1. Which costs will change with an increase in activity within the relevant range?

Group of answer choices

Unit variable cost and total variable cost

Unit fixed cost and unit variable cost

Unit fixed cost and total variable cost

Unit fixed cost and total fixed cost

2. Which of the following would take place if a company were able to reduce its variable
cost per unit?

Contribution Margin Break-even Point

Group of answer choices

Decrease and Increase

Increase and Increase

Increase and Decrease

Decrease and Decrease

3. CVP analysis relies on the assumptions that costs are either strictly fixed or strictly
variable. Consistent with these assumptions, as volume decreases total

Group of answer choices

variable costs remain constant.

fixed costs decrease.

costs remain constant.

costs decrease.

4. The contribution margin ratio always increases when the

Group of answer choices

break-even point increases.

variable costs as a percentage of net sales increase.

break-even point decreases.

variable costs as a percentage of net sales decrease

5. The most useful information derived from a break-even chart is the

Group of answer choices

Relationship among revenues, variable costs, and fixed costs at various levels of activity.

Relationship among revenues, variable costs, and fixed costs at a level of activity.

Relationship among revenues, variable costs, and fixed costs and desired income at various
levels of activity.

Relationship among variable costs, and fixed costs at various levels of activity.

6. On a cost-volume-profit chart (break-even graph), where are the total fixed costs shown?

Group of answer choices

As the point where the sales line crosses the total cost line

As the point where the sales line crosses the horizontal axis (volume)

As the point where the sales line intersects the vertical axis (pesos)

As the point where the total cost line intersects the vertical axis (pesos)

7. A is a fixed cost; B is a variable cost. During the current year the level of activity has
decreased but is still within the relevant range. We would expect that:

Group of answer choices

The cost per unit of B has decreased.

The cost per unit of A has remained unchanged.

The cost per unit of A has decreased.

The cost per unit of B has remained unchanged.

8. The most likely strategy to reduce the break-even point would be to

Group of answer choices

Decrease the fixed costs and increase the contribution margin.

Decrease both the fixed costs and the contribution margin.

Increase both the fixed costs and the contribution margin.

Increase the fixed costs and decrease the contribution margin.

9. Which of the following is not an assumption underlying C-V-P analysis?

Group of answer choices

Unit variable expenses remain unchanged as activity varies.

Inventory levels at the beginning and end of the period are the same.

The behavior of total revenue is linear.

The number of units produced exceeds the number of units sold.

10. A Company manufactures a single product that sells for P25. At present, the product is
manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses
are high, totaling P15 per unit, of which 60% is direct labor cost. Last year, the company sold
30,000 units, with the following results:

Sales (30,000 units) . . . . . . . . . . . . . . . . . . . . . P750,000

Variable expenses . . . . . . . . . . . . . . . . . . . . . . 450,000

Contribution margin . . . . . . . . . . . . . . . . . . . . . 300,000

Fixed expenses . . . . . . . . . . . . . . . . . . . . . . . . 210,000

Net operating income . . . . . . . . . . . . . . . . . . . .P90,000

Due to an increase in labor rates, the company estimates that variable expenses will increase by
P3 per unit next year. The president feels that the company must raise the selling price. If
Company wants to maintain the same CM ratio as last year, what selling price per unit must it
charge next year to cover the increased labor costs?

Answer: P3

11. A Company manufactures a single product that sells for P25. At present, the product is
manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses
are high, totaling P15 per unit, of which 60% is direct labor cost. Last year, the company sold
30,000 units, with the following results:

Sales (30,000 units) . . . . . . . . . . . . . . . . . . . . . P750,000

Variable expenses . . . . . . . . . . . . . . . . . . . . . . 450,000

Contribution margin . . . . . . . . . . . . . . . . . . . . 300,000

Fixed expenses . . . . . . . . . . . . . . . . . . . . . . . . 210,000

Net operating income . . . . . . . . . . . . . . . . . . . .P90,000

Due to an increase in labor rates, the company estimates that variable expenses will increase by
P3 per unit next year. If this change takes place and the selling price per unit remains constant at
P25, how many additional units must be sold next year in order to earn the same operating
income , as last year?

Answer: 42,857.142 = 42,857-30,000 = 12,857

12.

Answer: 17,000
13.

Answer: 4

14.

Answer: P1,055,000

Answer: P28.65 = P29

16.

Answer: 303,750

17. Archie sells a single product for P50. Variable costs are 60% of the selling price, and the
company has fixed costs that amount to P400,000. Current sales total 16,000 units. Each unit
that the company sells will increase overall profitability by how much per unit?

Answer: .40

18.

19. A Corporation's contribution margin ratio is 12% and its fixed monthly expenses are
P84,000. If the company's sales for a month are P738,000, what is the best estimate of the
company's net operating income? Assume that the fixed monthly expenses do not change.

Answer: P4,560
20.

21.

Cost-volume-profit analysis allows management to determine the relative profitability of a

product by
Group of answer choices
Determining the contribution margin per unit and projected profits at various levels of
production.
Assigning costs to a product in a manner that maximizes the contribution margin.
Highlighting potential bottlenecks in the production process.
Keeping fixed costs to an absolute minimum.