Chapter 20 – Cost-Volume-Profit Analysis
Financial and Managerial Accounting, 17/e 20-7
CHAPTER 20 NAME _____________________#
10-MINUTE QUIZ C SECTION
Paulsen Company sells only one product. The regular selling price is $50. Variable costs are
70% of this selling price, and fixed costs are $7,500 per month.
Management decides to increase the selling price from $50 to $55 per unit. Assume that the
cost of the product and the fixed operating expenses are not changed by this pricing decision.
1 Refer to the above data. At the original selling price of $50 per unit, what is the contribution
margin ratio?
2 Refer to the above data. At the original selling price of $50 per unit, how many units must
Paulsen sell to break even?
3 Refer to the above data. At the original selling price of $50 per unit, what dollar volume of
sales per month is required for Paulsen to earn a monthly operating income of $5,000?
4 Refer to the above data. At the increased selling price of $55 per unit, what is the
contribution margin ratio?
5 Refer to the above data. At the increased selling price of $55 per unit, what dollar volume of
sales per month is required to break-even?
Chapter 20 – Cost-Volume-Profit Analysis
CHAPTER 20 NAME #
10-MINUTE QUIZ D SECTION
Rhinefold brews reduced calorie beer and regular beer. Sales of its reduced calorie beer
represent 25% of the company’s total revenue. Sales of regular beer represent the remaining
75%. Reduced calorie beer has a contribution margin ratio of 80%, whereas the contribution
margin ratio of regular beer is only 60%. Rhinefold’s monthly fixed costs average $609,500.
1 What is the company’s monthly break–even point expressed in sales dollars? $__________
2 What monthly sales level must be achieved for Rhinefold to earn a monthly operating income
of $350,000? $__________
3 If Rhinefold generates $1,400,000 in monthly sales, it will earn a monthly operating income
of $__________.
4 Assume Rhinefold’s margin of safety was $300,000 in May. What was the company’s
operating income in May? $__________.
5 If Rhinefold’s monthly fixed costs increase by $8,500, what level of monthly sales revenue
will be required to break-even? $__________.
Chapter 20 – Cost-Volume-Profit Analysis
Financial and Managerial Accounting, 17/e 20-9
SOLUTIONS TO CHAPTER 20 10-MINUTE QUIZZES
QUIZ A QUIZ B
Learning Learning Objectives: 1, 4, 5, 6, 8, 9
Objectives: 4, 5, 6
QUIZ C
1
Sales price (100%) minus variable costs (70%) = 30%
Learning Objective: 7
Chapter 20 – Cost-Volume-Profit Analysis
QUIZ D
1
$609,500/[(75% x 60%) + (25% x 80%)] = $937,692
Chapter 20 – Cost-Volume-Profit Analysis
Financial and Managerial Accounting, 17/e 20-11
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Assignment Guide to Chapter 20
Brief Exercises
Exercises
Cases
Net
1 – 10
1 – 15
1
2
3
4
5
6
7
8
1
2
3
4
Time estimate (in minutes)
< 15
< 15
40
40
25
30
25
40
30
40
20
40
10
15
Difficulty rating
E
E
M
M
M
S
E
M
M
S
M
S
E
E
Learning Objectives:
1, 2, 3, 4, 7, 9
1, 2, 5, 9, 11,
13
√
√
√
√
1. Explain how fixed, variable, and
semivariable costs respond to
changes in the volume of business
activity.
2. Explain how economies of scale can
reduce unit costs.
1, 9, 11
3. Prepare a cost-volume-profit graph.
√
√
√
4. Compute contribution margin and
explain its usefulness.
4, 5, 6, 7
1, 3, 4, 5, 7,
8, 9, 10, 11,
13
√
√
√
√
√
√
√
√
5. Determine the sales volume
required to earn a desired level of
operating income.
4, 5, 6, 7
3, 4, 6, 7, 8,
9, 10, 11, 12,
13
√
√
√
√
√
√
√
6. Use the contribution margin ratio to
estimate the change in operating
income caused by a change in sales
volume.
5, 6, 7
4, 6, 7, 8, 9,
11, 12, 13
√
√
√
√
√
√
√
√
7. Use CVP relationships to evaluate a
new marketing strategy.
8
6, 14
√
√
√
√
√
√
8. Use CVP when a company sells
multiple products.
10
14
√
√
9. Determine semivariable cost
elements.
3, 4
2, 15
√
√
√
√