B Total revenues and total costs are linear in relation to output units. C Unit selling price, unit variable costs, and unit fixed costs are known and remain constant. D Proportion of different products will vary according to demand and supply when multiple products are sold.
A any factor that affects costs and revenues B any factor that affects revenues C the only factor that can influence a change in selling price D the only factor that can influence a change in demand Answer: B Diff: 1 Objective: 1 AACSB: Analytical thinking. A Selling price varies with demand and supply of the product. B Only selling price and variable cost per unit are known and constant. C Only selling price, variable cost per unit, and total fixed costs are known and constant.
D Selling price, variable cost per unit, fixed cost per unit, and total fixed costs are known and constant. A revenues minus period costs.
Answer the following questions using the information below: Northern Star sells several products. Answer the following questions using the information below: Bell Company sells several products. Information of average revenue and costs is as follows:. Selling price per unit Variable costs per unit: Direct material Direct manufacturing labor Manufacturing overhead Selling costs Annual fixed costs The company sells 10, units.
He currently plans to sell tables this month. Required: a. Compute contribution margin. Compute contribution margin percentage. Compute gross margin. Compute gross margin percentage. Compute operating income. Answer: a. Objective 3. Hence breakeven is approximately units. A total fixed costs increase B total fixed costs decrease.
Information of average revenue and costs is as follows: Selling price per unit Variable costs per unit: Direct material Direct manufacturing labor Manufacturing overhead Selling costs Annual fixed costs. What is the contribution margin percentage? Selling price per unit Variable costs per unit: Direct material Direct manufacturing labor Manufacturing overhead Selling costs Annual fixed costs. Hunter currently plans to perform procedures this month.
What is the breakeven point for the month assuming that Dr. Hunter plans to perform the procedure times? In an attempt to improve performance, management is considering a number of alternative actions.
Each situation is to be evaluated separately. What is the current breakeven point in terms of number of units? A increasing variable cost per unit B increasing contribution margin per unit C reducing its total fixed costs D increasing the selling price per unit Answer: A Diff: 1 Objective: 2 AACSB: Analytical thinking 37 The breakeven point is the quantity of output at which total revenues equal fixed costs.
What is the contribution margin per phone? What is the breakeven point in phones? Why should a manager be concerned about the breakeven point and what helps them study the breakeven analysis? Answer: The breakeven point is the level of production and sales at which total revenues equal total costs. Managers should be concerned about the breakeven point because it helps determine when a business venture will be profitable. Breakeven point shows a company how far sales can decline before a net loss will be incurred.
It helps to assess the risk of loss. The graph method helps managers visualize the relationships between total revenues and total costs.
The graph shows each relationship as a line. Sales 8, units Less variable expenses Contribution margin Less fixed expenses Net income. Compute how many units must be sold to break even. Answer the following questions using the information below: Assume the following cost information for Fernandez Company: Selling price Variable costs Total fixed costs Tax rate.
A Net income is operating income divided by income tax rate. B Net income is operating income plus operating revenues minus operating costs minus income taxes. C Net income is operating income plus nonoperating revenues minus nonoperating costs minus income taxes. D Net income is operating income minus nonoperating revenues minus nonoperating costs minus sales taxes. What is the breakeven point in cards?
Answer: Net income is operating income plus nonoperating revenues such as interest revenue minus nonoperating costs such as interest cost minus income taxes. How much would sales have to increase to justify the additional expenditure? What is the effect on operating income with the increase of advertising expenses? Calculate operating income and the breakeven point for Calculate the breakeven point for What is the contribution margin per lamp?
What is the breakeven point in lamps? What is the margin of safety, assuming 1, lamps are sold? What is the contribution margin per tire? What is the breakeven point in tires?
What is the margin of safety, assuming 33, tires are sold? A budgeted expenses and breakeven expenses B budgeted revenues and breakeven revenues C actual operating income and budgeted operating income D actual sales margin and budgeted sales margin Answer: B Diff: 1 Objective: 5 AACSB: Analytical thinking. The company currently plans to sell slabs this month. What is the margin of safety assuming 75 slabs are budgeted? A sensitivity analysis B incremental budgeting C variance analysis.
What is the breakeven point in batteries? Local business supporters will donate any other items required for the event. D The lowest breakeven point cannot be determined. D Both the options have 0 operating income as they are operating at breakeven point. D Operating leverage is indeterminable. Which option should you choose if you are expecting to produce units? A Option one as sales is higher than breakeven B Option two as sales is lower than breakeven C Option two as it would lead to a higher operating income D Option one as fixed costs is more Answer: A Explanation: A Option one will result in operating income while Option 2 will result in an operating loss.
Calculate the operating leverage of the company. A fixed costs are more than the contribution margin B contribution margin and operating income are inversely related C there is a higher possibility of net loss than a higher-leveraged firm D less risk is assumed than in a highly leveraged firm Answer: D Diff: 1 Objective: 6 AACSB: Analytical thinking 8 If the contribution margin ratio is 0. A a small increase in sales results in a small decrease in operating income B when demand is low the risk of loss is high C a decrease in sales reduces the total fixed cost per unit D a decrease in sales reduces the cost per unit Answer: B Diff: 2 Objective: 6 AACSB: Application of knowledge 13 Companies with a greater proportion of direct costs have a greater risk of loss than companies with a greater proportion of indirect costs.
Answer: FALSE Explanation: Companies with a greater proportion of fixed costs have a greater risk of loss than companies with a greater proportion of variable costs. Diff: 2 Objective: 6 AACSB: Application of knowledge 14 The degree of operating leverage at a specific level of sales helps the managers calculate the effect that potential changes in sales will have on operating income. Diff: 2 Objective: 6 AACSB: Application of knowledge 16 Companies that are substituting variable costs for fixed costs receive a greater per unit return above the breakeven point.
Answer: FALSE Explanation: Companies that are substituting fixed costs for variable costs receive a greater per unit return above the breakeven point. Diff: 2 Objective: 6 AACSB: Application of knowledge 17 A company with a higher degree of operating leverage is at greater risk during economic downturns because of its higher fixed costs.
Answer: TRUE Explanation: A company with a low degree of operating leverage is at lesser risk during downturns in the economy. Diff: 2 Objective: 6 AACSB: Application of knowledge 18 The risk-return tradeoff across alternative cost structures can be measured as operating leverage. Diff: 2 Objective: 6 AACSB: Application of knowledge 20 When a company has the least fixed costs, the company is operating at a very high operating leverage.
The company is planning on renting an exhibition booth for both display and selling purposes at the annual crafts and art convention. The convention coordinator allows three options for each participating company. They are: 1. Compute the breakeven sales in pillows of each option. Which option should Query Company choose, assuming sales are expected to be pillows?
It rents a building but owns all of its equipment. All employees are paid a fixed salary except for the busy season April-June , when temporary help is hired by the hour.
Utilities and other operating charges remain fairly constant during each month except those in the busy season. Because a large number of customers buy tires prior to winter, discounts run above average during the busy season. This test bank is recommended as being one of the most effective and efficient ways to prep for any exam. This test bank is just what you need to get through your classes when you are pressed for time and you need to cover the material in a hurry.
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