Cost Volume Profit Chapter 5 Quiz
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Questions and Answers

Which one of the following events will increase the company's overall break-even point?

  • Increasing scissors' selling price
  • A decrease in the cost of direct materials used in all three products
  • An increase in the demand for rocks
  • An increase in the cost of direct materials used in all three products (correct)
  • What will be the effect on operating income if the variable cost per unit is decreased by 10% and the total fixed cost is increased by 20%?

  • It will increase by $1,000. (correct)
  • It will increase by $6,000.
  • It will decrease by $5,000.
  • It will decrease by $1,000.
  • In order to break even, how many units should UCB produce and sell?

  • 230,000 units (correct)
  • 200,000 units
  • 143,750 units
  • 3,588,000 units
  • How much were the total fixed costs for The James Company, which requires 22,223 units to be sold to break even?

    <p>$100,004</p> Signup and view all the answers

    The contribution margin ratio (CM ratio) is:

    <p>The CM converted to a percentage by dividing the CM dollar value by the sales value.</p> Signup and view all the answers

    How many units does J&J Co. need to sell in order to earn a profit of $150,000?

    <p>100,000</p> Signup and view all the answers

    What is the contribution margin per unit of the edible straws for Ringo and Paul Corp.?

    <p>$3.26</p> Signup and view all the answers

    What is the change to pre-tax income if Mane and Guchey Ltd. implements the new piece of machinery?

    <p>Increase by $1,000</p> Signup and view all the answers

    Which one of the following is a TRUE key assumption when using cost-volume-profit (CVP)?

    <p>In multiproduct companies, the sales mix is constant.</p> Signup and view all the answers

    Using the sales mix provided, calculate the weighted average contribution margin to determine the total sales BPC must attain in order to reach a target profit of $90,000.

    <p>381,098</p> Signup and view all the answers

    Study Notes

    Cost Volume Profit Analysis

    • Company XYZ's contribution margins per unit: Rocks highest, scissors lowest. Increased direct material costs raise overall break-even point.
    • Decreasing variable costs by 10% and raising total fixed costs by 20% leads to a $1,000 increase in operating income.
    • UCB reported losses despite $3,120,000 sales; needed 230,000 units to break even based on current performance.
    • James Company requires $100,004 in total fixed costs based on selling price of $10 and variable costs of $5.50 per unit, needing to sell 22,223 units to break even.
    • Contribution Margin (CM) ratio calculated as CM dollar value divided by sales value, important for understanding profitability.
    • J&J Co. needs to sell 40,000 units to achieve a profit of $150,000, given a sales price of $12.50 and variable costs of $10 per unit.
    • Ringo and Paul Corp. has a contribution margin per unit for edible straws determined as $3.26, with fixed and variable cost breakdowns provided.
    • Mane and Guchey Ltd. projects a $1,000 increase in pre-tax income with new machinery, despite increased variable manufacturing overhead and lease costs.
    • A true assumption of CVP analysis includes constant sales mix in multiproduct companies, impacting overall calculations.
    • Bambi's Parka Corp. must achieve total sales of $381,098 to reach a target profit of $90,000, based on the weighted average contribution margin across their product lines.

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    Description

    Test your knowledge on Chapter 5 of Cost Volume Profit analysis with these flashcards. This quiz covers key concepts including contribution margins and break-even points. Perfect for students looking to reinforce their understanding of cost behavior and profitability.

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