CVP Quiz - COST VOLUME PROFIT ANALYSIS PRACTICE QUIZ PDF

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COST VOLUME PROFIT ANALYSIS PRACTICE QUIZ...

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The contribution margin ratio always increases when: A. break-even point decreases B. break-even point increases C. variable cost as a percentage of net sales increases D. variable cost as a percentage of net sales decreases ANSWER: D Merchants, Inc. sells Product X to retailers for P200. The unit variable cost is P40 with a selling commission of 10%. Fixed manufacturing cost totals P1,000,000 per month, while fixed selling and administrative cost equal P420,000. The incometax rate is 30%. The target sales if after tax income is P123,200 would be: A. 19,950 units B. 15,640 units C. 18,750 units D. 11,400 units ANSWER: D Sari-sari Corporation is a multiple-product firm. In their review of operations, they decided to shift the sales mix from less profitable products to more profitable products, accounting for 35% of gross sales. This will cause the company's break-even point to: A. decrease B. change by 15% C. increase D. not change ANSWER: A Assuming that the flexible budget is in use, when production level is expected to increase within a relevant range, the expected effect on fixed cost per unit (FCU) and variable cost per unit (VCU) would be: A. FCU, to decrease and VCU, to decrease B. FCU, to decrease and VCU, no change C. FCU, no change and VCU, no change D. FCU, not change and VCU, to decrease ANSWER: B Neth and Company has sales of P400,000 with variable cost of P300,000, fixed cost of P120,000 and an operating loss of P20,000. By how much would Neth need to increase its sales in order to achieve a target operating income of 10% of sales? A. P400,000 B. P462,000 C. P500,000 D. P800,000 ANSWER: A When using the graph method, if unit output exceeds the break-even point, A. expenses are extremely high relative to revenues B. there is loss because the total cost line exceeds the total revenue line C. total sales exceeds total cost D. there is profit since the total cost line exceeds the total revenue line ANSWER: C The most impotant use of the cost-volume-graph is to show A. the break-even point B. the cost/margin ratio at various levels of sale activity

C. the relationships among volume,costs,revenues over wide ranges of activity D. the determination of cross-over point ANSWER: C Which of the following formulas is used to determine the break-even point when using the contribution margin method? A. Revenues less operating income equal variable cost plus fixed cost B. Unit contribution margin times the break-even number of units equals fixed cost C. Selling price less unit fixed cost equals contribution margin D. Total fixed cost equals total revenues ANSWER: B Ipo-ipo Corporation would like to market a new product at a selling price of P15 per unit. Fixed cost for this product is P1,000,000 for less than 50,000 units of output and P1,500,000 for 500,000 or more units of output. The contribution margin percentage is 20%. How many units of this product mus be sold to earn a target operating income of P1 million? A. 754,900 B. 833,334 C. 825,530 D. 785,320 ANSWER: B The following data refer to cost-volume-profit relationship of K Co. Breakeven point in units 1,000 Varaiable cost per unit P250 Total fixed cost P75,000 How much will be contributed to operating income by the 1,001st unit sold? A. P250 B. P325 C. P75 D. 0 ANSWER: C Which of the followng statement is true? A. A shift in sales mix toward less profitable products will cause the over-all break-even point to fall B. One way to compute break-even point is to divide total sales by the cost margin ratio C. Once the break-even point has been reached, net income will increase by the unit contribution margin for each additional unit sol D. As sales exceed the break-even point, a high contribution margin ration will result in lower profit, rather than a low contribution margin ratio ANSWER: C Sats and Co. sell three products: Sim, Plu and Corp. Sim is the most profitable product while Cop is the least profitable. Which one of the following events will definitely decrease the firm's over-all break-even point for the upcoming accounting period? A. An increase in the over-all market for Plu B. A decrease in Cop's selling price C. An increase in anticipated sales of Sim relative to the sales of Plu and Cop D. An increase in Sim's raw material cost ANSWER: C

Chuchay Manufacturing Company produces two products for which the following data have been tabulated. Fixed manufacturing cost is applied at a rate of P1.00 per machine hour. Per unit Chu Chay Selling price 4.00 3.00 Variable manufacturing cost 2.00 1.50 Fixed manufacturing cost 0.75 0.20 Variable selling cost 1.00 1.00 The sales manager had a P160,000 increase in the budget allotment for advertising and wants to apply the money to the most profitable product. The products are not substitures for one another in the eyest of the company's customers. Suppose the sales manager chooses to devote the entire P160,000 to increased advertising for Chu. The minimum increase in sales units of Chu required to offset the increased advertising is A. 640,000 units B. 160,000 units C. 128,000 units D. 80,000 units ANSWER: B Suppose the sales manager chooses to devote the entire P160,000 to increased advertising for Chay. The minimum increase in revenues for Chay required to offset the increased advertising would be A. P160,000 B. P320,000 C. P960,000 D. P1,600,000 ANSWER: C Suppose Chuchay has only 100,000 machine hours that can be made available to produce additional units of Chu and Chay. If the potential increase in sales units for either product resulting from advertising is far in excess of this production capacity, which product should be advertised and what is the estimated incease in contribution margin earned? A. Product Chu should be produced, yielding a contribution margin of P75,000 B. Product Chu should be produced, yielding a contribution margin of P133,333 C. Prudct Chay should be produced, yielding a contribution margin of P187,500 D. Product Chay should be produced, yielding a contribution margin of P250,000 ANSWER: D...