Choose the best answer for each of the following multiple-choice questions.

1. Cost-volume-profit analysis includes some simplifying assumptions. Which of the following is not one of these assumptions?

a. Cost and revenues are predictable.

b. Cost and revenues are linear over the relevant range.

c. Changes in beginning and ending inventory levels are insignificant in amount.

d. Sales mix changes are irrelevant.

2. The term relevant range, as used in cost accounting, means the range

a. over which costs may fluctuate.

b. over which cost relationships are valid.

c. of probable production.

d. over which production has occurred in the past ten years.

3. How would the following be used in calculating the number of units that must be sold to earn a targeted operating income?

4. Information concerning Norton Corporation's product is as follows:
Sales ......$300,000
Variable costs ...240,000
Fixed costs ......40,000
Assuming that Norton increased sales of the product by 20 percent, what should the operating income be?
a. $20,000
b. $24,000
c. $32,000
d. $80,000
5. The following data apply to McNally Company for last year:
Total variable costs per unit .......$3.50
Contribution margin/Sales ........30%
Break-even sales (present volume) ...$1,000,000
McNally wants to sell an additional 50,000 units at the same selling price and Contribution margin. By how much can fixed costs increase to generate additional profit equal to 10 percent of the sales value of the additional 50,000 units to be sold?
a. $50,000
b. $57,500
c. $67,500
d. $125,000
6. Fordman Company's break-even point is 8,500 units. Variable cost per unit is $140, and total fixed costs are $297,500 per year. What price does Fordman charge?
a. $140
b. $35
c. $175
d. cannot be determined from the abovedata

Transcribed Image Text:

Contribution per Unit Estimated Operating Income Denominator Numerator Not used Numerator Numerator Numcrator Denominator Denominator a. b. d.