Font size
WorksheetsBAC1054 CVP Analysis
Total questions: 20
Worksheet time: 1hrs 7mins
A fixed cost remains constant in total and on a per unit basis at various levels of activity.
True
False
A variable cost remains constant per unit at various levels of activity.
True
False
For CVP analysis, both variable and fixed costs are assumed to have a linear relationship within the relevant range of activity.
True
False
The difference between the costs at the high and low levels of activity represents the fixed cost element of a mixed cost.
True
False
Contribution margin is the amount of revenues remaining after deducting cost of goods sold.
True
False
The break-even point is where total sales equal total variable costs.
True
False
The margin of safety is the difference between sales at breakeven and sales at a determined activity level.
True
False
A variable cost is a cost that
varies per unit at every level of activity.
occurs at various times during the year.
varies in total in proportion to changes in the level of activity.
may or may not be incurred, depending on management's discretion.
An increase in the level of activity will have the following effects on unit costs for variable and fixed costs:
VC - Increases FC - Decreases
VC - Remains constant FC - Remains constant
VC - Decreases FC - Remains constant
VC - Remains constant FC - Decreases
If the activity level increases 10%, total variable costs will
remain the same.
increase by more than 10%.
decrease by less than 10%.
increase 10%.
Which of the following is not a fixed cost?
Direct materials
Depreciation
Lease charge
Property taxes
Why is identification of a relevant range important?
It is required under GAAP.
Cost behavior outside of the relevant range is not linear, which distorts CVP analysis.
It directly impacts the number of units of product a customer buys.
It is a cost that is incurred by a company that must be accounted for.
A mixed cost contains
a variable element and a fixed element.
both selling and administrative costs.
both retailing and manufacturing costs.
both operating and nonoperating costs.
At the high level of activity in November, 7,000 machine hours were run and power costs were $18,000. In April, a month of low activity, 2,000 machine hours were run and power costs amounted to $9,000. Using the high-low method, the estimated fixed cost element of power costs is
$18,000.
$9,000.
$5,400.
$12,600.
Which one of the following is not an assumption of CVP analysis?
All units produced are sold.
All costs are variable costs.
Sales mix remains constant.
The behavior of costs and revenues are linear within the relevant range.
Contribution margin
is always the same as gross profit margin.
excludes variable selling costs from its calculation.
is calculated by subtracting total manufacturing costs per unit from sales revenue per unit.
equals sales revenue minus variable costs.
A company has total fixed costs of $240,000 and a contribution margin ratio of 20%. The total sales necessary to break even are
$960,000.
$1,200,000.
$300,000.
$288,000.
The break-even point is where
total sales equal total variable costs.
contribution margin equals total fixed costs.
total variable costs equal total fixed costs.
total sales equal total fixed costs.
Reliable Manufacturing wants to sell a sufficient quantity of products to earn a profit of $100,000. If the unit sales price is $10, unit variable cost is $8, and total fixed costs are $200,000, how many units must be sold to earn income of $100,000?
150,000 units
100,000 units
37,500 units
1,500,000 units
In evaluating the margin of safety, the
break-even point is not relevant.
higher the margin of safety ratio, the greater the margin of safety.
higher the dollar amount, the lower the margin of safety.
higher the margin of safety ratio, the lower the fixed costs.
