Question 1

The term that represents operating income plus nonoperating revenues minus nonoperating costs minus income taxes is:

Accepted Answer

A)  net income.
B)  projected income.
C)  forecasted income.
D)  operating income.
E)  nonoperating income.

Question 2

In the presence of fixed costs,the degree of operating leverage is the same at different levels of sales.

Accepted Answer

A) True 
 B)False

Question 3

When the outcomes are measured in monetary terms,expected value is often called:

Accepted Answer

A)  unknown fund values.
B)  unexpected probabilities.
C)  expected monetary fund.
D)  expected monetary value.
E)  expected probability statement.

Question 4

In the equation method,revenues in each column are calculated as:

Accepted Answer

A)  revenues = Selling price (SP) - Quantity of units sold (Q) .
B)  revenues = Selling price (SP) / Quantity of units sold (Q) .
C)  revenues = Selling price (SP) × Variable cost per unit (VCU) .
D)  revenues = Selling price (SP) × Quantity of units sold (Q) .
E)  revenues = Selling price (SP) - Variable cost per unit (VCU) .

Question 5

________ ________ is a "what-if" technique that managers use to examine how an outcome will change if the original predicted data are not achieved or if an underlying assumption changes.

Accepted Answer

A)  Electronic Spreadsheet
B)  Weighted average
C)  Manufacturing option
D)  Electronic analysis
E)  Sensitivity analysis

Question 6

Strategic decisions never involve risk.

Accepted Answer

A) True 
 B)False

Question 7

Write a short essay and define the profit-volume (PV)graph.What are the benefits of the PV graph to managers?

Accepted Answer

The PV graph shows how changes in the quantity of units sold affect operating income.Recall that managers want to know how many units of a product they must sell to earn a specific level of operating income.The PV graph is beneficial to the manager because the illustration makes it easier to determine the precise point at which the difference between the total revenues line and the total costs line equal the target amount.

Question 8

Which of the following is not a characteristic of CVP-based sensitivity analysis?

Accepted Answer

A)  Disregards the various fixed-cost structures.
B)  Helps managers evaluate various fixed-cost structures.
C)  Helps managers evaluate various variable-cost structures.
D)  Highlights the risks as fixed costs are substituted for variable costs in a company's cost structure.
E)  Highlights the returns as fixed costs are substituted for various costs in a company's cost structure.

Question 9

The tool useful for calculating contribution margin and operating income is:

Accepted Answer

A)  margin of safety.
B)  sensitivity analysis.
C)  the breakeven point.
D)  contribution margin per unit.
E)  operating leverage.

Question 10

If the Resort Operating Center plans a targeted operating income of $210,000 and the tax rate is 30%,what is the organization's target net income?

Accepted Answer

A)  $63,000.
B)  $89,000.
C)  $109,000.
D)  $118,000.
E)  $147,000.

Question 11

Gross margin and contribution margin are related but give different insights to managers.

Accepted Answer

A) True 
 B)False

Question 12

The store has fixed costs of $25,000 and a contribution margin per unit of $90 per unit.
Compute the breakeven quantity in units.

Accepted Answer

A)  266.55 units.
B)  275.77 units.
C)  277.77 units.
D)  288.88 units.
E)  299.99 units.

Question 13

To determine the margin of safety,managers compute:

Accepted Answer

A)  budgeted revenues / breakeven sales.
B)  budgeted sales + breakeven sales.
C)  budgeted revenues + breakeven revenues.
D)  budgeted sales - breakeven sales.
E)  budgeted revenues - breakeven revenues.

Question 14

Sunny Pastures reported the following information:

Required:
Compute the quantity of units required to be sold to have an operating income of $5,000.

Accepted Answer

A)  24.44 units
B)  40.22 units
C)  64.44 units
D)  88.88 units
E)  94.44 units D

Question 15

The store has a contribution margin per unit of $90 and the products sells for $225.The manager needs to know the contribution margin percentage.
Required:
Compute the contribution margin percentage.

Accepted Answer

A)  2.5%
B)  40%
C)  45%
D)  245%
E)  250%

Question 16

The difference between total revenues and total variable costs is:

Accepted Answer

A)  margin of safety.
B)  sensitivity analysis.
C)  the breakeven point.
D)  contribution margin.
E)  operating leverage.

Question 17

Contribution margin percentage is not a useful tool to calculate the effect of a change in revenues on contribution margin.

Accepted Answer

A) True 
 B)False

Question 18

The quantities (or proportion)of various products (or services)that constitute total unit sales of a company is known as the sales mix.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is true about net income?

Accepted Answer

A)  Income targets are expressed in terms of operating income.
B)  Income targets are expressed in terms of net income.
C)  Income targets are not expressed in terms of net income.
D)  Managers always ignore the effect of net income on income taxes.
E)  Decisions do not result in large operating incomes and never have favorable tax consequences.

Question 20

A manager at the Film Shoppe at the mall reported that the company had a contribution margin of $3,000 and total variable costs were $25.00.
Required:
Compute the operating income.

Accepted Answer

A)  $.83
B)  $120
C)  $2,750
D)  $2,780
E)  $75,000 C

Exam 3: Cost-Volume-Profit Analysis

The term that represents operating income plus nonoperating revenues minus nonoperating costs minus income taxes is:

Correct Answer
verified

In the presence of fixed costs,the degree of operating leverage is the same at different levels of sales.

Correct Answer
verified

When the outcomes are measured in monetary terms,expected value is often called:

Correct Answer
verified

In the equation method,revenues in each column are calculated as:

Correct Answer
verified

is a "what-if" technique that managers use to examine how an outcome will change if the original predicted data are not achieved or if an underlying assumption changes.

Correct Answer
verified

Strategic decisions never involve risk.

Correct Answer
verified

Write a short essay and define the profit-volume (PV)graph.What are the benefits of the PV graph to managers?

Which of the following is not a characteristic of CVP-based sensitivity analysis?

Correct Answer
verified

The tool useful for calculating contribution margin and operating income is:

Correct Answer
verified

If the Resort Operating Center plans a targeted operating income of $210,000 and the tax rate is 30%,what is the organization's target net income?

Correct Answer
verified

Gross margin and contribution margin are related but give different insights to managers.

Correct Answer
verified

The store has fixed costs of $25,000 and a contribution margin per unit of $90 per unit. Compute the breakeven quantity in units.

Correct Answer
verified

To determine the margin of safety,managers compute:

Correct Answer
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Sunny Pastures reported the following information: Required: Compute the quantity of units required to be sold to have an operating income of $5,000.

Correct Answer
verified
D

The store has a contribution margin per unit of $90 and the products sells for $225.The manager needs to know the contribution margin percentage. Required: Compute the contribution margin percentage.

Correct Answer
verified

The difference between total revenues and total variable costs is:

Correct Answer
verified

Contribution margin percentage is not a useful tool to calculate the effect of a change in revenues on contribution margin.

Correct Answer
verified

The quantities (or proportion)of various products (or services)that constitute total unit sales of a company is known as the sales mix.

Correct Answer
verified

Which of the following is true about net income?

Correct Answer
verified

A manager at the Film Shoppe at the mall reported that the company had a contribution margin of $3,000 and total variable costs were $25.00. Required: Compute the operating income.

Correct Answer
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C

Exam 3: Cost-Volume-Profit Analysis

The term that represents operating income plus nonoperating revenues minus nonoperating costs minus income taxes is:

Correct AnswerverifiedShow Answer

In the presence of fixed costs,the degree of operating leverage is the same at different levels of sales.

Correct AnswerverifiedShow Answer

When the outcomes are measured in monetary terms,expected value is often called:

Correct AnswerverifiedShow Answer

In the equation method,revenues in each column are calculated as:

Correct AnswerverifiedShow Answer

________ ________ is a "what-if" technique that managers use to examine how an outcome will change if the original predicted data are not achieved or if an underlying assumption changes.

Correct AnswerverifiedShow Answer

Strategic decisions never involve risk.

Correct AnswerverifiedShow Answer

Write a short essay and define the profit-volume (PV)graph.What are the benefits of the PV graph to managers?

Which of the following is not a characteristic of CVP-based sensitivity analysis?

Correct AnswerverifiedShow Answer

The tool useful for calculating contribution margin and operating income is:

Correct AnswerverifiedShow Answer

If the Resort Operating Center plans a targeted operating income of $210,000 and the tax rate is 30%,what is the organization's target net income?

Correct AnswerverifiedShow Answer

Gross margin and contribution margin are related but give different insights to managers.

Correct AnswerverifiedShow Answer

The store has fixed costs of $25,000 and a contribution margin per unit of $90 per unit. Compute the breakeven quantity in units.

Correct AnswerverifiedShow Answer

To determine the margin of safety,managers compute:

Correct AnswerverifiedShow Answer

Sunny Pastures reported the following information: Required: Compute the quantity of units required to be sold to have an operating income of $5,000.

Correct AnswerverifiedD

The store has a contribution margin per unit of $90 and the products sells for $225.The manager needs to know the contribution margin percentage. Required: Compute the contribution margin percentage.

Correct AnswerverifiedShow Answer

The difference between total revenues and total variable costs is:

Correct AnswerverifiedShow Answer

Contribution margin percentage is not a useful tool to calculate the effect of a change in revenues on contribution margin.

Correct AnswerverifiedShow Answer

The quantities (or proportion)of various products (or services)that constitute total unit sales of a company is known as the sales mix.

Correct AnswerverifiedShow Answer

Which of the following is true about net income?

Correct AnswerverifiedShow Answer

A manager at the Film Shoppe at the mall reported that the company had a contribution margin of $3,000 and total variable costs were $25.00. Required: Compute the operating income.

Correct AnswerverifiedC

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is a "what-if" technique that managers use to examine how an outcome will change if the original predicted data are not achieved or if an underlying assumption changes.

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D

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C