Chapter 7 – Cost-Volume-Profit Analysis
45. A recent income statement of Carson Corporation reported the following data:
Sales revenue
$2,500,000
Variable costs
1,500,000
Fixed costs
800,000
If these data are based on the sale of 5,000 units, the break-even sales would be:
46. Hsu, Inc. sells a single product for $12. Variable costs are $8 per unit and fixed costs total
$360,000 at a volume level of 60,000 units. Assuming that fixed costs do not change, Hsu’s
break-even point would be:
47. Sarafine, Inc. sells a single product for $20. Variable costs are $8 per unit and fixed costs
total $120,000 at a volume level of 5,000 units. Assuming that fixed costs do not change,
Sarafine’s break-even sales would be:
48. Bargain Town recently reported sales revenues of $800,000, a total contribution margin of
$300,000, and fixed costs of $180,000. If sales volume amounted to 10,000 units, the
company’s variable cost per unit must have been:
49. Dane Company has a break-even point of 120,000 units. If the firm’s sole product sells for
$40 and fixed costs total $480,000, the variable cost per unit must be:
50. Starlight Co. makes and sells only one product. The unit contribution margin is $6 and the
break-even point in unit sales is 24,000. The company’s fixed costs are:
51. The contribution-margin ratio is:
52. At a volume level of 500,000 units, Sullivan reported the following information:
Sales price
$60
Variable cost per unit
20
Fixed cost per unit
4
0.67
Feedback E: There is a correct answer listed.
53. Which of the following expressions can be used to calculate break-even sales revenue
with the contribution-margin ratio (CMR)?
Chapter 7 – Cost-Volume-Profit Analysis
Use the following information to answer Questions 54-61.
54. Refer to the figure above. Line A is the:
55. Refer to the figure above. Line C represents the level of:
56. Refer to the figure above. The slope of line A is equal to the:
57. Refer to the figure above. The slope of line B is equal to the:
58. Refer to the figure above. The vertical distance between the total cost line (Line B) and
the total revenue line (Line A) represents:
59. Refer to the figure above. Assume that the company whose cost structure is depicted in
the figure expects to produce a loss for the upcoming period. The loss would be shown on the
graph:
60. Refer to the figure above. At a given sales volume, the vertical distance between the fixed
cost line and the total cost line represents:
61. Refer to the figure above. Assume that the company whose cost structure is depicted in
the figure expects to produce a profit for the upcoming accounting period. The profit would
be shown on the graph by the letter:
Chapter 7 – Cost-Volume-Profit Analysis
Use the following information to answer Questions 62-64.
62. Refer to the figure above. Line A is the:
63. Refer to the figure above. The triangular area between the horizontal axis and Line A, to
64. Refer to the figure above. The triangular area between the horizontal axis and Line A, to
the left of 4,000, represents:
65. A recent income statement of McClennon Corporation reported the following data:
Units sold
8,000
Sales revenue
$9,600,000
Variable costs
6,000,000
Fixed costs
2,600,000
If the company desired to earn a target profit of $1,270,000, it would have to sell:
66. Flower Depot, Inc. sells a single product for $10. Variable costs are $4 per unit and fixed
costs total $120,000 at a volume level of 10,000 units. What dollar sales level would Flower
Depot have to achieve to earn a target profit of $240,000?
67. The difference between budgeted sales revenue and break-even sales revenue is the:
68. Finn’s budget for the upcoming year revealed the following figures:
Sales revenue $840,000
Contribution margin 504,000
Income 54,000
If the company’s break-even sales total $750,000, Finn’s safety margin would be:
69. Santa Fe Production sells a single product to wholesalers. The company’s budget for the
upcoming year revealed anticipated unit sales of 31,600, a selling price of $20, variable cost
per unit of $8, and total fixed costs of $360,000. Santa Fe’s safety margin in units is:
70. Santa Fe Production sells a single product to wholesalers. The company’s budget for the
upcoming year revealed anticipated unit sales of 31,600, a selling price of $20, variable cost
per unit of $8, and total fixed costs of $360,000. If Santa Fe’s unit sales are 200 units less than
anticipated, its break-even point will:
71. Santa Fe Production sells a single product to wholesalers. The company’s budget for the
upcoming year revealed anticipated unit sales of 31,600, a selling price of $20, variable cost
per unit of $8, and total fixed costs of $360,000. If Santa Fe’s unit sales are 300 units more
than anticipated, its break-even point will:
72. If a company desires to increase its safety margin, it should:
73. Morgan Technologies sells a single product at $20 per unit. The firm’s most recent income
statement revealed unit sales of 100,000, variable costs of $800,000, and fixed costs of
$400,000. If a $4 drop in selling price will boost unit sales volume by 20%, the company will
experience:
A. no change in profit because a 20% drop in sales price is balanced by a 20% increase in
volume.
74. Markham Industries is studying the profitability of a change in operation and has gathered
the following information:
Current Operation
Anticipated Operation
$38,000
$48,000
$16
$22
$10
$12
9,000
6,000
Should Markham Industries make the change?
75. Charriott sells a single product at $14 per unit. The firm’s most recent income statement
revealed unit sales of 80,000, variable costs of $800,000, and fixed costs of $560,000.
Management believes that a $3 drop in selling price will boost unit sales volume by 20%.
Which of the following correctly depicts how these two changes will affect the company’s
break-even point?
Drop in Sales Price
Increase in Sales Volume
Increase
Increase
Increase
Decrease
Decrease
Increase
Decrease
Decrease
76. All other things being equal, a company that sells multiple products should attempt to
structure its sales mix so the greatest portion of the mix is composed of those products with
77. McGuire Corporation sells three products: R, S, and T. Budgeted information for the
upcoming accounting period follows.
Product Sales Volume (Units) Selling Price Variable Cost
R 16,000 $14 $9
S 12,000 10 6
T 52,000 11 8
The company’s weighted-average unit contribution margin is:
78. Elise Corporation has the following sales mix for its three products: A, 20%; B, 35%; and
C, 45%. Fixed costs total $400,000 and the weighted-average contribution margin is $100.
How many units of product A must be sold to break-even?
Chapter 7 – Cost-Volume-Profit Analysis
Use the following information to answer Questions 79-82.
Ahmed & Co. makes and sells two types of shoes, Plain and Fancy. Data concerning these
products are as follows:
Plain Fancy
Unit selling price $20.00 $35.00
Variable cost per unit 12.00 24.50
Sixty percent of the unit sales are Plain, and annual fixed expenses are $45,000.
79. The weighted-average unit contribution margin is:
80. Assuming that the sales mix remains constant, the total number of units that Ahmed must
sell to break even is:
81. Assuming that the sales mix remains constant, the number of units of Plain that Ahmed
must sell to break even is:
82. Assuming that the sales mix remains constant, the number of units of Fancy that Ahmed
must sell to break even is: