1. The contribution income statement would require a firm to:
2. From a strategic management perspective, the primary reason a firm performs CVP
analysis is to find the level of sales that:
3. CVP analysis for revenue and cost planning has the primary objective of:
4. The breakeven point is:
5. CVP analysis using activity-based costs will tend to shift some costs from fixed to
variable classifications, resulting in:
6. Calculating the margin of safety (MOS) measure will help a firm answer which of the
following questions?
7. A relatively low margin of safety ratio (MOS%) for a product is usually an indication that
the product:
8. High operating leverage represents increased risk associated with relatively:
9. CVP analysis with multiple products assumes that sales will continue at the same mix of
products, expressed in either sales units or sales dollars. This assumption is essential, because a
change in the product mix will probably change:
10. The CVP profit-planning model assumes that over the relevant range of activity:
11. In performing short-term CVP analysis for a new product or service, the decision-maker
would:
12. In measuring the variable cost per unit, CVP analysis includes:
13. The difference between sales price per unit and variable cost per unit is the:
14. The contribution margin per unit multiplied by the number of units sold is the:
15. Which one of the following is the
most
useful
measure
for comparing the risk of two
alternative products?
16. Which one of the following is defined, at any given sales volume, as the ratio of the total
contribution margin to operating profit at that sales volume?
17. Which one of the following is not included as a factor in CVP analysis?
18. Which of the following is not an underlying assumption of a conventional CVP analysis?
19. Grant’s Western Wear is a retailer of western hats located in Atlanta, Georgia. Although
Grant’s carries numerous styles of western hats, each hat has approximately the same price and
invoice purchase cost, as shown below. Sales personnel receive large commissions to encourage
them to be more aggressive in their sales efforts. Currently the economy of Atlanta is really
humming, and sales growth at Grant’s has been great. However, the business is very competitive,
and Grant has relied on its knowledgeable and courteous staff to attract and retain customers,
who otherwise might go to other western wear stores. Also, because of the rapid growth in sales,
Grant is finding it more difficult to manage certain aspects of the business, such as restocking of
inventory and hiring and training new salespeople.
Sales price $36.00
Per-unit variable costs:
Invoice cost 18.60
Sales commissions 5.40
Total per-unit variable costs $24.00
Total annual fixed costs:
Advertising $24,000
Rent 30,000
Salaries 126,000
Total fixed costs $180,000
The annual breakeven point in unit sales is calculated to be:
20. Grant’s Western Wear is a retailer of western hats located in Atlanta, Georgia. Although
Grant’s carries numerous styles of western hats, each hat has approximately the same price and
invoice purchase cost, as shown below. Sales personnel receive large commissions to encourage
them to be more aggressive in their sales efforts. Currently the economy of Atlanta is really
humming, and sales growth at Grant’s has been great. However, the business is very competitive,
and Grant has relied on its knowledgeable and courteous staff to attract and retain customers,
who otherwise might go to other western wear stores. Also, because of the rapid growth in sales,
Grant is finding it more difficult to manage certain aspects of the business, such as restocking of
inventory and hiring and training new salespeople.
Sales price $36.00
Per-unit variable costs:
Invoice cost 18.60
Sales commissions 5.40
Total per-unit variable costs $24.00
Total annual fixed costs:
Advertising $24,000
Rent 30,000
Salaries 126,000
Total fixed costs $180,000
The annual breakeven point in dollar sales is calculated to be:
21. Grant’s Western Wear is a retailer of western hats located in Atlanta, Georgia. Although
Grant’s carries numerous styles of western hats, each hat has approximately the same price and
invoice purchase cost, as shown below. Sales personnel receive large commissions to encourage
them to be more aggressive in their sales efforts. Currently the economy of Atlanta is really
humming, and sales growth at Grant’s has been great. However, the business is very competitive,
and Grant has relied on its knowledgeable and courteous staff to attract and retain customers,
who otherwise might go to other western wear stores. Also, because of the rapid growth in sales,
Grant is finding it more difficult to manage certain aspects of the business, such as restocking of
inventory and hiring and training new salespeople.
Sales price $36.00
Per-unit variable costs:
Invoice cost 18.60
Sales commissions 5.40
Total per-unit variable costs $24.00
Total annual fixed costs:
Advertising $24,000
Rent 30,000
Salaries 126,000
Total fixed costs $180,000
If 24,000 hats were sold, Grant’s operating income (πB) would be:
22. Stylish Sitting is a retailer of office chairs located in San Francisco, California. Due to
increased market competition, the CFO of Stylish Sitting has grown worried about the firm’s
upcoming income stream. The CFO asked you to use the company financial information provided
below.
Sales price $75.00
Per-unit variable costs
Invoice cost 41.70
Sales commissions 18.30
Total per unit variable costs $60.00
Total annual fixed costs:
Advertising $56,000
Rent 78,000
Salaries 226,000
Total annual fixed costs $360,000
The annual breakeven point, in
unit
sales, is:
23. Stylish Sitting is a retailer of office chairs located in San Francisco, California. Due to
increased market competition, the CFO of Stylish Sitting has grown worried about the firm’s
upcoming income stream. The CFO asked you to use the company financial information provided
below.
Sales price $75.00
Per-unit variable costs
Invoice cost 41.70
Sales commissions 18.30
Total per unit variable costs $60.00
Total annual fixed costs:
Advertising $56,000
Rent 78,000
Salaries 226,000
Total annual fixed costs $360,000
The annual breakeven point, in
dollar
sales, is:
24. Stylish Sitting is a retailer of office chairs located in San Francisco, California. Due to
increased market competition, the CFO of Stylish Sitting has grown worried about the firm’s
upcoming income stream. The CFO asked you to use the company financial information provided
below.
Sales price $75.00
Per-unit variable costs
Invoice cost 41.70
Sales commissions 18.30
Total per unit variable costs $60.00
Total annual fixed costs:
Advertising $56,000
Rent 78,000
Salaries 226,000
Total annual fixed costs $360,000
If 40,000 office chairs were sold, Stylish Sitting’s operating income (πB) would be:
25. Premium Beds is a retailer of luxury bed frames located in Los Angeles, California. Due to
a recent industry-wide financial crisis, the CFO of Premium Beds fears a significant drop in the
firm’s upcoming income stream. The CFO asked you to use the company financial information
provided below.
Sales price per unit $3,000.00
Per-unit variable costs:
Invoice cost 2,218.80
Sales commissions 781.20
Total per unit variable costs $2,500.00
Total annual fixed costs:
Advertising $236,000
Rent 178,000
Salaries 386,000
Total annual fixed costs $800,000
The annual breakeven point in
units
is:
26. Premium Beds is a retailer of luxury bed frames located in Los Angeles, California. Due to
a recent industry-wide financial crisis, the CFO of Premium Beds fears a significant drop in the
firm’s upcoming income stream. The CFO asked you to use the company financial information
provided below.
Sales price per unit $3,000.00
Per-unit variable costs:
Invoice cost 2,218.80
Sales commissions 781.20
Total per unit variable costs $2,500.00
Total annual fixed costs:
Advertising $236,000
Rent 178,000
Salaries 386,000
Total annual fixed costs $800,000
The annual breakeven point in
dollars
is: