,000,0
00
D. $1,000,0
00

44. Last month Empire Company had a $30,000 profit on sales of $250,000. Fixed costs are $60,000 a month. How much would sales have to decrease for Empire to break even?

A. $90,00
0
B. $83,33
3
C. $166,66
7
D. $280,00
0

47. Last month Stagecoach Company had a $60,000 loss on sales of $300,000. Fixed costs are $120,000 a month. What sales revenue is needed for Stagecoach to break even?

A. $360,00
0
B. $480,00
0
C. $600,00
0
D. $420,00
0

50. Merlot, Inc. has fixed costs of $200,000, sales price of $50, and variable cost of $30 per unit. How many units must be sold to earn profit of $80,000?

A. 2,80
0
B. 11,20
0
C. 14,00
0
D. 202,40
0

53. Fern, Inc. has fixed costs of $400,000 and a contribution margin ratio of 30%. How much sales revenue must be earned for a profit of $80,000?

A. $144,00
0
B. $336,00
0
C. $1,600,0
00
D. $1,920,0
00

56. Louise Corp has a contribution margin ratio of 35%, fixed costs of $60,000, and a profit of $45,000. What are total sales?

A. $300,00
0
B. $105,00
0
C. $36,75
0
D. $171,42
9

B. $130,00

C. $240,00

A. $22.5
0
B. $9.0
0
C. $6.0
0
D. $2.0
0

61. Bugle Corp has sales of $400,000, a variable cost ratio of 40%, and a profit of $40,000. If 10,000 units were sold, what is the contribution margin per unit?

A. $13.0
0
B. $20.0
0
C. $7.0
0
D. $3.0
0

64. Vesper Company has sales of $200,000, variable costs of $8 per unit, fixed costs of $50,000, and a profit of $30,000. How many units were sold?

A. $31,50
0
B. $105,00
0
C. $150,00
0
D. $350,00
0

67. Leather Company sold 20,000 units, had variable costs of $12 per unit, fixed costs of $100,000, and profits of $60,000. What is the selling price per unit?

A. actual sales and budgeted
sales.

B. actual sales and break-even
sales.

71. Jerome Corp has fixed costs of $500,000 and a contribution margin ratio of 40%. Currently, sales are $3,000,000. What is Jerome's margin of safety?

A. $1,750,0
00
B. $3,500,0
00
C. $5,250,0
00
D. $7,000,0
00

B. how much profit would drop if sales
decreased.

C. how much sales could drop before the firm no longer earns profits.

A. $35,00
0
B. $37,50
0
C. $50,00
0
D. $85,00
0