Question

bubble in your answer in the space provided on the right side of the scantron. ALSO, cirele your hoice questions (3.2 points each). Select the BEST answer for each question and answer on this test paper. 2-4 "Unless the problem otherwise indicates, assume that sales and production have been equal for this and the prior period." 1. Which of the following assumption is used in cost-volume-profit analysis? A) All costs are classified as fixed or variable B) The total cost function is linear C) The total revenue function is linear D) All of the above 2. The portion of each dollar that can be used to cover fixed costs and provide a profit is known as: A) Contribution margin B) Gross margin percent C) Margin of safety D) Operating leverage 3. Nancy Company has sales of $100,000, variable costs of $5 per unit, fixed costs of $25,000, and a profit of $15,000. How many units were sold? A) 20,000 B) 16,000 C) 12,000 D) 8,000 4. At a level of 20,000 units sold. Gail Corp, has sales of $400,000, a variable cost ratio of 60% , and profit of $40,000. What is the break-even point in units? A) 12,000 B) 8,000 C) 20,000 D) 15,000 5. Product Y sells for $15 per unit, and has related variable expenses of $9 per unit. Fixed exp total $300,000 per year. How many units of Product Y must be sold each year to yield an ann of $90,000? A) 50,000 units B) 65,000 units C) 15,000 units D) 43,333 units

Answer 1

1	Answer is D) All of the above
	Total cost are classified as fixed or variable
	CVP Assumption are
	Constant sales price, Constant variable cost per unit, constant total fixed cost, units sold equals units produced
	So that total cost and revenue functions are linear.
2	Answer is A)Contribution margin
	Contribution margin - Fixed cost = Profit
3	Answer is C) 12,000
	Contribution = Fixed cost + Profit = $25,000+$15,000 = $40,000
	Variable cost = Sales - Contribution = $100,000-$40,000 = $60,000
	Units sold = Variable cost ÷ Variable cost per unit = 60,000/5 = 12,000 units
4	Answer is D)15,000
	Contribution % = Sales % - Variable cost % = 100%-60%=40%
	Contribution margin per unit = (Sales x Contribution %) ÷ units sold = ($400,000 x 40%)/20,000 units= $8
	Fixed cost = Contribution - Profit = $160,000-$40,000 = $120,000
	Break-even point in units = Fixed cost ÷ Contribution margin per unit = $120,000/$8 = 15,000 units
5	Answer is B)65,000 units
	Contribution per unit = Sales per unit - Variable cost per unit = $15-$9 = $6
	Contribution = Fixed cost + desired profit = $300,000+$90,000 = $390,000
	Sales in units = Contribution ÷ Contribution per unit = $390,000/$6 = 65,000 units