ACCY 2002
Fall 2013
Quiz # 5 – Chapter 7
DUE October 20th
PLEASE WRITE YOUR ANSWERS ON THE ANSWER SHEET AND HAND IN THAT PAGE ONLY. YOU
MAY KEEP THE QUIZ QUESTIONS TO CHECK YOUR ANSWERS AND AS A STUDY AID.
Use the following to answer question 1:
Consider the following budgeted data for Urqhart Corporation:
Sales
Selling price
Variable expense
Fixed expense
2,500 units
$80 per unit
$35 per unit
$37,500
1. If the sales volume decreases by 25%, the variable expense per unit increases by 15% and all other data remain
as in the budget, net operating income will be (round to the nearest dollar)::
a. $37,031
b. $46,875
c. $56,719
d. $61,875
e. $34,219
Use the following information to answer questions 2 and 3.
Pacifico Company produced and sold 90,000 units of a single product last year, with the following results:
Sales revenue
Manufacturing costs:
Variable
Fixed
Selling costs:
Variable
Fixed
Administrative costs:
Variable
Fixed
$2,700,000
1,170,000
540,000
81,000
108,000
369,000
216,000
2. Pacifico’s operating leverage factor was:
a. 4
b. 5
c. 6
d. 7
e. 8
3. If Pacifico’s sales revenues increase 30%, what will be the percentage increase in income before income taxes?
a. 30%
b. 90%
c. 120%
d. 150%
4. Strand has a break-even point of 120,000 units. If the firm’s sole product sells for $40 and fixed costs total
$480,000, the variable cost per unit must be:
a. $4
b. $36
c. $42
d. $44
Use the following to answer questions 5-6:
Budgeted sales
Selling price
Contribution margin ratio
Margin of safety
12,000 units
$25 per unit
40%
$90,000
5. The break-even in sales dollars will be:
a. $210,000
b. $120,000
c. $180,000
d. $84,000
6. Net operating income at sales of 12,000 units will be:
a. $0
b. $36,000
c. $120,000
d. $300,000
7. Assuming no change in sales volume or other data, an increase in a firm’s per-unit contribution margin would:
a. Increase net income
b. Decrease net income
c. Have no effect on net income
d. Increase fixed costs
e. Decrease fixed costs
8. A recent income statement of Yale Corporation reported the following data:
Sales revenue
Variable costs
Fixed costs
$2,500,000
1,500,000
800,000
If these data are based on the sale of 5,000 units, break-even sales would be:
a. $2,000,000
b. $2,206,000
c. $2,500,000
d. $10,000,000
Use the following to answer question 9:
Archie sells a single product for $50. Variable costs are 60% of the selling price, and the company has fixed costs
that amount to $400,000. Current sales total 16,000 units.
9. In order to produced a target profit of $22,000, Archie’s dollar sales must total:
a. $8,440
b. $21,100
c. $1,000,000
d. $1,055,00
10. Which of the following would take place if a company were able to reduce its variable cost per unit?
Total Contribution Break-even
Margin
Point
a. Increase
Increase
b. Increase
Decrease
c. Decrease
Increase
d. Decrease
Decrease
e. Increase
No effect
Use the following to answer question 11:
11. Line B is equal to the:
a. Total fixed costs
b. Total revenue
c. Total expenses
d. Profit
12. Which of the following underlying assumptions form(s) the basis for cost-volume-profit analysis?
a. Revenues and costs behave in a linear manner.
b. Costs can be categorized as variable, fixed, or semi-variable.
c. Variable cost per unit, selling price, and total fixed cost remain constant.
d. Worker efficiency and productivity remain constant.
e. All of the above are assumptions that underlie cost-volume-profit analysis.
13. Maxie’s budget for the upcoming year revealed the following figures:
Sales revenue
$840,000
Contribution margin
504,000
Net income
54,000
If the company’s break-even sales total $750,000, Maxie’s safety margin would be:
a. ($90,000)
b. $90,000
c. $246,000
d. $336,000
e. $696,000
14. The contribution income statement differs from the traditional income statement in which of the following ways?
a. The traditional income statement separates costs into fixed and variable components.
b. The traditional income statement subtracts all variable costs from sales to obtain the contribution margin.
c. Cost-volume-profit relationships can be analyzed more easily from the contribution income statement.
d. The effect of sales volume changes on profit is readily apparent on the traditional income statement.
e. The contribution income statement separates costs into product and period categories.
15. Garth Company sells a single product. If the selling price per unit and the variable expense per unit both increase
by 10% and fixed expenses do not change, then:
Contribution
Margin per unit
a. Increases
b. No change
c. No change
d. Increases
Contribution
Margin Ratio
Increases
No change
Increases
No change
Break-even
in Units
Decreases
No change
No change
Decreases
ACCY 2002
Fall 2013
Quiz # 5 – Chapter 7
DUE October 20th
PLEASE WRITE YOUR NAME AND ANSWERS ON THE ANSWER SHEET. HAND IN THAT
PAGE ONLY. YOU MAY KEEP THE QUIZ QUESTIONS TO CHECK YOUR ANSWERS AND TO
USE AS A STUDY AID.
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