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How does the cost-volume-profit model accommodate non-linear costs and revenues?


A) Non-linear costs and revenues are ignored by the model.
B) Inventory levels are segregated into distinct ranges within which a linear relationship is expected to approximate the actual cost or revenue behavior.
C) It is not a problem since non-linear costs and revenues do not exist in practice.
D) None of these is correct.

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Phan Company has not reported a profit in five years.This year the company would like to narrow its loss to $7,500.Assuming its selling price is $36.50 per unit and its variable costs per unit are $24,how many units must be sold to achieve its target given that total fixed costs are $60,000? (Do not round intermediate calculations.)


A) 2,188
B) 1,439
C) 4,200
D) 1,600

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Which of the following is not an assumption made when performing cost-volume-profit analysis?


A) Number of units produced is greater than the number of units sold.
B) Worker efficiency is held constant.
C) The company produces within the relevant range of activity.
D) There is a linear relationship between cost and volume for both fixed and variable cost.

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Contribution margin ratio will remain the same at various levels of sales even if total fixed costs are altered.

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Jensen Company has a contribution margin ratio of 45%.This means that its variable costs are 55% of sales.

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A margin of safety of 30% means that every dollar in revenue generates thirty cents in profit.

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What does the margin of safety measure?

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The margin of safety measures ...

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Consider the following cost-volume-profit graph: Consider the following cost-volume-profit graph: The line designated by the letter (B) represents which of the following? A) Variable cost B) Break-even C) Total revenue D) Total cost The line designated by the letter (B) represents which of the following?


A) Variable cost
B) Break-even
C) Total revenue
D) Total cost

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M and M,Inc.produces a product that has a variable cost of $3.00 per unit.The company's fixed costs are $30,000.The product is sold for $5.00 per unit and the company desires to earn a target profit of $20,000.What is the amount of sales that will be necessary to earn the desired profit?


A) $75,000
B) $50,000
C) $83,333
D) $125,000

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Select the correct statement regarding break-even point analysis.


A) The break-even point in sales dollars equals total fixed costs divided by contribution margin per unit.
B) An increase in fixed costs causes the break-even point to increase.
C) An increase in contribution margin per unit causes the break-even point in units to increase.
D) A decrease in the variable cost per unit causes the break-even point in units to increase.

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The pricing strategy that begins with the determination of a price at which a product will sell and then focuses on developing a cost structure for the product that will yield a profit is known as:


A) cost-plus pricing.
B) prestige pricing.
C) developmental pricing.
D) target costing.

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Martinez Company sells one product that has a sales price of $20 per unit,variable costs of $8 per unit,and total fixed costs of $200,000.what is the contribution margin ratio?


A) 40%
B) 60%
C) 50%
D) 66%

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Database software is especially useful for performing cost-volume-profit sensitivity analysis.

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Which of the following statements regarding Company A is incorrect?


A) If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its break-even point in units is 36,000 units.
B) If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its variable expenses must be $20 per unit.
C) If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, once it has covered its fixed costs, net income will increase by $30 for each additional unit sold.
D) Both if Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its break-even point in units is 36,000 units and if Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its variable expenses must be $20 per unit are incorrect.

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Falls Company has a contribution margin of $32 per unit and fixed costs of $500,000,and it desires to earn a profit of $100,000.What is the sales volume in units required to achieve this desired profit?


A) 3,125 units
B) 18,750 units
C) 15,625 units
D) 12,500 units

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Zeus,Inc.produces a product that has a variable cost of $9.50 per unit.The company's fixed costs are $40,000.The product sells for $12.00 a unit and the company desires to earn a $20,000 profit.What is the volume of sales in units required to achieve the target profit? (Do not round intermediate calculations.)


A) 24,000 units
B) 16,000 units
C) 17,000 units
D) 4,000 units

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Cooper Company sells a product at $50 per unit that has unit variable costs of $20.The company's break-even sales point in sales dollars is $150,000.How much profit will the company make if it sells 4,000 units?


A) $210,000
B) $120,000
C) $60,000
D) $30,000

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Rocky Mountain Bottling Company produces a soft drink that is sold for a dollar.At production and sales of 800,000 units,the company pays $600,000 in production costs,half of which are fixed costs.At that volume,general,selling,and administrative costs amount to $250,000,of which $70,000 are fixed costs.What is the amount of contribution margin per unit?


A) $0.40
B) $0.5375
C) $0.25
D) None of these is correct.

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Company A makes and sells a single product,unless otherwise indicated.What happens to the break-even point when the variable cost per unit decreases?

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The break-...

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At the break-even point:


A) Sales would be equal to total costs.
B) Contribution margin would be equal to total fixed costs.
C) Sales would be equal to fixed costs.
D) Both sales would be equal to total costs and contribution margin would be equal to total fixed costs are correct.

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