WorksheetsCOB 242 - Unit 3
Total questions: 23
Worksheet time: 13mins
Contribution Margin:
is first used to cover variable expenses
equals sales minus fixed expenses
becomes profit after fixed expenses are covered
is not affected by changes in activity
Which of the following are assumptions of cost-volume-profit analysis?
In multi product companies, the sales mix is constant
Costs are linear and can be accurately divided into variable and fixed elements
Fixed costs per unit stay the same within the relevant range
Variable costs per unit increase over the relevant range of activity
The break-even point is reached when the contribution margin is equal to:
total sales
total variable expenses
profit
total fixed expenses
When constructing a CVP graph, the vertical axis represents:
fixed costs
unit volume
variable costs
dollars
The vertical distance between the total revenue line and the total expense line on a CVP graph represents the total
profit or loss
gross margin
contribution margin
units sold
When preparing a CVP graph, the horizontal axis represents:
sales dollars
variable costs
total costs
unit volume
The calculation of contribution margin (CM) ratio is
net operating income ÷ total contribution margin
variable expenses ÷ contribution margin
contribution margin ÷ sales
contribution margin ÷ total expenses
A company has a target profit of $204,000. The company's fixed costs are $305,000. The contribution margin per unit is $40. The BREAK-EVEN point in unit sales is ____.
7,625
5,100
12,725
1,495
A company with a high ratio of fixed costs:
is more likely to experience a loss when sales are down than a company with mostly variable costs
is more likely to experience greater profits when sales are up than a company with mostly variable costs
will not be concerned about fluctuating sales
will be able to avoid some of the fixed costs when sales decrease by lowering production
Operating leverage is a measure of how sensitive _____ is to a given percentage of change in sales dollars.
total gross margin
selling price per unit
net operating income
total variable expense
In a manufacturing company, the ____ budget shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory.
direct materials
cash
sales
production
Given budgeted sales of 10,000 units, desired ending inventory of 5,000 units, and beginning inventory of 2,000 units, required production is ______ units.
Multiple choice question.
10,000
15,000
13,000
7,000
The first line of the direct labor budget consists of the budgeted units expected to be ______ during the period.
sold
produced
Borrowing money is required whenever _____.
the cash excess equals the minimum required cash balance
there is a cash deficiency
the cash excess is greater than the minimum required cash balance
the cash excess is less than the minimum required cash balance
What is subtracted from total budgeted selling and administrative expenses to determine the cash disbursements for selling and administrative expenses?
Direct labor costs
Ending finished goods inventory
Manufacturing overhead
Non-cash expenses
The amounts under the Year column in the cash budget always equal the sum of the amounts for the months or quarters of the budget.
True
False
A budget that is prepared at the beginning of the period for a specific level of activity is called a ______ budget.
flexible
planning
strategic
optimal
An estimate of what revenue and costs should have been, based on the actual level of activity is shown on a ______.
planning budget
fixed budget
flexible budget
profit and loss statement
Unfavorable activity variances may not indicate bad performance because ______.
costs should not change as activity changes
increased activity should result in higher variable costs
increased activity should result in higher fixed costs
managers tried their hardest
A flexible budget shows what budgeted amounts should have been at the actual level of activity. As a result of this change in activity, the flexible budget will show a change in total ______.
fixed costs
revenue
variable costs
The difference between a revenue or cost item in the planning budget and the same item in the flexible budget at the actual level of activity is a(n) ______ variance.
revenue
activity
spending
Given planning budget revenue of $284,000, actual revenue of $275,000, and flexible budget revenue of $290,000, there is a(n) _____ activity variance.
favorable
unfavorable
A spending variance is the _____.
difference between what a cost should have been at the actual level of activity and the actual amount of the cost
difference between the budgeted cost of the item and the actual cost of the item
projected amount to be spent
actual amount spent
