Question
13. If a company has variable costs of $40 per unit, fixed costs of $3,000 per month and sells its product for $50, how many
13. If a company has variable costs of $40 per unit, fixed costs of $3,000 per month and sells its product for $50, how many units must it sell to break-even?
| a. | 300 |
| b. | 250 |
| c. | 100 |
| d. | 50 |
14. A company produces two products, A and B. A sells for $16 and has variable costs of $10. B sells for $12 and has variable costs of $8. Fixed Costs for the period are $35,000. Normally four units of A are sold for every two units of B units. How many units of B must be sold if the company expects profits of $50,000?
| a. | 15,947 |
| b. | 10,637 |
| c. | 5,313 |
| d. | Cannot be determined |
15. What does sensitivity analysis refers to?
| a. | control. |
| b. | what-if situations. |
| c. | variable costs only. |
| d. | fixed costs only. |
Cheesy Company
The Company is considering the introduction of a new product with the following price and cost characteristics
| Sales price | $150 each |
| Variable cost | $60 each |
| Fixed cost | $135,000 per year |
The company expects to sell 2,000 units for the year.
16. Refer Cheesy Company. How many units must be sold to break even?
| a. | 900 |
| b. | 2,250 |
| c. | 2,000 |
| d. | 1,500 |
17. What effect could an increase (investment) in fixed costs have on the break-even point and the contribution margin?
Break-even Point Contribution Margin
| a. | Increase Increase |
| b. | Increase Decrease |
| c. | Decrease Increase |
| d. | Decrease Decrease |
18. Calculate margin of safety using the following assumptions:
| Sales Price per unit | $500 |
| Variable cost per unit | $300 |
| Fixed Costs in total | $200,000 |
| Actual Sales Volume | 1,750 units |
| a. | 1,000 units |
| b. | $500,000 |
| c. | 1,750 units |
| d. | 750 units |
19. Which of the following is a typical cost structure for home builders?
| a. | high fixed costs relative to variable costs. |
| b. | high variable costs relative to fixed costs. |
| c. | high profits relative to total costs. |
| d. | None of the answers is correct. |
20. Which of the following is the major assumption as to cost and revenue behavior underlying conventional cost-volume-profit calculations?
| a. | variability of fixed costs. |
| b. | variability of unit prices and efficiency. |
| c. | curvilinearity of relationships. |
| d. | linearity of relationships. |
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Intermediate Accounting Reporting and Analysis
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach
2nd edition
9781305727557, 1285453824, 9781337116619, 130572755X, 978-1285453828
