answer cost volume profit analysis problems

56. Assuming that the flexible budget is in use, when production level is expected to increase within a relevant range, the expected effect on fixed cost per unit (FCU) and variable cost per unit (VCU) would be: a. FCU, to decrease and VCU, to decrease b. FCU, to decrease and VCU, no change c. FCU, no change and VCU, no change d. FCU, no change and VCU, to decrease 57. Neth and Company has sales of P400,000 with variable cost of P300,000, fixed cost of P120,000, and an operating loss of P20,000. By how much would Neth need to increase its sales in order to achieve a target operating income of 10% of sales? a. P400,000 C. P500,000 b. P462,000 d. P800,000 58. When using the graph method, if unit output exceeds the break-even point, a. expenses are extremely high relative to revenues. b. there is loss because the total cost line exceeds the total revenue line. c. total sales exceeds total cost. d. there is profit since the total cost line exceeds the total revenue line. 59. The most important use of the cost-volume-profit graph is to show a. the break-even point b. the cost/margin ratio at various levels of sale activity c. the relationships among volume, costs, revenues over wide ranges of activity d. the determination of cross-over point 60. Which of the following formulas is used to determine the break-even point when using the contribution margin method? a. Revenues less operating income equals variable cost plus fixed cost b. Unit contribution margin times the break-even number of units equals fixed cost. C. Selling price less unit fixed cost equals contribution margin d. Total fixed cost equals total revenues 61. Ipo-ipo Corporation would like to market a new product at a selling price of P15 per unit. Fixed cost for this product is P1,000,000 for less than 50,000 units of output and P1,500,000 for 500,000 or more units of output. The contribution margin percentage is 20%. How many units of this product must be sold to earn a target operating income of P1 million? a. 754,900 C. 825,530 b. 833,334 d. 785,320 62. The following data refer to cost-volume-profit relationship of K Co. Break-even point in units :,000 Variable cost per unit 1 250 Total fixed cost P75,000 How much will be contributed to operating income by the 1,001st unit sold? a. P250 C. P75 b. P325 d, zero 63. Which of the following statements is true? a. A shift in sales mix toward less profitable products will cause the over-all break-even point to fall. One way to compute break-even point is to divide total sales by the cost margin ratio. C. Once the break-even point has been reached, net income will increase by the unit contribution margin for each additional unit sold. d. As sales exceed the break even point, a high contribution margin ratio will result in lower profit, rather than a low contribution margin ratio. 64. When used in cost-volume profit analysis. Sensitivity analysis a. determines the most profitable mix of products to be sold.MAS 8003 COST-VOLUME-PROFIT ANALYSIS Page 17 of 23 Yakal Company shows the following budgeted data for the year 2017: Estimated sales 18,090 units Amount Per unit Direct labor P54,000 P3.00 Materials 8,100 0.45 Fixed overhead 13,500 0.75 Administrative expenses 16,200 0.90 P91,800 P5.10 Selling expenses are expected to be 20% of sales and profit before tax is to amount to P1.50/unit. 45. In order to attain the company's goal for 2017, the selling price per unit must be set at: a. P5.10 C. P8.25 b. P6.00 d. P9.75 46. The company's break-even point in units assuming that overhead and administrative expenses are fixed but that other expenses are fully variable, is equal to: a. 4,286 units C. 9,428 units b. 5,143 units d. 18,000 units ITEMS 47 and 48 ARE BASED ON THE FOLLOWING INFORMATION: Sta. Rosa Appliances Company presents its budgeted data for the year 2017. It is estimated that the company will sell 240 refrigerators for the year 2017. The estimated costs of these sales are as follows: Amount Per unit Direct labor P40,800 P 170 Materials 240,000 1,000 Fixed overhead 98,400 410 Administrative expenses _100,800 420 2480,000 P2.000 Selling expenses are expected to be 20% of sales. Profit before tax is to amount to P500 per unit. 47. In order to attain the company's goal for 2017, the selling price per unit must be set at; a. P2,000 C. P2,625 b. P2,500 d. P3,125 48. The company's break-even point in units assuming that overhead and administrative expenses are fixed but that other expenses are fully variable, is equal to: a. 74 units C. 188 units b. 150 units d. 240 units ITEMS 49 and 50 ARE BASED ON THE FOLLOWING INFORMATION: The production specialists of Won Corporation are considering the purchase of a new manufacturing equipment with a higher production capacity. Analysis shows that with the increased production, sales volume can be increased by as much as 50%. However, fixed manufacturing costs will increase by 60%. Variable manufacturing costs, on the other hand, is expected to drop from P2.00 to P1.80 per unit. There will be no change in the total fixed selling and administrative expenses and in the variable selling and administrative expenses per unit. The selling price per unit, likewise, will remain the same. Presented below are the results of the operations of Won Corporation for the year 2016: (Note: Won has since been operating at full capacity) Sales (200,000 units) P1,000,000 Manufacturing cost of goods sold:Fixed P200,000 Variable 400,000 (600,000) Selling and administrative expense Fixed P49,750 Variable 60,000 (109,750) P 290,250 49. Should Wilson decide to purchase the equipment, what would be the break-even point in terms of units? a. 86,120 C. 150,200 b. 127,500 d. 150,000 50. What is the maximum income (before taxes) that Won can earn after the purchase of equipment? a. P210,250 C. P500,250 b. P550,000 d. P502,500 51. The contribution margin ratio always increases when: a. break-even point decreases b. break-even point increases c. vanable cost as a percentage of net sales Increases d. variable cost as a percentage of net sales decreases 52. Merchants, Inc. sells Product X to retailers for P200. The unit variable cost is P40 with a selling commission of 10%. Fixed manufacturing cost totals P1,000,000 per month, while fixed selling and administrative cost equals P420,(00. The Income tax rate is 30%. The target sales if after tax income is P123,200 would be: a. 19,950 units 18,750 units b. 15,640 units d. 11,400 units 53. Sari-san Corporation is a multiple-product firm. In their review of operations, they decided to shift the sales mix from less profitable products to more profitable products, accounting for 35% of gross sales. This will cause the company's break-even point to: a. decrease C. increase b. change by 15% d. not change 54. All of the following statements are correct except a. Job cost records are used to accumulate product costs of individual units or small batches of identical units for both product costing and control purposes. b. Process costing, In contrast to job order costing, is applicable to a continuous process of production of the same of similar goods. C. The basic purpose of any costing system is to allocate the costs of production (direct materials, direct labor, and manufacturing overhead) to the units produced d. In comparison to job order costing systems, process costing systems are usually more complicated and more expensive. 55. Unico, Inc. formulates and sells three chemicals B1, B2, and B3. It sells to industrial users who use and buy these chemicals in the following ratio: three (3) measures of Bl for one (1) measure of B3, two (2) of B2 per one (1) measure of B1. The company makes the following contribution margin per measure: BI P30 B2 45 B3 90 Fixed cost amounted to P1.8 million At break even point, the volume of BI to be sold would be. a 12,090 C. 24,000 36,000 4,000