Hho9e Ch19 Tif Testgen

Accounting, 9e (Horngren)
Chapter 19 Cost-Volume-Profit Analysis

Learning Objective 19-1
1) Peterson Company has both fixed and variable costs. f the vol!me do!bles" the total fixed costs #ill do!ble.
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LO% 19-1
(OC *ef% (19-1+
$$C',% $nalytic '-ills
$CP$ ,!siness% Critical .hin-ing
$CP$ &!nctional% /eas!rement
0) .otal variable costs change in response to changes in the vol!me of prod!ction.
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LO% 19-1
(OC *ef% (19-1+
$$C',% Content23no#ledge
+) .he mixed cost per !nit is constant thro!gho!t the relevant range of activity.
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4) &ixed costs per !nit decrease as prod!ction levels decrease.
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(OC *ef% (19-1+
5) Peterson Company has both fixed and variable costs. f the vol!me do!bles" the total variable costs #ill do!ble.
$ns#er% .*1(
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LO% 19-1
(OC *ef% (19-1+
1
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
6) .he variable cost per !nit is ass!med to be constant #ithin a partic!lar relevant range of activity.
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7) 8ariable costs change in direct proportion to a change in vol!me.
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(OC *ef% (19-1+
9) Peterson Company has both fixed and variable costs. f the vol!me do!bles" the total of all costs combined #ill
do!ble.
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LO% 19-1
(OC *ef% (19-1+
9) :ithin the relevant range for prod!ction costs" the total fixed costs and the variable cost per !nit remain the same.
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(OC *ef% (19-1+
1;) .otal fixed costs can change from one relevant range to another.
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LO% 19-1
(OC *ef% (19-1+
2
11) :hich of the follo#ing is <O. a fixed cost=
$) Property taxes
,) 'alary of plant manager
C) )irect materials cost
)) 'traight-line depreciation
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)iff% 1
LO% 19-1
(OC *ef% (19-1+
10) $ 15> increase in prod!ction vol!me #ill res!lt in a%
$) 15> increase in the variable cost per !nit.
,) 15> increase in total mixed costs.
C) 15> increase in total man!fact!ring costs.
)) 15> increase in total variable costs.
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(OC *ef% (19-1+
1+) :hich of the follo#ing statements is CO**(C. #ith respect to variable cost per !nit" #ithin the relevant
range=
$) t #ill increase as prod!ction decreases.
,) t #ill decrease as prod!ction decreases.
C) t #ill remain the same as prod!ction levels change.
)) t #ill decrease as prod!ction increases.
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14) :hich of the follo#ing statements is CO**(C. #ith respect to total variable costs" #ithin the relevant range=
$) .hey #ill decrease as prod!ction increases.
,) .hey #ill remain the same as prod!ction levels change.
C) .hey #ill decrease as prod!ction decreases.
)) .hey #ill increase as prod!ction decreases.
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LO% 19-1
(OC *ef% (19-1+
3
15) :hich of the follo#ing statements is CO**(C. #ith respect to total fixed costs" #ithin the relevant range=
$) .hey #ill remain the same as prod!ction levels change.
,) .hey #ill increase as prod!ction decreases.
C) .hey #ill decrease as prod!ction decreases.
)) .hey #ill decrease as prod!ction increases.
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LO% 19-1
(OC *ef% (19-1+
16) :hich of the follo#ing statements is CO**(C. #ith respect to fixed costs per !nit=
$) .hey #ill increase as prod!ction decreases.
,) .hey #ill decrease as prod!ction decreases.
C) .hey #ill remain the same as prod!ction levels change.
)) .hey #ill increase as prod!ction increases.
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LO% 19-1
(OC *ef% (19-1+
17) .he long distance company that yo! !se charges ?5.;; per month and ?;.1; per min!te per call. f yo!r c!rrent
bill is ?05.;;" ho# many min!tes did yo! !se=
$) 05; min!tes
,) 1;; min!tes
C) 0;; min!tes
)) 15; min!tes
$ns#er% C
(xplanation% C) Calc!lations%
?05 - ?5 @ ?0;
?0;2?;.1; @ 0;;
)iff% 1
LO% 19-1
(OC *ef% (19-1+
4
19) Aenny #as revie#ing the #ater bill for her doggy day spa and determined that her highest bill" ?1"7;;" occ!rred
in A!ly #hen she #ashed 9;; dogs and her lo#est bill" ?9;;" occ!rred in <ovember #hen she #ashed 4;; dogs.
:hat #as the variable cost per dog associated #ith AennyBs #ater bill=
$) ?;.67
,) ?1.;;
C) ?;.5;
)) ?0.;;
$ns#er% )
(xplanation% )) Calc!lations%
?1"7;; - ?9;; @ ?9;;
9;; - 4;; @ 4;;
?9;;24;; @ ?0
)iff% 1
LO% 19-1
(OC *ef% (19-1+
19) Aenny #as revie#ing the #ater bill for her doggy day spa and determined that her highest bill" ?1"7;;" occ!rred
in A!ly #hen she #ashed 9;; dogs and her lo#est bill" ?9;;" occ!rred in <ovember #hen she #ashed 4;; dogs.
:hat #as the fixed cost associated #ith AennyBs #ater bill=
$) ?15;
,) ?+;;
C) ?1;;
)) ?0;;
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?1"7;; - ?9;; @ ?9;;
9;; - 4;; @ 4;;
?9;;24;; @ ?0
?1"7;; - C9;; D ?0) @ ?1;;
)iff% 0
LO% 19-1
(OC *ef% (19-1+
5
0;) )a-ota Company provides the follo#ing information abo!t its single prod!ct%
.argeted operating income ?4;";;;
'elling price per !nit ?+.5;
8ariable cost per !nit ?1.;5
.otal fixed costs ?9;";;;
:hat is the contrib!tion margin ratio=
$) ;.7;
,) ;.44
C) ;.56
)) ;.+;
$ns#er% $
(xplanation% $) Calc!lations% C+.5;-1.;5)2+.5; @ ;.7;
)iff% 0
LO% 19-1
(OC *ef% (19-1+
01) :hich of the follo#ing is the term for a cost that does <O. change in total despite #ide changes in vol!me=
$) &ixed cost
,) 8ariable cost
C) /ixed cost
)) '!n- cost
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LO% 19-1
(OC *ef% $cco!nting 8ocab!lary
00) :hich of the follo#ing is the term for a cost that is part variable and part fixed=
$) &ixed cost
,) 8ariable cost
C) /ixed cost
)) '!n- cost
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LO% 19-1
6
0+) :hich of the follo#ing is the term for a cost that changes in total in direct proportion to a change in vol!me=
$) &ixed cost
,) 8ariable cost
C) /ixed cost
)) '!n- cost
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LO% 19-1
04) A, Company has fixed costs of ?+;;";;;. .otal costs" both fixed and variable" are ?+79";;; #hen 4;";;; !nits
are prod!ced. Eo# m!ch is the variable cost per !nit= CPlease ro!nd to the nearest cent.)
$) ?9.45
,) ?0.79
C) ?7.5;
)) ?1.95
$ns#er% )
?+79";;; - ?+;;";;; @ ?79";;;
?79";;;24;";;; @ ?1.95
)iff% 1
LO% 19-1
(OC *ef% (19-1+
05) A, Company has fixed costs of ?+;;";;;. .otal costs" both fixed and variable" are ?+79";;; #hen 4;";;; !nits
are prod!ced. f the vol!me increases to 5;";;; !nits" #hat #ill the total costs be=
$) ?+75";;;
,) ?470"5;;
C) ?+97"5;;
)) ?++;";;;
$ns#er% C
?+79";;; - ?+;;";;; @ ?79";;;
?79";;;24;";;; @ ?1.95
5;";;; D ?1.95 @ ?97"5;;
?97"5;; F ?+;;";;; @ ?+97"5;;
)iff% 0
LO% 19-1
(OC *ef% (19-1+
7
06) $xelrod Company has fixed costs of ?05;";;;. Eighest prod!ction vol!me this year #as in Aan!ary #hen there
#ere 1;;";;; !nits prod!ced and total costs of ?55;";;;. Eo# m!ch is the variable cost per !nit= CPlease ro!nd all
amo!nts to the nearest cent.)
$) ?+.;;
,) ?5.5;
C) ?0.5;
)) ?+.5;
$ns#er% $
(xplanation% $) Calc!lations%
?55;";;; - ?05;";;; @ ?+;;";;;
?+;;";;;21;;";;; @ ?+.;;
)iff% 0
LO% 19-1
(OC *ef% (19-1+
07) $xelrod Company has fixed costs of ?05;";;;. Eighest prod!ction vol!me this year #as in Aan!ary #hen there
#ere 1;;";;; !nits prod!ced and total costs of ?55;";;;. n A!ne" the company prod!ced only 6;";;; !nits. Eo#
m!ch #as the total cost in A!ne=
$) ?+79";;;
,) ?4+;";;;
C) ?++;";;;
)) ?414"5;;
$ns#er% ,
(xplanation% ,) Calc!lations%
?55;";;; - ?05;";;; @ ?+;;";;;
?+;;";;;21;;";;; @ ?+.;;
6;";;; D ?+.;; @ ?19;";;;
?19;";;; F ?05;";;; @ ?4+;";;;
)iff% +
LO% 19-1
(OC *ef% (19-1+
8
09) $rlington CompanyBs highest point of total cost #as ?61"975 in A!ne. .heir point of lo#est cost #as ?50"05; in
)ecember. .he company ma-es a single prod!ct. Prod!ction vol!me in A!ne #as 7";;; !nitsG prod!ction vol!me
in )ecember #as 10"5;; !nits. Eo# m!ch is the fixed cost per month=
$) ?9"605
,) ?40"5;;
C) ?4;";;;
)) ?01"975
$ns#er% C
?61"975 - ?50"05; @ ?9"605
?9"6052C10"5;; - 7.;;;) @ ?1.75
10"5;; D ?1.75 @ ?01"975
?61"975 - ?01"975 @ ?4;";;;
)iff% 0
LO% 19-1
(OC *ef% (19-1+
09) $rlington CompanyBs highest point of total cost #as ?61"975 in A!ne. .heir point of lo#est cost #as ?50"05; in
in )ecember #as 10"5;; !nits. Eo# m!ch is the variable cost per !nit=
$) ?4.95
,) ?1.;5
C) ?1.75
)) ?7.46
$ns#er% C
?61"975 - ?50"05; @ ?9"605
?9"6052C10"5;; - 7.;;;) @ ?1.75
)iff% 0
LO% 19-1
(OC *ef% (19-1+
9
+;) $rlington CompanyBs highest point of total cost #as ?61"975 in A!ne. .heir point of lo#est cost #as ?50"05; in
in )ecember #as 10"5;; !nits. f the prod!ction vol!me is 9";;; !nits" #hat #ill the total costs be=
$) ?55";;;
,) ?55"75;
C) ?45"6;;
)) ?57";60
$ns#er% ,
?61"975 - ?50"05; @ ?9"605
?9"6052C10"5;; - 7.;;;) @ ?1.75
10"5;; D ?1.75 @ ?01"975
?61"975 - ?01"975 @ ?4;";;;
9";;; D ?1.75 @ ?15"75;
?4;";;; F ?15"75; @ ?55"75;
)iff% +
LO% 19-1
(OC *ef% (19-1+
+1) Orleans Company has a normal range of prod!ction vol!mes bet#een 1;;";;; !nits and 19;";;; !nits per
month. .hat is considered the relevant range for prod!ction cost analysis. f the company expands significantly
beyond 19;";;; !nits per month" #hich of the follo#ing #o!ld be the most li-ely expectation=
$) .he fixed costs #ill remain the same" b!t the variable cost per !nit may change.
,) .he fixed costs may change" b!t the variable cost per !nit #ill remain the same.
C) .he fixed costs and the variable cost per !nit #ill not change.
)) ,oth the fixed costs and the variable cost per !nit may change.
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LO% 19-1
(OC *ef% (19-1+
10
+0) .he phone bill for a CP$ firm is a mixed cost. Please refer to the 4-month data belo#" apply the high-lo#
method" and ans#er the H!estion.
Minutes Total Bill
Aan +;; ?0"65;
&eb 15; ?0"575
/ar 1;; ?0"55;
$pr 05; ?0"605
Eo# m!ch is the fixed portion of the total cost=
$) ?0";5;
,) ?1"96;
C) ?0"5;;
)) ?05;
$ns#er% C
?0"65; - ?0"55; @ ?1;;
?1;;2 C+;; - 1;;) @ ?;.5;
+;; D ?;.5; @ ?15;
?0"65; - ?15; @ ?0"5;;
)iff% 0
LO% 19-1
(OC *ef% (19-1+
++) .he phone bill for a CP$ firm is a mixed cost. Please refer to the 4-month data belo#" apply the high-lo#
Minutes Total Bill
Aan +;; ?0"65;
&eb 15; ?0"575
/ar 1;; ?0"55;
$pr 05; ?0"605
Eo# m!ch is the variable cost per min!te=
$) ?;.5;
,) ?1.75
C) ?0.5;
)) ?;.05
$ns#er% $
?0"65; - ?0"55; @ ?1;;
?1;;2 C+;; - 1;;) @ ?;.5;
)iff% 0
LO% 19-1
(OC *ef% (19-1+
11
+4) .he phone bill for a CP$ firm is a mixed cost. Please refer to the 4-month data belo#" apply the high-lo#
Minutes Total Bill
Aan +;; ?0"65;
&eb 15; ?0"575
/ar 1;; ?0"55;
$pr 05; ?0"605
f the company !ses 09; min!tes in /ay" ho# m!ch #ill the total bill be=
$) ?0"605
,) ?0"75;
C) ?0"64;
)) ?0"54;
$ns#er% C
?0"65; - ?0"55; @ ?1;;
?1;;2 C+;; - 1;;) @ ?;.5;
+;; D ?;.5; @ ?15;
?0"65; - ?15; @ ?0"5;;
09; D ?;.5; @ ?14;
?0"5;; F ?14; @ ?0"64;
)iff% 0
LO% 19-1
(OC *ef% (19-1+
+5) Porterho!se Company has both fixed and variable prod!ction costs. f vol!me goes !p by 0;>" ho# #o!ld that
affect the total variable costs= C$ss!me all vol!mes are #ithin the relevant range.)
$) :o!ld go !p 0;>
,) :o!ld remain the same
C) :o!ld go !p by some amo!nt less than 0;>
)) :o!ld go do#n
$ns#er% $
)iff% 0
LO% 19-1
(OC *ef% (19-1+
12
affect the total fixed costs= C$ss!me all vol!mes are #ithin the relevant range.)
$) :o!ld go !p 0;>
)) :o!ld go do#n
$ns#er% ,
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LO% 19-1
(OC *ef% (19-1+
affect the total of all costs= C$ss!me all vol!mes are #ithin the relevant range.)
$) :o!ld go !p 0;>
)) :o!ld go do#n
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)iff% 0
LO% 19-1
(OC *ef% (19-1+
+9) $merica &irst Company provided the follo#ing man!fact!ring costs for the month of A!ne.
)irect materials cost ?4;";;;
AanitorBs salary ?0"5;;
Property taxes ?9";;;
)irect labor cost ?69";;;
Pac-aging costs ?9"4;;
(H!ipment depreciation Cstraight-line) ?10";;;
&actory ins!rance ?9"5;;
&actory managerBs salary ?6"4;;
Eo# m!ch of the above #o!ld normally be considered fixed costs=
$) ?47"9;;
,) ?06"4;;
C) ?+5"9;;
)) ?+9"4;;
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(xplanation% )) Calc!lations% ?0"5;; F ?9";;; F ?10";;; F ?9"5;; F ?6"4;; @ ?+9"4;;
)iff% 0
LO% 19-1
(OC *ef% (19-1+
13
+9) $merica &irst Company provided the follo#ing man!fact!ring costs for the month of A!ne.
)irect materials cost ?4;";;;
AanitorBs salary ?0"5;;
Property taxes ?9";;;
)irect labor cost ?69";;;
Pac-aging costs ?9"4;;
(H!ipment depreciation Cstraight-line) ?10";;;
&actory ins!rance ?9"5;;
&actory managerBs salary ?6"4;;

Eo# m!ch of the above #o!ld normally be considered variable costs=
$) ?1;9";;;
,) ?105"4;;
C) ?117"4;;
)) ?+9"4;;
$ns#er% C
(xplanation% C) Calc!lations% ?4;";;; F ?69";;; F ?9"4;; @ ?117"4;;
)iff% 0
LO% 19-1
(OC *ef% (19-1+
4;) $ce Card Company has variable costs of ?;.4; per !nit of prod!ct. .he remainder of its prod!ction costs are
fixed. n /ay" the vol!me #as 10";;; !nits and the total prod!ction costs #ere ?6"9;;. Eo# m!ch are the fixed
costs=
$) ?0"1;;
,) ?0"0;;
C) ?1"95;
)) ?0";05
$ns#er% $
(xplanation% $) Calc!lations% ?6"9;; - C10";;; D ?;.4;) @ ?0"1;;
)iff% 1
LO% 19-1
(OC *ef% (19-1+
1) f a !nit sells for ?11.4; and has a variable cost of ?+.9;" its contrib!tion margin per !nit is ?7.6;.
$ns#er% .*1(
(xplanation% Calc!lation% ?11.4; - ?+.9; @ ?7.6;
)iff% 1
LO% 19-0
(OC *ef% '19-4
14
0) Contrib!tion margin is defined as the sales reven!e min!s the fixed costs.
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)iff% 1
LO% 19-0
(OC *ef% '19-4
+) &ixed costs divided by the contrib!tion margin per !nit eH!als the brea-even point in !nit sales.
$ns#er% .*1(
)iff% 1
LO% 19-0
(OC *ef% '19-4
4) C8P analysis ass!mes that the O<LI factor that affects costs is change in vol!me.
$ns#er% .*1(
)iff% 1
LO% 19-0
(OC *ef% '19-4
5) ,oth the income statement approach and the contrib!tion margin approach #ill yield the same ans#er for
calc!lating brea-even points.
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)iff% 1
LO% 19-0
(OC *ef% '19-4
6) .he brea-even point represents the sales vol!me at #hich the companyBs net income is Jero.
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)iff% 1
LO% 19-0
(OC *ef% '19-5
7) f all other factors are constant" an increase in fixed costs #ill increase the brea-even point.
$ns#er% .*1(
)iff% 1
LO% 19-0
(OC *ef% '19-4
15
9) &ixed costs divided by the contrib!tion margin ratio eH!als the brea-even point in sales dollars.
$ns#er% .*1(
)iff% 1
LO% 19-0
(OC *ef% '19-5
9) 'ome companies !se contrib!tion margin rather than sales reven!es as the basis of incentives for motivating sales
persons beca!se it #ill lead them to sell more of the higher margin goods.
$ns#er% .*1(
)iff% 1
LO% 19-0
(OC *ef% '19-5
$$C',% *eflective .hin-ing
$CP$ &!nctional% /eas!rement" *eporting
1;) ,rea-even is the point #here the sales reven!es are exactly eH!al to the fixed costs.
$ns#er% &$L'(
)iff% 1
LO% 19-0
(OC *ef% '19-5
11) ,rea-even is the point #here the sales reven!es are exactly eH!al to the total variable costs pl!s the total fixed
costs.
$ns#er% .*1(
)iff% 1
LO% 19-0
(OC *ef% '19-5
10) $rt!ro CompanyBs model $ generator sells for ?456 and model , sells for ?+9;. .he variable cost of model $ is
?4;4 and of model , is ?+0;. f $rt!ro CompanyBs sales incentives re#ard sales of the goods #ith highest
contrib!tion margin" the sales force #ill be motivated to p!sh sales of model $ more aggressively than model ,.
$ns#er% &$L'(
(xplanation% Calc!lations%
?456 - ?4;4 @ ?50
?+9; - ?+0; @ ?7;
)iff% 1
LO% 19-0
(OC *ef% '19-5
16
1+) $rt!ro CompanyBs model $ generator sells for ?456" and model , sells for ?+9;. .he variable cost of model $ is
?4;4 and of model , is ?+0;. f $rt!ro sells more of model , than model $" it #ill generate lo#er reven!es" b!t
higher net income.
$ns#er% .*1(
?456 - ?4;4 @ ?50
?+9; - ?+0; @ ?7;
)iff% 0
LO% 19-0
(OC *ef% '19-5
14) Pa!la sells hand--nitted scarves at the flea mar-et. (ach scarf sells for ?05. Pa!la pays ?+; to rent a vending
space for one day. Eer variable costs are ?15 per scarf. Eo# many scarves does she need to sell to brea- even=
$) 4
,) +
C) 5
)) 0
$ns#er% ,
(xplanation% ,) Calc!lations% ?+;2C?05 - ?15) @ +
)iff% 1
LO% 19-0
(OC *ef% '19-4
15) Pa!la sells hand--nitted scarves at the flea mar-et. (ach scarf sells for ?05. Pa!la pays ?+; to rent a vending
space for one day. Eer variable costs are ?15 per scarf. :hat total reven!e amo!nt does she need to earn to brea-
even=
$) ?95
,) ?75
C) ?5;
)) ?1;;
$ns#er% ,
?+;2C?05 - ?15) @ +
+ D ?05 @ ?75
)iff% 1
LO% 19-0
(OC *ef% '19-4
17
16) )alian Company provides the follo#ing information%
Price per !nit% ?0;
8ariable cost per !nit% ?9
&ixed costs per month% ?15";;;
Eo# m!ch is the contrib!tion margin per !nit=
$) ?10.;;
,) ?4.;;
C) ?4.5;
)) ?16.;;
$ns#er% $
(xplanation% $) Calc!lations% ?0; - ?9 @ ?10
)iff% 1
LO% 19-0
(OC *ef% '19-5
Price per !nit% ?0;
Eo# m!ch is the contrib!tion margin ratio=
$) 10>
,) 6>
C) 4;>
)) 6;>
$ns#er% )
?0; - ?9 @ ?10
?102?0; @ 6;>
)iff% 0
LO% 19-0
(OC *ef% '19-5
18
Price per !nit% ?0;
:hat is the brea-even point in terms of !nits sold=
$) 1"15;
,) 1"0;;
C) 1"975
)) 1"05;
$ns#er% )
?0; - ?9 @ ?10
?15";;;2?10 @ 1"05;
)iff% 0
LO% 19-0
(OC *ef% '19-5
Price per !nit% ?0;
:hat is the brea-even point in terms of sales reven!es=
$) ?19"5;;
,) ?05";;;
C) ?+7"5;;
)) ?00"75;
$ns#er% ,
?0; - ?9 @ ?10
?15";;;2?10 @ 1"05;
1"05; D ?0; @ ?05";;;
)iff% 0
LO% 19-0
(OC *ef% '19-5
19
0;) *eevis Company has fixed costs of ?7"5;;. .heir contrib!tion margin ratio is 0;>. :hat is the brea--even
point in sales dollars=
$) ?00";;;
,) ?+7"5;;
C) ?1"5;;
)) ?+0"75;
$ns#er% ,
(xplanation% ,) Calc!lations% ?7"5;;20;> @ ?+7"5;;
)iff% 0
LO% 19-0
(OC *ef% '19-5
01) *eevis Company sells hand-se#n shirts for ?05 per !nit" and has fixed costs of ?7"5;;. .heir contrib!tion
margin ratio is 0;>. Eo# many !nits do they have to sell to brea- even=
$) 95;
,) 1"75;
C) 1"105
)) 1"5;;
$ns#er% )
?7"5;;20;> @ ?+7"5;;
?+7"5;;2?05 @ 1"5;;
)iff% +
LO% 19-0
(OC *ef% '19-5
00) *eevis Company sells hand-se#n shirts for ?05 per !nit" and has fixed costs of ?7"5;;. .heir contrib!tion
margin ratio is 0;>. Eo# m!ch is the variable cost per !nit=
$) ?0;
,) ?9
C) ?5
)) ?15
$ns#er% $
?05 D 0;> @ ?5
?05 - ?5 @ ?0;
)iff% +
LO% 19-0
(OC *ef% '19-5
20
0+) Olymp!s Company sells 1"4;; !nits per month at a price of ?09.;; per !nit. .he variable cost is ?00.5; per
!nit. Eo# m!ch is the total contrib!tion margin= CPlease ro!nd to nearest #hole dollar.)
$) ?9"5;;
,) ?7"7;;
C) ?+9"0;;
)) ?6"75;
$ns#er% ,
(xplanation% ,) Calc!lations% 1"4;; D C?09.;; - ?00.5;) @ ?7"7;;
)iff% 1
LO% 19-0
(OC *ef% '19-5
04) Olymp!s Company sells 1"4;; !nits per month at a price of ?09.;; per !nit. .he variable cost is ?00.5; per
!nit. &ixed costs are ?6"9;; per month. Eo# m!ch is the operating income=
$) ?9"5;;
,) ?+0"+;;
C) ?9;;
)) ?75;
$ns#er% C
1"4;; D C?09.;; - ?00.5;) @ ?7"7;;
?7"7;; - ?6"9;; @ ?9;;
)iff% 1
LO% 19-0
(OC *ef% '19-5
05) $ companyBs contrib!tion margin ratio is 9>. &ixed costs are ?0"4;; per month. Eo# m!ch sales reven!e is
needed to brea- even=
$) ?09";;;
,) ?+6";;;
C) ?+0";;;
)) ?+;";;;
$ns#er% )
(xplanation% )) Calc!lations% ?0"4;;29> @ ?+;";;;
)iff% 0
LO% 19-0
(OC *ef% '19-5
21
06) $ companyBs prod!ct sells for ?04; per !nit. 8ariable cost is ?0;9 per !nit. &ixed costs r!n at ?15;"4;; per
month. Eo# many !nits need to be sold to brea- even=
$) 4"7;;
,) 4"05;
C) +"9;;
)) 4"9;;
$ns#er% $
?04; - ?0;9 @ ?+0
?15;"4;;2?+0 @ 4"7;;
)iff% 0
LO% 19-0
(OC *ef% '19-5
07) $ companyBs prod!ct sells for ?04; per !nit. 8ariable cost is ?01; per !nit. &ixed costs r!n at ?141";;; per
month. Eo# many dollars of sale reven!e are reH!ired to brea- even=
$) ?1"09;";;;
,) ?1"109";;;
C) ?956";;;
)) ?1";5;";;;
$ns#er% ,
?04; - ?01; @ ?+;
?141";;;2?+; @ 4"7;;
4"7;; D ?04; @ ?1"109";;;
)iff% 0
LO% 19-0
(OC *ef% '19-5
09) $ companyBs prod!ct sells for ?04; per !nit. .he contrib!tion margin ratio is 10.5>. &ixed costs r!n at
?141";;; per month. Eo# many dollars of sale reven!e are reH!ired to brea- even=
$) ?1"109";;;
,) ?1"109";;;
C) ?956";;;
)) ?1";5;";;;
$ns#er% ,
(xplanation% ,) Calc!lations% ?141";;;210.5> @ ?1"109";;;
)iff% 0
LO% 19-0
(OC *ef% '19-5
22
09) $ companyBs contrib!tion margin is ?9 per !nit. &ixed costs are ?14"95; per month. Eo# many !nits m!st be
sold to brea- even=
$) 1"7;;
,) 1"405
C) 95;
)) 1"65;
$ns#er% )
(xplanation% )) Calc!lations% ?14"95;2?9 @ 1"65;
)iff% 1
LO% 19-0
(OC *ef% '19-5
+;) Olymp!s Company sells 1"4;; !nits per month at a price of ?09.;; per !nit. .he variable cost is ?00.5; per
!nit. &ixed costs are ?6"9;; per month. Please prepare a contrib!tion margin income statement in the format
provided here.
$ns#er%
*even!es ?+9"0;;
8ariable expenses ?+1"5;;
Contrib!tion margin ?7"7;;
&ixed expenses ?6"9;;
<et operating income ?9;;
(xplanation% .his H!estion is not available in /y$cco!ntingLab.
)iff% 1
LO% 19-0
(OC *ef% '19-5
23
Learning Objective 19-+
1) .he brea-even point on a C8P graph is the point #here the sales reven!e line intersects the total cost line.

$ns#er% .*1(
)iff% 1
LO% 19-+
(OC *ef% (19-19
0) C8P graphs can help managers H!ic-ly estimate the profit or loss earned at different levels of sales vol!me.
$ns#er% .*1(
)iff% 1
LO% 19-+
(OC *ef% (19-19
24
+) On a C8P graph" in the area #here the reven!e line appears above the total cost line" the vertical distance
separating the t#o lines represents #hat=
$) Contrib!tion margin
,) Operating loss
C) Operating income
)) 8ariable costs
$ns#er% C
)iff% 1
LO% 19-+
(OC *ef% (19-19
25
4) On a C8P graph" in the area #here the reven!e line appears belo# the total cost line" the vertical distance
separating the t#o lines represents #hat=
$) Contrib!tion margin
,) Operating loss
C) Operating income
)) 8ariable costs
$ns#er% ,
)iff% 1
LO% 19-+
(OC *ef% (19-19
26
5) n a C8P graph" #hat does the line #hich begins at the lo#er left corner represent=
$) .otal sales reven!e
,) .otal variable cost
C) .otal fixed cost
)) ,oth the total variable cost and the total sales reven!e
$ns#er% $
)iff% 1
LO% 19-+
(OC *ef% (19-19
27
6) On a C8P graph" the intersection of the sales line and the total cost line is -no#n as the%
$) total cost point.
,) brea-even point.
C) !nit contrib!tion margin.
)) margin of safety point.
$ns#er% ,
)iff% 1
LO% 19-+
(OC *ef% (19-19
28
7) On a C8P graph" there is a point #here the t#o diagonal lines intersect. :hich of the follo#ing statements
acc!rately describes that point=
$) t is the point #here total reven!es eH!al total variable costs.
,) t is the point #here fixed costs eH!al variable costs.
C) t is the point #here total reven!es eH!al fixed costs.
)) t is the point #here total costs eH!al total reven!es.
$ns#er% )
)iff% 1
LO% 19-+
(OC *ef% (19-19
9) A!rassic /an!fact!rers prod!ces flooring material. &ixed costs are ?5";;; per month. 'ales price for one !nit of
prod!ct is ?5;" and the variable cost per !nit is ?+;. f A!rassic managers create a C8P graph from vol!me levels of
Jero to 4;; !nits" #here #ill the reven!e and total cost lines intersect=
$) 05; !nits
,) 19; !nits
C) 04; !nits
)) 075 !nits
$ns#er% $
(xplanation% $) Calc!lations% ?5";;;2C?5; - ?+;) @ 05;
)iff% 0
LO% 19-+
(OC *ef% (19-19
29
9) A!rassic /an!fact!rers prod!ces flooring material. &ixed costs are ?5";;; per month. 'ales price for one !nit of
prod!ct is ?5;" and the variable cost per !nit is ?+;. f A!rassic #ishes to earn an operating income of ?0";;;" ho#
many !nits need to be sold=
$) 07;
,) +;;
C) +0;
)) +5;
$ns#er% )
?5";;; F ?0";;; @ ?7";;;
?7";;;2?0; @ +5;
)iff% 0
LO% 19-+
(OC *ef% (19-19
1;) A!rassic /an!fact!rers prod!ces flooring material. &ixed costs are ?5";;; per month. 'ales price for one !nit
of prod!ct is ?5;" and the variable cost per !nit is ?+;. f A!rassic #ishes to earn an operating income of ?5";;;"
ho# many !nits need to be sold=
$) 5;;
,) +;;
C) 45;
)) +5;
$ns#er% $
?5";;; F ?5";;; @ ?1;";;;
?1;";;;2?0; @ 5;;
)iff% 0
LO% 19-+
(OC *ef% (19-19
11) Chambers Company sells glass vases at a #holesale price of ?0.5; per !nit. 8ariable cost is ?1.75 per !nit.
ChambersB fixed costs are ?6"5;; per month. f Chambers #ishes to ma-e operating income of ?0"5;;" ho# many
!nits m!st be sold=
$) 11"5;;
,) 11"75;
C) 10";;;
)) 10"5;;
$ns#er% C
?6"5;; F ?0"5;; @ ?9";;;
?9";;;2C?0.5; - ?1.75)

@ 10";;;
)iff% 0
LO% 19-+
(OC *ef% (19-19
30
10) Chambers Company sells glass vases at a #holesale price of ?0.5; per !nit. 8ariable cost is ?1.75 per !nit.
ChambersB fixed costs are ?6"5;; per month. Chambers is c!rrently selling 15";;; !nits per month. f Chambers
#ants to increase operating income by 0;>" ho# many more !nits" over and above the c!rrent vol!me" m!st they
sell= CPlease ro!nd to nearest #hole n!mber.)
$) 1"166
,) 1"+++
C) 1"067
)) 5"666
$ns#er% C
C?0.5; - ?1.75) D 15";;; @ ?11"05;
?11"05; - ?6"5;; @ ?4"75;
?4"75; D 1.0 F ?5"7;;
C?5"7;; F ?6"5;;)2 ?;.75 @ 16"067
16"067 - 15";;; @ 1"067
)iff% +
LO% 19-+
(OC *ef% (19-19
1+) *!nnymeade Prod!cts ma-es a racing bicycle tire. Cost and vol!me data are belo#.
Price per !nit ?19.;;
8ariable cost per !nit ?14.5;
&ixed cost per month ?09";;;
C!rrent sales vol!me C!nits) 1;";;;
Eo# m!ch is c!rrent monthly operating income=
$) ?7";;;
,) ?6"95;
C) ?5"9;;
)) ?7"05;
$ns#er% $
(xplanation% $) Calc!lations% C?19.;; - ?14.5;) D 1;";;; @ ?+5";;;
?+5";;; - ?09";;; @ ?7";;;
)iff% 1
LO% 19-+
(OC *ef% (19-19
31
14) *!nnymeade Prod!cts ma-es a racing bicycle tire. Cost and vol!me data are belo#.
8ariable cost per !nit ?14.5;
C!rrent sales vol!me C!nits) 1;";;;
f management #ants to earn ?9";;; of operating income" ho# many !nits m!st be sold= CPlease ro!nd to nearest
#hole n!mber.)
$) 11"667
,) 1;"571
C) 9"667
)) 1;"+++
$ns#er% ,
?19.;; - ?14.5; @ ?+.5;
C?9";;; F ?09";;;)2?+.5; @ 1;"571
)iff% 0
LO% 19-+
(OC *ef% (19-19
15) ,ell Prod!cts man!fact!res pac-s of pesticides #hich are sold to farmers. Cost" vol!me and price data are as
follo#s%
8ariable cost per !nit ?0;.;;
C!rrent sales vol!me C!nits) +";;;
Eo# m!ch is ,ellBs c!rrent monthly operating income=
$) ?1";;;
,) ?5";;;
C) ?6"75;
)) ?7";;;
$ns#er% )
(xplanation% )) Calc!lations% ?05.;; - ?0;.;; @ ?5.;;
+";;; D ?5 F ?15";;;
?15";;; - ?9";;; @ ?7";;;
)iff% 0
LO% 19-+
(OC *ef% (19-19
32
follo#s%
f ,ell #ishes to earn ?1;";;; of operating income" #hat vol!me of sales is needed=
$) +"15;
,) +"0;;
C) +"5;;
)) +"6;;
$ns#er% )
(xplanation% )) Calc!lations% ?05.;; - ?0;.;; @ ?5.;;
?1;";;; F ?9";;; @ ?19";;;
?19";;;2?5.;; @ +"6;;
)iff% 0
LO% 19-+
(OC *ef% (19-19
follo#s%
f ,ell #ishes to increase their c!rrent operating income by 1;>" #hat vol!me of sales is needed=
$) +"14;
,) +"0;;
C) +"5;;
)) +"605
$ns#er% $
?7";;; D 11;> @ ?7"7;;
?05.;; - ?0;.;; @ ?5.;;
?7"7;; F ?9";;; @ ?15"7;;
?15"7;;2?5.;; @ +"14;
)iff% 0
LO% 19-+
(OC *ef% (19-19
33
follo#s%
f ,ell #ishes to do!ble their c!rrent operating income" #hat vol!me of sales is needed=
$) +"14;
,) 4"4;;
C) +"5;;
)) +"605
$ns#er% ,
?7";;; D 0 @ ?14";;;
?05.;; - ?0;.;; @ ?5.;;
?14";;; F ?9";;; @ ?00";;;
?00";;;2?5.;; @ 4"4;;
)iff% 0
LO% 19-+
(OC *ef% (19-19
19) A!an /artineJ played classical g!itar professionally !ntil his motorcycle accident left him disabled. $fter long
months of therapy" he hired an experienced l!thier Cma-er of stringed instr!ments) and opened a small shop that
ma-es and sells 'panish g!itars. .he g!itars sell for ?6;;" and the fixed monthly operating costs are as follo#s%
*ent and !tilities ?96;
:ages and benefits of l!thier ?1"5;;
Other ?9;;
A!an got conf!sed #hen his acco!ntant told him abo!t contrib!tion margin ratios" b!t he !nderstood clearly that for
every dollar of sales" ?;.7; #ent to cover his fixed costs" and that anything past that point #as p!re profit.
Eo# many g!itars does A!an have to sell each month to brea- even=
$) 6
,) 5
C) 10
)) 9
$ns#er% )
?6;; D 7;> @ ?40;
?96; F ?1"5;; F ?9;; @ ?+"+6;
?+"+6;2?40; @ 9
)iff% 0
LO% 19-+
(OC *ef% (19-19
34
0;) A!an /artineJ played classical g!itar professionally !ntil his motorcycle accident left him disabled. $fter long
Other ?9;;
Eo# many dollars of reven!e does A!an have to ma-e each month to brea- even=
$) ?+"95;
,) ?4"9;;
C) ?+"+6;
)) ?5"0;;
$ns#er% ,
?6;; D 7;> @ ?40;
?96; F ?1"5;; F ?9;; @ ?+"+6;
?+"+6;2?40; @ 9
9 D ?6;; @ ?4"9;;
)iff% 0
LO% 19-+
(OC *ef% (19-19
Other ?9;;
A!an #ishes to ma-e ?0"5;; of operating profit each month. f so" ho# many g!itars #ill A!an have to sell=
$) 10
,) 14
C) 19
)) 9
$ns#er% ,
?6;; D 7;> @ ?40;
?96; F ?1"5;; F ?9;; @ ?+"+6;
C?+"+6; F ?0"5;;)2?40; @ 14
)iff% +
LO% 19-+
(OC *ef% (19-19
35
Other ?9;;
A!an #ishes to ma-e ?0"5;; of operating profit each month. f so" ho# m!ch sales reven!e #ill A!an have to ma-e=
$) ?9"76;
,) ?9"14;
C) ?9"4;;
)) ?7"96;
$ns#er% C
?6;; D 7;> @ ?40;
?96; F ?1"5;; F ?9;; @ ?+"+6;
C?+"+6; F ?0"5;;)2?40; @ 1+.95
14 D ?6;; @ ?9"4;;
)iff% +
LO% 19-+
(OC *ef% (19-19
1) f variable costs go !p" and all other factors remain the same" the b!siness #ill have to sell more !nits to brea-
even.
$ns#er% .*1(
)iff% 1
LO% 19-4
(OC *ef% (19-19
36
0) f variable costs go !p" and all other factors remain the same" the margin of safety #ill shrin-.
$ns#er% &$L'(
)iff% 1
LO% 19-4
(OC *ef% '19-9
+) f variable costs go do#n" and all other factors remain the same" the company #ill have to sell more !nits to brea-
even.
$ns#er% &$L'(
)iff% 1
LO% 19-4
(OC *ef% (19-19
4) f variable costs go do#n" and all other factors remain the same" the margin of safety #ill become larger.
$ns#er% .*1(
)iff% 1
LO% 19-4
(OC *ef% '19-9
5) f fixed costs go !p and all other factors remain the same" the company #ill have to sell fe#er !nits to brea- even.
$ns#er% &$L'(
)iff% 1
LO% 19-4
(OC *ef% (19-19
6) f fixed costs go !p and all other factors remain the same" the margin of safety #ill become smaller.
$ns#er% .*1(
)iff% 1
LO% 19-4
(OC *ef% '19-9
7) f a company red!ces its fixed costs" the operating income #ill increase in the exact same amo!nt as the cost
red!ction.
$ns#er% .*1(
)iff% 0
LO% 19-4
(OC *ef% (19-19
37
Other ?9;;
A!an -no#s his brea-even point is no# 9 !nits per month" b!t he is considering raising his price to ?66;. f he does
so" ho# #ill that affect the contrib!tion margin ratio=
$) t #ill stay the same.
,) t #ill go !p 7;> to 75>.
C) t #ill go !p from 7;> to approximately 7+>.
)) t #ill go do#n from 7;> to approximately 67>.
$ns#er% C
?6;; D 7;> @ ?40;
?6;; - ?40; @ ?19;
?66; - ?19; @ ?49;
?49;2?66; @ 70.7>
)iff% +
LO% 19-4
(OC *ef% (19-19
38
Other ?9;;
A!an -no#s his brea-even point is no# 9 !nits per month" b!t he is considering raising his price to ?66;. f he does
so" ho# #ill that affect the brea-even point=
$) t #ill stay the same.
,) t #ill go !p from 9 to 1; !nits.
C) t #ill !p from 9 to 10 !nits.
)) t #ill go do#n from 9 to 7 !nits.
$ns#er% )
?6;; D 7;> @ ?40;
?6;; - ?40; @ ?19;
?66; - ?19; @ ?49;
?+"+6;2?49; @ 7
)iff% +
LO% 19-4
(OC *ef% (19-19
1;) &airfield Company management has b!dgeted the follo#ing amo!nts for its next fiscal year%
.otal fixed expenses ?9+0"5;;
'ale price per !nit ?4;
8ariable expenses per !nit ?05
:hat #ill happen to the brea-even point in !nits if &airfield can red!ce fixed expenses by ?00"5;;=
$) .he brea-even point #ill decrease by 1"5;; !nits.
,) .he brea-even point #ill decrease by 560 !nits.
C) .he brea-even point #ill decrease by 9;; !nits.
)) .he brea-even point #ill increase by 560 !nits.
$ns#er% $
?4; - ?05 @ ?15
?00"5;;2?15 @ 1"5;;
)iff% +
LO% 19-4
(OC *ef% (19-19
39
11) &airfield Company management has b!dgeted the follo#ing amo!nts for its next fiscal year%

.otal fixed expenses ?9+0"5;;
'ale price per !nit ?4;
8ariable expenses per !nit ?05
f &airfield Company spends an additional ?+;";;; on advertising" sales vol!me sho!ld increase by 0"5;; !nits.
:hat effect #ill this decision have on operating income=
$) Operating income #ill decrease ?60"5;;.
,) Operating income #ill increase ?7"5;;.
C) Operating income #ill increase ?7;";;;
)) Operating income #ill increase ?+7"5;;.
$ns#er% ,
0"5;; D ?15 @ ?+7"5;;
?+7"5;; - ?+;";;; @ ?7"5;;
)iff% +
LO% 19-4
(OC *ef% (19-19
10) :hich of the follo#ing statements is CO**(C. if the variable cost per !nit increases #hile the sale price per
!nit and total fixed costs remain constant=
$) .he brea-even point decreases.
,) .he contrib!tion margin increases.
C) .he brea-even point remains the same.
)) .he brea-even point increases.
$ns#er% )
)iff% 0
LO% 19-4
(OC *ef% (19-19
1+) :hich of the follo#ing statements is CO**(C. if total fixed costs decrease #hile the sales price per !nit and
variable costs per !nit remain constant=
$) .he contrib!tion margin increases.
,) .he brea-even point increases.
C) .he contrib!tion margin decreases.
)) .he brea-even point decreases.
$ns#er% )
)iff% 0
LO% 19-4
(OC *ef% (19-19
40
14) Lightfoot Company sells its prod!ct for ?55 and has variable costs of ?+; per !nit. .otal fixed costs are ?05";;;.
:hat #ill be the effect on the brea-even point if variable costs increase by 1;> d!e to an increase in the cost of
direct materials=
$) t #ill increase by approximately 1+6 !nits.
,) t #ill increase by approximately 040 !nits.
C) t #ill decrease by approximately 1+6 !nits.
)) t #ill decrease by approximately 040 !nits.
$ns#er% $
?05";;;2C?55 - ?+;) @ 1";;;
?05";;;2C?55 - ?++) @ 1"1+6
1"1+6 - 1";;; @ 1+6
)iff% +
LO% 19-4
(OC *ef% (19-19
15) :hich of the follo#ing #ill lo#er the brea-even point ass!ming no other changes=
$) $ decrease in the sales price per !nit
,) $n increase in total fixed costs
C) $n increase in the variable costs per !nit
)) $n increase in the sales price per !nit
$ns#er% )
)iff% 1
LO% 19-4
(OC *ef% (19-19
16) Ko!ld (nterprises sells comp!ter dis-s for ?1.5; per dis-. 1nit variable expenses total ?;.9;. .he brea-even
point in !nits is +";;; and b!dgeted sales in !nits are 4"+;;. :hat is the margin of safety in dollars=
$) ?4"5;;
,) ?1"95;
C) ?0"59;
)) ?79;
$ns#er% ,
(xplanation% ,) Calc!lations% C4"+;; - +";;;) D ?1.5; @ ?1"95;
)iff% 0
LO% 19-4
(OC *ef% '19-19
41
17) .he /cPherson Company is facing a ?6 increase in the variable cost of prod!cing one of its prod!cts for the
!pcoming year. ,eca!se of this sit!ation" the sales manager has made a proposal to increase the selling price of the
prod!ct #hile increasing the advertising b!dget at the same time. .he price increase #ill lo#er sales vol!me" b!t the
other changes may help the company maintain its profit margins. /cPherson has provided the follo#ing
information regarding the c!rrent year res!lts and the proposal made by the sales manager%
Current Year Proposal
1nit sales 07";;; 19";;;
'ales price per !nit ?49 ?59
8ariable cost per !nit ?+; ?+6
&ixed cost ?76";;; ?96";;;
*elative to the c!rrent year" the sales managerBs proposal #ill%
$) decrease operating income by ?9;";;;.
,) increase contrib!tion margin by ?9;";;;.
C) decrease the !nit brea-even point.
)) decrease operating income by ?11;";;;.
$ns#er% )
(xplanation% )) Calc!lation%
L07";;; D C?49-?+;)M - ?76";;;N @ ?41;";;;
L19";;; D C?59-?+6)M - ?96";;; @ ?+;;";;;
?+;;";;; - ?41;";;; @ C?11;";;;)
)iff% +
LO% 19-4
(OC *ef% (19-19
19) /oylan Company has provided the follo#ing contrib!tion margin income statement%
'ales ?777";;;
8ariable expenses ?5;4";;;
Contrib!tion margin ?07+";;;
&ixed expenses ?010";;;
Operating income ?61";;;
f the sales vol!me increases 1;>" #hich of the follo#ing statements is CO**(C.=
$) Operating income #ill increase ?6"1;;.
,) Operating income #ill increase ?07"+;;.
C) &ixed expenses #ill increase ?01"0;;.
)) Contrib!tion margin #ill increase ?77"7;;.
$ns#er% ,
C?777";;; D 1.1) - C?5;4";;; D 1.1) - 010";;; @ ?99"+;;
?99"+;; - 61";;; @ ?07"+;;
)iff% +
LO% 19-4
(OC *ef% (19-19
42
19) Aarvis &oods prod!ces a go!rmet condiment #hich sells for ?1;.;; per !nit. 8ariable costs are ?7.5; per !nit"
and fixed costs are ?19";;; per month. Aarvis is c!rrently selling 9";;; !nits per month. f Aarvis is forced to red!ce
the selling price do#n to ?9.;; per !nit" and vol!me remains constant" ho# #ill that affect its brea-even point=
$) ,rea-even #ill go !p by 4"9;; !nits.
,) ,rea-even #ill stay the same.
C) ,rea-even #ill go do#n by 4"9;; !nits.
)) ,rea-even #ill go !p by 1"5;; !nits.
$ns#er% $
?19";;; 2 C?1;.;; - ?7.5;) @ 7"0;;
?19";;; 2 C?9.;; - ?7.5;) @ 10";;;
10";;; - 7"0;; @ 4"9;;
)iff% 0
LO% 19-4
(OC *ef% (19-19
0;) Aarvis &oods prod!ces a go!rmet condiment #hich sells for ?1;.;; per !nit. 8ariable costs are ?7.5; per !nit"
the selling price do#n to ?9.;; per !nit" and vol!me remains constant" ho# #ill that affect its brea-even point in
dollars=
$) ,rea-even #ill go do#n by ?+6";;; of sales reven!es.
,) ,rea-even #ill go do#n by ?4"9;; of sales reven!es.
C) ,rea-even #ill go !p by ?+6.;;; of sales reven!es.
)) ,rea-even #ill go !p by ?9";;; of sales reven!es.
$ns#er% C
?19";;; 2 C?1;.;; - ?7.5;) @ 7"0;;
7"0;; D ?1;.;; @ ?70";;;
?19";;; 2 C?9.;; - ?7.5;) @ 10";;;
10";;; D ?9.;; @ ?1;9";;;
?1;9";;; - ?70";;; @ ?+6";;;
)iff% 0
LO% 19-4
(OC *ef% (19-19
43
the selling price do#n to ?9.;; per !nit" and vol!me remains constant" ho# #ill that affect its operating income=
$) Operating income #ill go !p by ?6";;;.
,) Operating income #ill become a loss of ?6";;;.
C) Operating income #ill become a loss of ?0";;;.
)) Operating income #ill go !p by ?0";;;.
$ns#er% ,
9";;; D C?1;.;; - ?7.5;) - ?19";;;@ ?0";;;
9.;;; D C?9.;; - ?7.5;) - ?19";;; @ C?6";;;)
)iff% 0
LO% 19-4
(OC *ef% (19-19
and fixed costs are ?19";;; per month. Aarvis is c!rrently selling 9";;; !nits per month. f Aarvis red!ces the selling
price do#n to ?9.;; per !nit" they believe vol!me #ill rise to 1+";;; !nits per month. Eo# #o!ld that affect its
operating income=
$) Operating income #ill go !p by ?6";;;.
,) Operating income #ill go do#n by ?1"6;;.
C) Operating income #ill go do#n by ?5;;.
)) Operating income #ill go !p by ?0";;;.
$ns#er% C
9";;; D C?1;.;; - ?7.5;) - ?19";;;@ ?0";;;
1+.;;; D C?9.;; - ?7.5;) - ?19";;; @ ?1"5;;
?0";;; - ?1"5;; @ ?5;;
)iff% 0
LO% 19-4
(OC *ef% (19-19
0+) Aarvis &oods prod!ces a go!rmet condiment #hich sells for ?1;.;; per !nit. 8ariable costs are ?7.5; per !nit"
and fixed costs are ?19";;; per month. Aarvis is c!rrently selling 9";;; !nits per month. Eo# m!ch is AarvisBs
margin of safety expressed in !nits=
$) 05; !nits
,) 9;; !nits
C) 16; !nits
)) 4; !nits
$ns#er% ,
?1;.;; - ?7.5; @ ?0.5;
?19";;;2?0.5; @ 7"0;;
9";;; - 7"0;; @ 9;;
)iff% 0
LO% 19-4
(OC *ef% '19-9
44
and fixed costs are ?19";;; per month. Aarvis is c!rrently selling 9";;; !nits per month. Eo# m!ch is AarvisBs
margin of safety expressed in sales reven!e=
$) ?9";;;
,) ?7"4;;
C) ?6";;;
)) ?0"6;;
$ns#er% $
?1;.;; - ?7.5; @ ?0.5;
?19";;;2?0.5; @ 7"0;;
7"0;; D ?1;.;; @ ?70";;;
9.;;; D ?1;.;; @ ?9;";;;
?9;";;; - ?70";;; @ ?9";;;
)iff% 0
LO% 19-4
(OC *ef% '19-9
05) $rH!eb!s Company is o#ned and operated by a craftsman #ho ma-es replicas of historic firearms for m!se!ms"
sportsmen and collectors. Ee is c!rrently prod!cing 4; flintloc- m!s-ets per month. Cost data are as follo#s%
Price ?70; per !nit
8ariable cost ?47; per !nit
&ixed costs ?9";;; per month
n A!ne" the cost of the special -ind of metal he !ses #ent !p considerably" and the variable cost per !nit increased
by ?5; per !nit. f vol!me and other factors remain constant" ho# #ill this affect the companyBs brea-even point=
$) t #ill go !p by 10 !nits.
,) t #ill have no effect on brea-even.
C) t #ill go !p by 9 !nits per month.
)) t #ill go do#n by 0 !nits per month.
$ns#er% C
?70; - ?47; @ ?05;
?9";;;2?05; @ +0
?70; - ?50; @ ?0;;
?9";;;2?0;; @ 4;
4; - +0 @ 9
)iff% 0
LO% 19-4
(OC *ef% (19-19
45
Price ?70; per !nit
by ?5; per !nit. f vol!me and other factors remain constant" ho# #ill this affect the companyBs brea-even point in
sales dollars=
$) t #ill go !p by ?5"76; of sales reven!e.
,) t #ill go !p by ?0"4;; of sales reven!e.
C) t #ill go do#n by ?4;; of sales reven!e.
)) t #ill go do#n by ?0"70; of sales reven!e.
$ns#er% $
?70; - ?47; @ ?05;
?9";;;2?05; @ +0
+0 D ?70; @ ?0+";4;
?70; - ?50; @ ?0;;
?9";;;2?0;; @ 4;
4; D ?70; @ ?09"9;;
?09"9;; - ?0+";4; @ ?5"76;
)iff% 0
LO% 19-4
(OC *ef% (19-19
Price ?70; per !nit
by ?5; per !nit. f vol!me and other factors remain constant" ho# #ill this affect the companyBs operating income=
$) t #ill go !p by ?5"76; of sales reven!e.
,) t #ill go !p by ?0"4;; of sales reven!e.
C) t #ill go do#n by ?4;; of sales reven!e.
)) t #ill go do#n by ?0";;;.
$ns#er% )
?70; - ?47; @ ?05;
C4; D ?05;) - ?9";;; @ ?0";;;
?70; - ?50; @ ?0;;
C4; D ?0;;) - ?9";;; @ ?;
?0";;; - ?; @ ?0";;;
)iff% 0
LO% 19-4
(OC *ef% (19-19
46
Price ?70; per !nit
by ?5; per !nit. .he o#ner believes he can pass along half of the cost increase to his c!stomers by raising the price
to ?745" and still maintain the same vol!me of sales. f so" ho# #ill this affect his operating income=
$) t #ill go !p by ?1";;;.
,) t #ill go do#n by ?1";;;.
C) t #ill go do#n by ?1"005.
)) t #ill go do#n by ?0"5;;.
$ns#er% ,
?70; - ?47; @ ?05;
C4; D ?05;) - ?9";;; @ ?0";;;
?745 - ?50; @ ?005
C4; D ?005) - ?9.;;; @ ?1";;;
?0";;; - ?1";;; @ ?1";;;
)iff% 0
LO% 19-4
(OC *ef% (19-19
Price ?70; per !nit
Eo# m!ch is his margin of safety expressed in !nits per month=
$) 9 !nits
,) 6 !nits
C) 4 !nits
)) 0 !nits
$ns#er% $
?9";;;2?05; @ +0
4; - +0 @ 9
)iff% 0
LO% 19-4
(OC *ef% '19-9
47
+;) $rH!eb!s Company is o#ned and operated by a craftsman #ho ma-es replicas of historic firearms for m!se!ms"
Price ?70; per !nit
Eo# m!ch is his margin of safety expressed in sales reven!e=
$) ?0";;;
,) ?1"6;;
C) ?9;;
)) ?1"0;;
$ns#er% $
?70; - ?47; @ ?05;
?9";;;2?05; @ +0
4; - +0 D ?05; @ ?0";;;
)iff% 0
LO% 19-4
(OC *ef% '19-9
+1) .aiJhong 'emicond!ctor Company mass prod!ces several common comp!ter chips. .ype $ sells for ?1.0; per
!nit. 8ariable cost is ?;.95 per !nit and the fixed costs are ?+0";;; per month. .aiJhong c!rrently sells 14;";;;
!nits per month. 1nder intense press!re to boost profits" the prod!ction manager has a plan #hich #ill red!ce fixed
costs by 1;>. Eo# #ill this affect the brea-even point in terms of !nits per month=
$) t #ill go do#n by 10"9;; !nits.
,) t #ill go do#n by 9";;; !nits.
C) t #ill go !p by 1"0;; !nits.
)) t #ill stay the same.
$ns#er% $
?1.0; - ?;.95 @ ?;.05
?+0";;;2?;.05 @ 109";;;
?+0";;; D 1;> @ ?+"0;;
C?+0";;; - ?+"0;;)2?;.05 @ 115"0;;
109";;; - 115"0;; @ 10"9;;
)iff% 0
LO% 19-4
(OC *ef% (19-19
48
costs by 1;>. Eo# #ill this affect the brea-even point in terms of sales reven!e=
$) t #ill go do#n ?+"0;;.
,) t #ill go do#n by ?15"+6;.
C) t #ill go !p by ?9"46;.
)) t #ill go do#n by ?16"0;;.
$ns#er% ,
?1.0; - ?;.95 @ ?;.05
?+0";;;2?;.05 @ 109";;;
109";;; D ?1.0; @ ?15+"6;;
?+0";;; D 1;> @ ?+"0;;
C?+0";;; - ?+"0;;)2?;.05 @ 115"0;;
115"0;; D ?1.0; @ ?1+9"04;
?15+"6;; - ?1+9"04; @ ?15"+6;
)iff% 0
LO% 19-4
(OC *ef% (19-19
++) .aiJhong 'emicond!ctor Company mass prod!ces several common comp!ter chips. .ype $ sells for ?1.0; per
costs by 1;>. Eo# #ill this affect net operating income=
$) t #ill go !p exactly 1;>.
,) t #ill go do#n approximately 4;>.
C) t #ill go !p approximately 10>.
)) t #ill go !p approximately 1;7>.
$ns#er% )
?1.0; - ?;.95 @ ?;.05
C14;";;; D ?;.05) - ?+0";;; @ ?+";;;
C14;";;; D ?;.05) - ?09"9;; @ ?6"0;;
?6"0;; - ?+.;;; @ ?+"0;;
?+"0;;2?+";;; @ 1;7>
)iff% +
LO% 19-4
(OC *ef% (19-19
49
!nit. 8ariable cost #as ?;.95 per !nit and the fixed costs #ere ?+0";;; per month. .aiJhong c!rrently sells 14;";;;
!nits per month. ,eca!se of volatility in the precio!s metals mar-et" the variable cost per !nit has j!st gone !p by
?;.;5" b!t the company does not believe it can pass the extra cost on to the c!stomer. .o offset higher variable
costs" the prod!ction manager has developed a plan #hich #ill red!ce fixed costs by 0;>. Eo# #ill these
combined changes affect net operating income=
$) t #ill go !p 1;>.
,) t #ill go do#n 0;>.
C) t #ill go !p 10>.
)) t #ill go do#n 11;>.
$ns#er% ,
?1.0; - ?;.95 @ ?;.05
C14;";;; D ?;.05) - ?+0";;; @ ?+";;;
C14;";;; D ?;.0;) - ?05"6;; @ ?0"4;;
?+";;; - ?0"4;; @ ?6;;
?6;;2?+";;; @ 0;>
)iff% +
LO% 19-4
(OC *ef% (19-19
!nits per month. Eo# m!ch is the margin of safety expressed in !nits per month=
$) 1+"6;; !nits
,) 1"6;; !nits
C) 9;; !nits
)) 10";;; !nits
$ns#er% )
?1.0; - ?;.95 @ ?;.05
?+0";;;2?;.05 @ 109";;;
14;";;; - 109";;; @ 10";;;
)iff% 0
LO% 19-4
(OC *ef% '19-9
50
!nits per month. Eo# m!ch is the margin of safety expressed in sales reven!es=
$) ?1+"75;
,) ?10"5;;
C) ?4"69;
)) ?14"4;;
$ns#er% )
?1.0; - ?;.95 @ ?;.05
?+0";;;2?;.05 @ 109";;;
109";;; D ?1.0; @ ?15+"6;;
14;";;; D ?1.0; @ ?169";;;
?169";;; - ?15+"6;; @ ?14"4;;
)iff% 0
LO% 19-4
(OC *ef% '19-9
+7) $ small b!siness prod!ces a single prod!ct and reports the follo#ing data%
Price ?9.;; per !nit
8ariable cost ?5.;; per !nit
&ixed cost ?01";;; per month
8ol!me 1;";;; per month
f the company red!ces its price to ?7.5;" it believes that the vol!me #ill go !p to 11";;; !nits.
Eo# #o!ld this change affect operating income=
$) t #ill go !p by ?7"5;;.
,) t #ill go !p by ?9";;;.
C) t #ill go do#n by ?0"5;;.
)) t #ill go do#n by ?4"5;;.
$ns#er% C
?9.;; - ?5.;; @ ?+.;;
C1;";;; D ?+.;;) - ?01";;; @ ?9";;;
?7.5; - ?5.;; @ ?0.5;
C11";;; D ?0.5;) - ?01";;; @ ?6"5;;
?9";;; - ?6"5;; @ ?0"5;;
)iff% 0
LO% 19-4
(OC *ef% (19-19
51

.he companyBs variable cost goes !p by ?;.75 per !nit" so they raise the price by the same amo!nt.
$ss!me other factors remain the same. Eo# #o!ld this change affect operating income=
$) t #ill go !p by ?7"5;;.
,) t #ill go !p by ?9";;;.
$ns#er% )
?9.;; - ?5.;; @ ?+.;;
C1;";;; D ?+.;;) - ?01";;; @ ?9";;;
?9.75 - ?5.75 @ ?+.;;
C1;";;; D ?+.;;) - ?01";;; @ ?9";;;
)iff% 0
LO% 19-4
(OC *ef% (19-19
.he companyBs variable cost goes !p by ?;.05 per !nit. &ixed costs are lo#ered from ?01";;; to ?19";;;. $ss!me
other factors remain the same. Eo# #o!ld this change affect operating income=
$) t #ill go !p by ?5;;.
,) t #ill go !p by ?9;;.
$ns#er% $
?9.;; - ?5.;; @ ?+.;;
C1;";;; D ?+.;;) - ?01";;; @ ?9";;;
?9.;; - ?5.05 @ ?0.75
C1;";;; D ?0.75) - ?19";;; @ ?9"5;;
?9"5;; - ?9";;; @ ?5;;
)iff% 0
LO% 19-4
(OC *ef% (19-19
52
4;) $ small b!siness prod!ces a single prod!ct and reports the follo#ing data%
.he price is raised to ?9.5; per !nit" and the vol!me drops to 9.;;; !nits per month.
$ss!me other factors remain the same. Eo# #o!ld this change affect operating income=
$) t #ill go !p by ?5;;.
,) t #ill go !p by ?1"5;;.
$ns#er% ,
?9.;; - ?5.;; @ ?+.;;
C1;";;; D ?+.;;) - ?01";;; @ ?9";;;
?9.5; - ?5.;; @ ?+.5;
C9";;; D ?+.5;) - ?01";;; @ ?1;"5;;
?1;"5;; - ?9";;; @ ?1"5;;
)iff% 0
LO% 19-4
(OC *ef% (19-19
41) $ small b!siness prod!ces a single prod!ct and reports the follo#ing data%
&ixed costs go !p by ?0";;; per month" and the price is raised by ?;.0; per !nit. $ss!me other factors remain the
same. Eo# #o!ld this change affect operating income=
$) t #ill go !p by ?5;;.
,) t #ill go !p by ?1"5;;.
$ns#er% )
?9.;; - ?5.;; @ ?+.;;
C1;";;; D ?+.;;) - ?01";;; @ ?9";;;
?9.0; - ?5.;; @ ?+.0;
C1;";;; D ?+.0;) - ?0+";;; @ ?9";;;
)iff% 0
LO% 19-4
(OC *ef% (19-19
53
1) Kray Company sells t#o prod!cts" O and I. &or the coming year" Kray predicts the sale of 5";;; !nits of O and
1;";;; !nits of I. .he contrib!tion margins of the t#o prod!cts are ?0 and ?+" respectively. .he #eighted-average
contrib!tion margin #o!ld be ?0.5;.
$ns#er% &$L'(
C?0 D 1) F C?+ D 0) @?9.;;
?92+ @ ?0.67
)iff% 0
LO% 19-5
(OC *ef% '19-1;
0) &or the next year" Eall Company predicts the sale of 15";;; !nits of a prod!ct #ith a contrib!tion margin of ?6
per !nit and +;";;; !nits of another prod!ct #ith a contrib!tion margin of ?9 per !nit. .he #eighted-average
contrib!tion margin per !nit is ?9.
$ns#er% .*1(
?6 D 15";;; @ ?9;";;;
?9 D +;";;; @ ?07;";;;
?9;";;; F ?07;";;; @ ?+6;";;;
?+6;";;;245";;; @ ?9
)iff% 0
LO% 19-5
(OC *ef% '19-1;
+) :hen companies sell m!ltiple prod!cts" prices are set to ens!re that all prod!cts have the same contrib!tion
margin.
$ns#er% &$L'(
)iff% 1
LO% 19-5
(OC *ef% '19-1;
4) .he combination of prod!cts that ma-e !p total sales" and the proportion of sales among the prod!cts is referred
to as Psales mix.P
$ns#er% .*1(
)iff% 1
LO% 19-5
(OC *ef% '19-1;
54
5) $ company sells prod!cts in t#o siJe pac-ages-reg!lar and long. .he t#o prod!cts sell in eH!al n!mbers. .he
contrib!tion margin of the reg!lar is ?10 and the contrib!tion margin of the long siJe is ?19. .he #eighted average
contrib!tion margin is ?15.
$ns#er% .*1(
?10 F ?19 @ ?+;
?+;20 @ ?15
)iff% 1
LO% 19-5
(OC *ef% '19-1;
6) $ company sells prod!cts in t#o siJe pac-ages-reg!lar and long. .hey sell t#ice as many reg!lars as they do the
long siJe. .he contrib!tion margin of the reg!lar is ?10 and the contrib!tion margin of the long siJe is ?19. .he
#eighted average contrib!tion margin is ?15.
$ns#er% &$L'(
?10 D 0 @ ?04
?19 D 1 @ ?19
C?04 F ?19)2+ @ ?14
)iff% 1
LO% 19-5
(OC *ef% '19-1;
7) ,ro#ning Company sells t#o prod!cts-O and I. Prod!ct O sells for ?05 per !nit #ith variable costs of ?15.
Prod!ct I sells for ?+; #ith variable costs of ?0;. .otal fixed costs for the company are ?0;";;;. ,ro#ning
Company typically sells three !nits of Prod!ct O for every !nit of Prod!ct I. :hat is the brea-even point in total
!nits=
$) 0";;; !nits
,) 1";91 !nits
C) 1"5;; !nits
)) 5;; !nits
$ns#er% $
?05 - ?15 @ ?1;
?+; - ?0; @ ?1;
C?1; D +) F C?1; D 1) @ ?4;
?4;24 @ ?1;
?0;";;;2?1; @ 0";;;
)iff% +
LO% 19-5
(OC *ef% (19-01
55
9) /ist Company sells t#o prod!cts-$ and ,. /ist predicts that it #ill sell 0"5;; !nits of $ and 1"5;; !nits of ,
d!ring the next period. .he !nit contrib!tion margins are ?+.5; and ?4.9;" respectively. :hat is the #eighted-
average !nit contrib!tion margin= CPlease ro!nd to nearest cent.)
$) ?+.99
,) ?4.05
C) ?4.15
)) ?+.71
$ns#er% $
C?+.5; D 0"5;;) F C?4.9; D 1"5;;) @ ?15"95;
?15"95;24";;; @ ?+.99
)iff% 0
LO% 19-5
(OC *ef% '19-1;
9) /c)aniel" nc. sells t#o prod!cts-A and ,. /c)aniel predicts that it #ill sell 7"0;; !nits of A and 5"6;; !nits of ,
in the next period. .he !nit contrib!tion margins are ?0.95 and ?6.+;" respectively. :hat is the #eighted-average
!nit contrib!tion margin=
$) ?5.15
,) ?4.59
C) ?4.99
)) ?4.+6
$ns#er% )
(xplanation% $) Calc!lations% LC7"0;; D ?0.95) F C5"6;; D ?6.+;)M 210"9;; @ ?4.+6
)iff% 0
LO% 19-5
(OC *ef% '19-1;
56
1;) Aac-son Company has provided the follo#ing information regarding the t#o prod!cts that it sells%
et Boats !"i Boats
'ales price per !nit ?9";;; ?0;";;;
8ariable cost per !nit ?4"9;; ?14";;;
$nn!al fixed costs are ?09;";;;.
Eo# many !nits m!st be sold in order for Aac-son to brea-even" ass!ming that Aac-son sells five jet boats for every
t#o s-i boats sold=
$) 7; jet boats and 09 s-i boats
,) 5; jet boats and 0; s-i boats
C) 0; jet boats and 5; s-i boats
)) 45 jet boats and 09 s-i boats
$ns#er% ,
LC?9";;;-?4"9;;) D 5M F LC?0;";;;-?14";;;) D 0M2C5F0) @ ?4";;;
?09;";;;2?4";;; @ 7;
7; D 527 @ 5;
7; D 027 @ 0;
)iff% +
LO% 19-5
(OC *ef% (19-01
11) ,ec-yBs ,a-ery sells three large m!ffins for every t#o small ones. $ small m!ffin sells for ?+" #ith a variable
cost of ?0.;;. $ large m!ffin sells for ?5 #ith a variable cost of ?0.5;. :hat is the #eighted-average contrib!tion
margin=
$) ?1.9+
,) ?1.75
C) ?1.05
)) ?1.9;
$ns#er% )
?5.;; - ?0.5; @ ?0.5;
?+.;; - ?0.;; @ ?1.;;
C?0.5; D +) F C?1.;; D 0) @ ?9.5;
?9.5;25 @ ?1.9;
)iff% 0
LO% 19-5
(OC *ef% '19-1;
57
cost of ?0.;;. $ large m!ffin sells for ?5 #ith a variable cost of ?0.5;. &ixed costs are ?+";;; per month. Eo#
m!ch is the brea-even in terms of total !nits= CPlease ro!nd to the nearest #hole n!mber.)
$) 1"04;
,) 1"579
C) 946
)) 1"19;
$ns#er% ,
?5.;; - ?0.5; @ ?0.5;
?+.;; - ?0.;; @ ?1.;;
C?0.5; D +) F C?1.;; D 0) @ ?9.5;
?9.5;25 @ ?1.9;
?+";;;2?1.9; @ 1"579
)iff% 0
LO% 19-5
(OC *ef% (19-01
1+) ,ec-yBs ,a-ery sells three large m!ffins for every t#o small ones. $ small m!ffin sells for ?+" #ith a variable
m!ch is the brea-even vol!me for each type of m!ffin=
$) 947 large" 6+0 small
,) 99; large" 504 small
C) 9;1 large" 600 small
)) 900 large" 697 small
$ns#er% $
?5.;; - ?0.5; @ ?0.5;
?+.;; - ?0.;; @ ?1.;;
C?0.5; D +) F C?1.;; D 0 ) @ ?9.5;
?9.5;25 @ ?1.9;
?+";;;2?1.9; @ 1"579
1"579 D +25 @ 947
1"579 D 025 @ 6+0
)iff% +
LO% 19-5
(OC *ef% (19-01
$CP$ &!nctional% *eporting
58
m!ch is the brea-even point in total sales dollars=
$) ?6";91
,) ?5"945
C) ?6"900
)) ?6"6+1
$ns#er% )
?5.;; - ?0.5; @ ?0.5;
?+.;; - ?0.;; @ ?1.;;
C?0.5; D +) F C?1.;; D 0 ) @ ?9.5;
?9.5;25 @ ?1.9;
?+";;;2?1.9; @ 1"579
1"579 D +25 @ 947
1"579 D 025 @ 6+0
C947 D ?5) F C6+0 D ?+) @ ?6"6+1
)iff% +
LO% 19-5
(OC *ef% (19-01
15) .he local convenience store sells soft drin-s. t sells t#o large drin-s for every small drin-. $ large drin- sells
for ?1.5;" #ith a variable cost of ?;.6;. $ small drin- sells for ?1.;; #ith a variable cost of ?;.5;. :hat is the
#eighted-average contrib!tion margin= CPlease ro!nd to the nearest cent.)
$) ?;.77
,) ?;.65
C) ?;.7;
)) ?;.45
$ns#er% $
?1.5; - ?;.6; @ ?;.9;
?1.;; - ?;.5; @ ?;.5;
C?;.9; D 0) F C?;.5; D 1) @ ?0.+;
?0.+;2+ @ ?;.77
)iff% 0
LO% 19-5
(OC *ef% '19-1;
59
16) .he local convenience store sells soft drin-s. t sells t#o large drin-s for every small drin-. $ large drin- sells
for ?1.5;" #ith a variable cost of ?;.6;. $ small drin- sells for ?1.;;" #ith a variable cost of ?;.5;. .he #eighted
average contrib!tion margin is ?;.7;.
$ns#er% &$L'(
?1.5; - ?;.6; @ ?;.9;
?1.;; - ?;.5; @ ?;.5;
C?;.9; D 0) F C?;.5; D 1) @ ?0.+;
?0.+;2+ @ ?;.77
)iff% 0
LO% 19-5
(OC *ef% '19-1;
17) $rgyle sells steel beams to b!ilding contractors in t#o siJes-reg!lar and heavy. $rgyle sells 4 reg!lar beams for
every one heavy beam. Cost data are as follo#s%
#egular Hea$y
Price per !nit ?0;.;; ?09.;;
8ariable cost per !nit ?16.;; ?0;.;;
Eo# m!ch is the #eighted average contrib!tion margin per !nit=
$) ?5.0;
,) ?6.;;
C) ?4.9;
)) ?4.15
$ns#er% C
?0; - ?16 @ ?4
?09 - ?0; @ ?9
C?4 D 4) F C?9 D 1) @ ?04
?0425 @ ?4.9;
)iff% 0
LO% 19-5
(OC *ef% '19-1;
60
#egular Hea$y
Price per !nit ?0;.;; ?09.;;
$rgyleBs fixed costs are ?0"99; per month. Eo# m!ch is the brea-even point in total n!mber of !nits=
$) 59;
,) 579
C) 60;
)) 6;;
$ns#er% )
?0; - ?16 @ ?4
?09 - ?0; @ ?9
C?4 D 4) F C?9 D 1) @ ?04
?0425 @ ?4.9;
?0"99;2?4.9; @ 6;;
)iff% 0
LO% 19-5
(OC *ef% (19-01
#egular Hea$y
Price per !nit ?0;.;; ?09.;;
$rgyleBs fixed costs are ?0"99; per month. Eo# m!ch is the brea-even point for each prod!ct type=
$) 5;; reg!lar" 1;; heavy
,) 40; reg!lar" 19; heavy
C) 49; reg!lar" 10; heavy
)) 10; reg!lar" 49; heavy
$ns#er% C
?0; - ?16 @ ?4
?09 - ?0; @ ?9
C?4 D 4) F C?9 D 1) @ ?04
?0425 @ ?4.9;
?0"99;2?4.9; @ 6;;
6;; D 425 @ 49;
6;; D 125 @ 10;
)iff% +
LO% 19-5
(OC *ef% (19-01
61
0;) $rgyle sells steel beams to b!ilding contractors in t#o siJes%reg!lar and heavy. $rgyle sells 4 reg!lar beams for
#egular Hea$y
Price per !nit ?0;.;; ?09.;;
$rgyleBs fixed costs are ?0"99; per month. Eo# m!ch is the brea-even point for total sales reven!es=
$) ?10"96;
,) ?1+"04;
C) ?9"6;;
)) ?10"99;
$ns#er% $
?0; - ?16 @ ?4
?09 - ?0; @ ?9
C?4 D 4) F C?9 D 1) @ ?04
?0425 @ ?4.9;
?0"99;2?4.9; @ 6;;
6;; D 425 @ 49;
6;; D 125 @ 10;
49; D ?0; @ ?9"6;;
10; D ?09 @ ?+"+6;
?9"6;; F ?+"+6; @ ?10"96;
)iff% +
LO% 19-5
(OC *ef% (19-01
1) :hen a company prod!ces more !nits than it sells" absorption costing income #ill exceed variable costing
income.
$ns#er% .*1(
)iff% 1
LO% 19-6
(OC *ef% (19$-+
0) .he only difference bet#een absorption costing and variable costing is the #ay that fixed man!fact!ring overhead
costs are treated.
$ns#er% .*1(
)iff% 1
LO% 19-6
(OC *ef% (19$-+
62
+) :hich of the follo#ing acc!rately describes absorption costing=
$) Only variable man!fact!ring costs are assigned to prod!cts.
,) Only fixed man!fact!ring costs are assigned to prod!cts.
C) ,oth variable and fixed man!fact!ring costs are assigned to prod!cts.
)) ,oth man!fact!ring and non-man!fact!ring costs are assigned to prod!cts.
$ns#er% C
)iff% 1
LO% 19-6
4) :hich of the follo#ing acc!rately describes variable costing=
$) Only variable man!fact!ring costs are assigned to prod!cts.
,) Only fixed man!fact!ring costs are assigned to prod!cts.
C) ,oth variable and fixed man!fact!ring costs are assigned to prod!cts.
)) ,oth man!fact!ring and non-man!fact!ring costs are assigned to prod!cts.
$ns#er% $
)iff% 1
LO% 19-6
5) f prod!ction exceeds !nits sold" #hich of the follo#ing statements is CO**(C.=
$) .he same operating income #ill res!lt !nder both a variable costing and absorption costing income statement.
,) $ higher operating income #ill res!lt !nder a variable costing income statement.
C) $ lo#er operating income #ill res!lt !nder an absorption costing income statement.
)) $ higher operating income #ill res!lt !nder an absorption costing income statement.
$ns#er% )
)iff% 0
LO% 19-6
(OC *ef% (19$-+
6) $ decrease in inventory levels #ill ca!se #hich of the follo#ing #hen comparing operating income !nder
absorption and variable costing=
$) .he same operating income !nder both variable costing and absorption costing
,) $ higher operating income !nder variable costing
C) $ lo#er operating income !nder variable costing
)) $ lo#er cost of goods sold and a higher operating income !nder absorption costing
$ns#er% ,
)iff% 0
LO% 19-6
(OC *ef% (19$-+
63
7) $llston Prod!cts sells a special -ind of effects pedal for m!sical performers. (ach !nit sells for ?0;.;;.
$dditional data for the month of $pril" 0;11" are as follo#s%
)irect materials ?4.;; per !nit
)irect labor ?9.;; per !nit
8ariable man!f. overhead ?0;";;; per month
&ixed man!f. overhead ?14";;; per month
Operating expenses ?01";;; per month
,eginning inventory ; !nits
1nits prod!ced 9";;; !nits
1nits sold 7"5;; !nits
(nding inventory 5;; !nits
1sing variable costing" #hat is the cost per !nit prod!ced=
$) ?16.05
,) ?14.05
C) ?14.5;
)) ?10.75
$ns#er% C
?0;";;;29";;; @ ?0.5;
?4.;; F ?9.;; F ?0.5; @ ?14.5;
)iff% 0
LO% 19-6
(OC *ef% (19$-+
64
1sing absorption costing" #hat is the cost per !nit prod!ced=
$) ?16.05
,) ?14.05
C) ?14.5;
)) ?10.75
$ns#er% $
?0;";;; F ?14";;; @ ?+4";;;
?+4";;;29";;; @ ?4.05
?4.;; F ?9.;; F ?4.05 @ ?16.05
)iff% 0
LO% 19-6
(OC *ef% (19$-+
65
1sing absorption costing" ho# m!ch is the net operating income for $pril=
$) ?6"9;;
,) ?7"49;
C) ?7"105
)) ?6"05;
$ns#er% C
?0;";;; F ?14";;; @ ?+4";;;
?+4";;;29";;; @ ?4.05
?4.;; F ?9.;; F ?4.05 @ ?16.05
7"5;; D ?16.05 @ ?101"975
7"5;; D ?0; @ ?15;";;;
?15;";;; - ?101"975 - ?01";;; @ ?7"105
)iff% +
LO% 19-6
(OC *ef% (19$-+
66
1;) $llston Prod!cts sells a special -ind of effects pedal for m!sical performers. (ach !nit sells for ?0;.;;.
1sing variable costing" ho# m!ch is the net operating income for $pril=
$) ?6"9;;
,) ?7"49;
C) ?7"105
)) ?6"05;
$ns#er% )
?0;";;;29";;; @ ?0.5;
?4.;; F ?9.;; F ?0.5; @ ?14.5;
7"5;; D ?14.5; @ ?1;9"75;
7"5;; D ?0; @ ?15;";;;
?15;";;; - ?1;9"75; - ?14";;; - ?01";;; @ ?6"05;
)iff% +
LO% 19-6
(OC *ef% (19$-+
67
:hich of the follo#ing statements is .*1(=
$) $bsorption costing prod!ces operating income that is ?975 higher than variable costing.
,) $bsorption costing prod!ces operating income that is ?975 lo#er than variable costing.
C) $bsorption costing prod!ces operating income that is ?1+"105 higher than variable costing.
)) $bsorption costing prod!ces operating income that is ?1+"105 lo#er than variable costing.
$ns#er% $
?0;";;;29";;; @ ?0.5;
?4.;; F ?9.;; F ?0.5; @ ?14.5;
7"5;; D ?14.5; @ ?1;9"75;
7"5;; D ?0; @ ?15;";;;
?15;";;; - ?1;9"75; - ?14";;; - ?01";;; @ ?6"05;
?0;";;; F ?14";;; @ ?+4";;;
?+4";;;29";;; @ ?4.05
?4.;; F ?9.;; F ?4.05 @ ?16.05
7"5;; D ?16.05 @ ?101"975
7"5;; D ?0; @ ?15;";;;
?15;";;; - ?101"975 - ?01";;; @ ?7"105
?7"105 -?6"05; @ ?975
)iff% +
LO% 19-6
(OC *ef% (19$-+
68
10) f a company !ses standard absorption costing" ho# co!ld a b!siness manager exploit that acco!nting method in
order to boost boo- income #itho!t violating the r!les of K$$P=
$) ,y adopting j!st-in-time inventory management" the manager co!ld red!ce the costs of financing and storing
inventory" #hich #o!ld in t!rn" help boost boo- income.
,) ,y coding administrative costs to inventory" the manager co!ld report lo#er total expenses and th!s report higher
income.
C) ,y red!cing inventory levels" the manager co!ld sho# higher sales reven!es" and th!s report higher boo-
income.
)) ,y b!ilding !p inventory levels" fixed man!fact!ring costs co!ld be Pstored !pP in inventory" the cost of goods
sold #o!ld be lo#er" and boo- income #o!ld be higher.
$ns#er% )
)iff% 0
LO% 19-6
(OC *ef% (19$-+
69

Hho9e Ch19 Tif Testgen

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Hho9e Ch19 Tif Testgen

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Accounting, 9e (Horngren)

Chapter 19 Cost-Volume-Profit Analysis

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