MULTIPLE CHOICES CHAPTER 2.
C-V-P ANALYSIS
1) The selling price per unit less the variable cost per unit is the:
A) fixed cost per unit
B) gross margin
C) margin of safety
D) contribution margin per unit
Answer the following questions using the information below:
Sherry's Custom Jewelry sells a single product. 700 units were sold resulting in $7,000 of
sales revenue, $2,800 of variable costs, and $1,200 of fixed costs.
2) Breakeven point in units is:
A) 200 units
B) 300 units
C) 500 units
D) None of these answers are correct.
3) The number of units that must be sold to achieve $6,000 of operating income is:
A) 1,000 units
B) 1,166 units
C) 1,200 units
D) None of these answers are correct.
Answer the following questions using the information below:
Holly's Ham, Inc. sells hams during the major holiday seasons. During the current year
11,000 hams were sold resulting in $220,000 of sales revenue, $55,000 of variable costs, and
$24,000 of fixed costs.
4) Breakeven point in units is:
A) 1,000 hams
B) 1,200 hams
C) 1,600 hams
D) None of these answers are correct.
5) The number of hams that must be sold to achieve $75,000 of operating income is:
A) 6,600 hams
B) 7,500 hams
C) 8,400 hams
D) None of these answers are correct.
6) At the breakeven point of 2,000 units, variable costs total $4,000 and fixed costs total
$6,000. The 2,001st unit sold will contribute ________ to profits.
A) $1
B) $2
C) $3
D) $5
7) The breakeven point is the activity level where:
A) revenues equal fixed costs
B) revenues equal variable costs
C) contribution margin equals variable costs
D) revenues equal the sum of variable and fixed costs
8) Breakeven point is:
A) total costs divided by variable costs per unit
B) contribution margin per unit divided by revenue per unit
C) fixed costs divided by contribution margin per unit
D) the sum of fixed and variable costs divided by contribution margin per unit
9) Sales total $200,000 when variable costs total $150,000 and fixed costs total $30,000. The
breakeven point in sales dollars is:
A) $200,000
B) $120,000
C) $ 40,000
D) $ 30,000
10) The breakeven point in CVP analysis is defined as:
A) when fixed costs equal total revenues
B) fixed costs divided by the contribution margin per unit
C) revenues less variable costs equal operating income
D) when the contribution margin percentage equals total revenues divided by variable costs
11) Which of the following statements about determining the breakeven point is FALSE?
A) Operating income is equal to zero.
B) Contribution margin - fixed costs is equal to zero.
C) Revenues equal fixed costs plus variable costs.
D) Breakeven revenues equal fixed costs divided by the variable cost per unit.
12) What is the breakeven point in units, assuming a product's selling price is $100, fixed
costs are $8,000, unit variable costs are $20, and operating income is $3,200?
A) 100 units
B) 300 units
C) 400 units
D) 500 units
13) If unit outputs exceed the breakeven point:
A) there is a loss
B) total sales revenue exceeds total costs
C) there is a profit
D) Both total sales revenue exceeds total costs and there is a profit.
14) How many units would have to be sold to yield a target operating income of $22,000,
assuming variable costs are $15 per unit, total fixed costs are $2,000, and the unit selling
price is $20?
A) 4,800 units
B) 4,400 units
C) 4,000 units
D) 3,600 units
15) If the breakeven point is 1,000 units and each unit sells for $50, then:
A) selling 1,250 units will result in a profit
B) sales of $40,000 will result in a loss
C) sales of $50,000 will result in zero profit
D) All of these answers are correct.
16) If breakeven point is 1,000 units, each unit sells for $30, and fixed costs are $10,000, then
on a graph the:
A) total revenue line and the total cost line will intersect at $30,000 of revenue
B) total cost line will be zero at zero units sold
C) revenue line will start at $10,000
D) All of these answers are correct.
17) When fixed costs are $40,000 and variable costs are 20% of the selling price, then
breakeven sales are:
A) $40,000
B) $50,000
C) $200,000
D) indeterminable
Answer the following questions using the information below:
Ruben intends to sell his customers a special round-trip airline ticket package. He is able to
purchase the package from the airline carrier for $150 each. The round-trip tickets will be
sold for $200 each and the airline intends to reimburse Ruben for any unsold ticket packages.
Fixed costs include $5,000 in advertising costs.
18) What is the contribution margin per ticket package?
A) $50
B) $100
C) $150
D) $200
19) How many ticket packages will Ruben need to sell to break even?
A) 34 packages
B) 50 packages
C) 100 packages
D) 150 packages
20) How many ticket packages will Ruben need to sell in order to achieve $60,000 of
operating income?
A) 367 packages
B) 434 packages
C) 1,100 packages
D) 1,300 packages
21) For every $25,000 of ticket packages sold, operating income will increase by:
A) $6,250
B) $12,500
C) $18,750
D) an indeterminable amount
Answer the following
questions using the
information below:
Northenscold Company
sells several products.
Information of average
revenue and costs is as
follows:
Selling price per unit
$20.00
Variable costs per unit:
Direct material $4.00
Direct manufacturing
labor $1.60
Manufacturing
overhead $0.40
Selling costs $2.00
Annual fixed costs
$96,000
Answer the following questions using the information below:
Northenscold Company sells several products. Information of average revenue and costs is as
follows:
Selling price per unit $20.00
Variable costs per unit:
Direct material $4.00
Direct manufacturing labor $1.60
Manufacturing overhead $0.40
Selling costs $2.00
Annual fixed costs $96,000
22) The number of units that Northenscold's must sell each year to break even is:
A) 8,000 units
B) 12,000 units
C) 16,000 units
D) indeterminable
23) The number of units that Northenscold's must sell annually to make a profit of $144,000
is:
A) 12,000 units
B) 18,000 units
C) 20,000 units
D) 30,000 units
Answer the following questions using the information below:
Franscioso Company sells several products. Information of average revenue and costs is as
follows:
Selling price per unit $28.50
Variable costs per unit:
Direct material $5.25
Direct manufacturing labor $1.15
Manufacturing overhead $0.25
Selling costs $1.85
Annual fixed costs $110,000
24) The number of units that Franscioso must sell each year to break even is:
A) 1,000 units
B) 4,000 units
C) 5,500 units
D) indeterminable
25) The number of units that Franscioso must sell annually to make a profit of $90,000 is:
A) 10,000 units
B) 12,000 units
C) 15,000 units
D) 20,000 units
Answer the following questions using the information below:
The following information is for Nichols Company:
Selling price
Variable costs
Total fixed costs
$50 per unit
$30 per unit
$100,000
26) The number of units that Nichols Company must sell to reach targeted operating income
of
$30,000 is:
A) 5,000 units
B) 6,500 units
C) 3,334 units
D) 4,334 units
27) If targeted operating income is $40,000, then targeted sales revenue is:
A) $350,000
B) $233,333
C) $166,667
D) $250,000
Answer the following questions using the information below:
Stephanie's Bridal Shoppe sells wedding dresses. The average selling price of each dress is
$1,000, variable costs are $400, and fixed costs are $90,000.
28) What is the Bridal Shoppe's operating income when 200 dresses are sold?
A) $30,000
B) $80,000
C) $200,000
D) $100,000
29) How many dresses are sold when operating income is zero?
A) 225 dresses
B) 150 dresses
C) 100 dresses
D) 90 dresses
Answer the following questions using the information below:
Dr. Charles Hunter, MD, performs a certain outpatient procedure for $1,000. His fixed costs
are
$20,000, while his variable costs are $500 per procedure. Dr. Hunter currently plans to
perform
200 procedures this month.
30) What is the breakeven point for the month assuming that Dr. Hunter plans to perform the
procedure 200 times?
A) 40 times
B) 30 times
C) 20 times
D) 10 times
