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1.
The most useful information derived from a breakeven chart is the
A. Amount of sales revenue needed to cover enterprise variable costs.
B. Amount of sales revenue needed to cover enterprise fixed costs.
C. Relationship among revenues, variable costs, and fixed costs at various levels of activity.
D. Volume or output level at which the enterprise breaks even.
2. Which of the factors is (are) involved in studying cost-volume-profit relationships?
A. Levels of production C. Fixed costs
B. Variable costs D. All of these
3. At the breakeven point, fixed cost is always
A. Less than the contribution margin C. More than the contribution margin
B. Equal to the contribution margin. D. More than the variable cost
4. At the break-even point:
A. net income will increase by the unit contribution margin for each additional item sold
above break-even.
B. the total contribution margin changes from negative to positive
C. fixed costs are greater than contribution margin
D. the contribution margin ratio begins to increase
5. In cost-volume-profit analysis, the greatest profit will be earned at
A. One hundred percent at normal productive capacity.
B. The production point with the lowest marginal cost.
C. The production point at which average total revenue exceeds average marginal cost.
D. The point at which marginal cost and marginal revenue are equal.
A. Moorehead Manufacturing Co., which produces two products for which the following
data have been tabulated. Fixed manufacturing cost is applied at a rate of P1.00 per machine
hour.
Per unit XY-7 BD-4
Selling price P4.00 P3.00
Variable manufacturing cost 2.00 1.50
Fixed manufacturing cost .75 .20
Variable selling cost 1.00 1.00
The sales manager has had a P160,000 increase in the budget allotment for advertising and wants
to apply the money to the most profitable product. The products are not substitute for one
another in the eyes of the company’s customers.
1. Suppose the sales manager chooses to devote the P160,000 to increased advertising for
XY-7. The minimum increase in sales units of XY-7 required to offset the increased
advertising is 160,000 units
2. Suppose the sales manager chooses to devote the entire P160,000 to increased advertising for
BD-4. The minimum increase in sales in peso of BD-4 required to offset the increased
advertising would be
P 959, 808.04 / P960, 000.
B. Information relating to the 2001 operations of McNickle Corp. follows:
Sales $120,000
Variable costs (36,000 )
Contribution margin $ 84,000
Fixed costs (70,000 )
Profit before taxes $ 14,000
McNickle’s break-even point for 2001 was 1,000 units. Compute McNickle’s sales price per
unit.
$100 per unit
C. Information concerning Label Corporation’s Product A follows:
Sales $300,000
Variable costs 240,000
Fixed costs 40,000
Assuming that Label increased sales of Product A by 20 percent, what should the profit
from Product A be? $32,000
