Question 47

Marcus Company manufactures and sells a single product, Product E. The product sells for P60 per unit
and has a C/M ratio of 40%. The company's monthly fixed expenses areP28,800. The variable cost per
unit of Product E is
А.Р31.20. с. Р36.00.
B.P24.00. d. P28.80.

Question 42
.The MEREDITH COMPANY is planning to sell product Z for P5 a unit. Variable costs are P3 a unit and
fixed costs are P 100,000. What must total sales be to break-even?
A.P160,000
B.P250,000
C.P166,000
D.P266,667

Question 40
.OMNIPOTENT COMPANY had sales of P3,000,000 variable costs of P 1,800,000,and fixed costs of
P800,000 for Product X. What would be the amount of sales pesos at the break-even point?
A.2,000,000
B.2,400,000
C.2,600,000
D.2,700,000

Question 25
.MARLYN COMPANY is contemplating an expansion program based on the following budget data:
Expected sales...P600,000
Variable costs..420,000
Fixed expenses..120,000
What is the amount of break-even sales
A.P400,000
B.P420,000
C.P540,000
D.P660,000

Question 11
The INSULAR CORPORATION sells two products, D and W. Insular sells these products at a rate of 2 units
of D to 3 units of W. The contribution margin is P4 per unit for D and P2 per unit for W. Insular has fixed
costs of P420,000.What would be the total units sold at the break-even point?
A. 140,000
B. 168,000
C. 150,000
D. 266,667
Question 2
Marcus Company manufactures and sells a single product, Product E. The product sells for P60 per unit
and has a C/M ratio of 40%. The company's monthly fixed expenses are P28,800. The break-even point
for Product E is
A.P48,000. c. 800 units.
B.P72,000. d. 1,000 units.

Question 1
.Marcus Company manufactures and sells a single product, Product E. The product sells for P60 per unit
and has a C/M ratio of 40%. The company's monthly fixed expenses are P28,800. If Marcus Company
desires a monthly income equal to 10% of sales, monthly sales will have to be (ignore taxes)
A.1,500 units. C. 2,000 units.
B.760 units. D. 1,600 units.

Question 48
Janette & Company has sales of P400,000 with variable costs of P300,000, fixed costs of P120,000, and
an operating loss of P20,000. By how much would Janette need to increase its sales in order to achieve a
target operating income of 10% of sales?
а. Р400,000
В. Р462,000
C. P500,000
D. P800,000

Question 31
Financial leverage is concerned with the relation between
a. Changes in volume and changes in EPS.
b. Changes in volume and changes in EBIT.
c. Changes in EBIT and changes in EPS.
D. Changes in EBIT and changes in operating income.

Question 18
22 The degree of operating leverage may be defined as
A. The percent change in operating income divided by the percent change in unit volume.
B. Q (P-VC) divided by Q (P-VC)- FC.
c. S-TVC divided by S-TVC – FC.
d. All of the above.

Question 39
LEAH MANUFACTURING is considering dropping product line. It currently produces n multipurpose
woodworking clamp in
Simple manufacturing process which utilizes special equipment. Variable costs amount to P6.00 per unit.
Fixed overhead costs,
Exclusive of depreciation, have been allocated to this product nt rate of P3.50 per unit and will continue
whether or not
Production ceases. Depreciation on the special equipment amounts to P20,000 year. If production of the
clamp is stopped, the
Special equipment can be sold for P 18,000; if production continues, however, the equipment will be
useless for further
Production at the end of one year and will have no salvage value. The clamp has a selling price of P10 a
unit. Ignoring tax
Effects, the minimum number of units that would have to be sold in the current year to break even on a
cash flow basis is
A.4,500 units
B.20,000 units
C.36,000 units
D.5,000 units

Question 16
At a breakeven point of 400 units sold, the variable costs were P400 and the fixed costs were P200.
What will the 401st unit
Sold contribute to profit before income taxes?
A.PO
В.РО.50
C.P1.00
D.P1.50

Question 12
Firms with high of operating leverage
A. will have a more significant shift in income as sales volume changes
B. have lower fixed costs
C. have low contribution margin ratios
D. are less dependent on volume to add profits

Question 30
.Kristin is a distributor of brass picture frames. For 2021, she plans to purchase for P30 each and sell
them for P45 each.
Kristin’s fixed costs are expected to be P240,000. Kristin’s only other costs will be variable costs of P60
per shipment for
Preparing the invoice and delivery documents, organizing the delivery, and following up for collecting
accounts receivable. The
P60 cost will be incurred each time Kristin ships an order of picture frames. Regardless of the number of
frames in the order.
Suppose Kristin sells 40,000 picture frames in 8000 shipments in 2021, what is the Kristin’s operating
income for 2021.?
A.P246,000
B.P325,000
C.P211,000
D. P312,000
Select the correct response:

Question 44
A conservative financing plan involves
A. Heavy reliance on debt.
B. Heavy reliance on equity.
C. High degree of financial leverage.
D. High degree of combined leverage.

Question 20
If EBIT equals P140,000 and interest equals P21,000, with rate of 31%, what is the degree of financial
leverage?
a. 6.67x
b. 1.18x
C. 1.00x
D. 1.12x

Question 13
A highly automated plant would generally have
A. More variable than fixed costs.
B. More fixed than variable costs.
C. All fixed costs.
D. All variable costs.
Select the correct response:

Question 22
To which function of management is CVP analysis more applicable?
A. Planning
B. Organizing
C. Directing
D. Controlling

Question 35
Combined leverage is concerned with the relationship between
A. Changes in EBIT and changes in EPS.
B. Changes in volume and changes in EPS.
C. Changes in volume and changes in EBIT.
D. Changes in EBIT and changes in net income.

Question 43
30.Redwood Furniture Company produces two kinds of chairs: an oak model and a chestnut wood
model. The oak model sells
for P60 and the chestnut model sells for P100. The variable expenses are as follows:
Oak Chesnut
Variable production costs per unit P30 P35
Variable selling expenses per unit P 6P5
Expected sales in units next year are: 5,000 oak chairs and 1,000 chestnut chairs. Fixed expenses are
budgeted at P135,000 per
Year.
The company’s overall contribution margin ratio for the sales mix expected is
А40%. С. 50%.
B.45%. d. 60%

Question 24
29.Redwood Furniture Company produces two kinds of chairs: an oak model and a chestnut wood
model. The oak model sells
For P60 and the chestnut model sells for P100. The variable expenses are as follows:
Oak Chesnut
Variable production costs per unit P30 P35
Variable selling expenses per unit P6P5
Expected sales in units next year are: 5,000 oak chairs and 1,000 chestnut chairs. Fixed expenses are
budgeted at P135,000 per
Year.
The yearly break-even point in total sales for the sales mix expected is
A.P270,000. C. P485,000.
B.P300,000. D. P500,000.
Question 26
Given the following income statement for OR Company for 2021:
Sales (30.000 units) P600,000
Less Operating Expenses:
Variable P390,000
Fixed 140,000
Total Expenses 530,000
Net income P70,000
The Company’s degree of operating leverage is
A.3. c. 4.28.
b. 2. D. 8.57.

Question 8
33.Given the following income statement for OR Company for 2021:
Sales (30.000 units) P600,000
Less Operating Expenses:
Variable P390,000
Fixed 140,000
Total expenses 530,000
Net income P70,000
The Company’s margin of saféty (jounded to the nearest whole percent) is
A.33% c. 12%
B.50% d. 67%

Question 37
7.In break-even analysis, the contribution margin is defined as
A. sales In minus variable costs.
B. sales minus fixed costs.
C. variable costs minus fixed costs.
D. fixed costs minus variable costs.

Question 21
A firm would be indifferent between financing plans when
A. Debit is equal to equity.
B. Return on assets equals return on equity.
C. The cost of borrowed funds equals the return on equity.
D. The cost of borrowed funds equals the return on assets.

Question 15
Kristin is a distributor of brass picture frames. For 2021, she plans to purchase for P30 each and sell
them for P45 each.
Kristin’s fixed costs are expected to be P240,000. Kristin’s only other costs will be variable costs of P60
per shipment for
Preparing the invoice and delivery documents, organizing the delivery, and following up for collecting
accounts receivable. The
P60 cost will be incurred each time Kristin ships an order of picture frames. Regardless of the number of
frames in the order.
Suppose Kristin anticipates making 500 shipments in 2021. How many picture frames must Kristin sell to
break even in 2021?
A. 18,000
B. 12,000
C. 14,000
D. 16,000

Question 45
.Cost-volume-profit analysis allows management to determine the relative profitability of a pröduct by
A. highlighting potential bottlenecks in the production process.
B. determining the contribution margin per unit arid projected profits. At various levels of production.
C. Assigning costs to a product-in a manner that maximizes the contribution margin.
D. keeping fixed costs to an absolute minimum.

Question 34
Kristin is a distributor of brass picture frames. For 2021, she plans to purchase for P30 each and sell
them for P45 each.
Kristin’s fixed costs are expected to be P240,000. Kristin’s only other costs will be variable costs of P60
per shipment for
Preparing the invoice and delivery documents, organizing the delivery, and following up for collecting
accounts receivable. The
P60 cost will be incurred each time Kristin ships an order of picture frames. Regardless of the number of
frames in the order.
Suppose Kristin sells 40,000 picture frames in 1,000 shipments in 2021, what is the Kristin’s operating
income for 2021?
a. P300,000 c. P240,000
B. P420,000 d. P450,000

Question 29
Given the following income statement for OR Company for 2021:
Sales (30.000 units) P600,000
Less Operating Expenses:
Variable P390,000
Fixed 140,000
530,000
Net income P70,000
The break-even point for 2021 is
A.26,600 units. C. P460,000.
B.17,500 units. D. P400,000

Question 9
An organization’s sales revenue is expected to be P 72,600, a 10% increase over last year. For the same
period, total fixed costs
Of P22,000 are expected to be the same as last year. If the number of units sold is expected to increase
by 1,100, the marginal
Revenue per unit will be
A.P4.00
B.P20.00
C.P6.00
D.P46.00

Question 19
The contribution margin increases when sales volume remains the same anc
A. variable cost per unit decreases.
B. variable cost per unit increases.
C. fixed costs decrease.
D. fixed costs increase.

Question 4
If the business cycle were just beginning its upswing, which firm would you anticipate would be likely to
show the best growth
In EPS over the next year? Firm A has high combined leverage and Firm B has low combined leverage.
A. Firm A
B. Firm B
C. Indifferent between the two
D. It depends on how much financial leverage each firm has.

Question 6
LESLIE COMPANY sells products X, Y, and Z. Leslie sells three units of X for each unit of Z, and two units
of Y for each unit of X.
The contribution margins are P 1.00 per unit of X, P 1.50 per unit of Y, and P3.00 per unit of Z. Fixed
costs are P600,000. How
Many units of X would Leslie sell at the break-even point?
A.40,000
B.360,000
C.120,000
D.400,000

Question 36
Firms with a high degree of operating leverage are
A. Easily capable of surviving large changes in sales volume,
B. Usually trading off lower levels of risk for higher profits.
C. Significantly affected by changes in interest rates,
D. Trading off higher fixed costs for lower per-unit variable costs.

Question 23
The OLIVIA COMPANY plans to market a new product. Based on its market studies, Olivia estimates that
it can sell 5,500 units
In 2020. The selling price will be P2.00 per unit. Variable costs are estimated to be 40% of the selling
price. Fixed costs are
Estimated to be P6,000. What is the break-even point?
A.3,750 units
B.5,500 units
C.5,000 units
D.7,500 units

Question 28
40.In planning its operations for 2020 based on a sales forecast of P6,000,000 LUZVIMIN, INC. prepared
the following
Estimated costs and expenses:
Variable Fixed
P1,600,000
1,400,000
Direct materials.
Direct labor.
Factory overhead. 600,000 P900,000
Selling expenses. 240,000 360,000
Administrative expenses.60 000 140 000
What would be the amount of sales pesos at the break-even point?
A.P2,250,000
B.P3,500,000
C.P4,000,000
D.P5,300,000

Question 41
A company has revenues of P500,00, variable costs of P300,000 and pretax profit of P150,000. If the
company increased the
Sales price per unit by 10%, reduced fixed costs by 20%, and left variable cost per unit unchanged, what
would be the new
Breakeven point in pesos?
A.P 88,000
B. P100,000
C. P110,000
D. P125,000

Question 49
Marcus Company manufactures and sells a single product, Product E The product sells for P60 per unit
and has a C/M ratio of
40%. The company’s monthly fixed expenses are P28,800. If the selling price were reduced by 5%,
variable costs reduced by
P1.00, and fixed costs increased to a total of P38,400, how many units would need to be sold to earn an
income of P21,000
(ignore taxes)?
a. 1,000 units. C. 1,700 units.
b. 2,700 units. D. 2,950 units.

Question 7
Which of the following would decrease contribution margin per unit the most?
A.15% decrease in selling price.
B.15% increase in variable expenses.
C.15% increase in selling price.
D.15% decrease in variable expenses.
E.15% decrease in fixed expenses.

Question 32
.Conservatively leveraged Firm C and highly leveraged Firm H operate at the same level of earnings
before interest and taxes
Where the return on assets is greater than the cost of debt.
A. Firm C will have a higher return on equity than H.
B. Firm H will have a higher return on equity than C.
C. The return on equity will not be affected by financial leverage.
D. The return on equity will be the same at an equal level of earnings.

Question 17
The degree of operating leverage is computed as
A. Percent change in operating profit divided by percent change in net income.
B. Percent change in volume divided by percent change in operating profit.
C. Percent change in EPS divided by percent change in operating income.
D. Percent change in operating income divided by percent change in volume.

Question 38
9.The break-even point can be calculated as
A. Variable costs divided by contribution margin.
B. Total costs divided by contribution margin.
C. Variable cost times contribution margin.
D. Fixed cost divided by contribution margin.

Question 50
Firm A employs a high degree of operating leverage; Firm B takes a more conservative approach. Which
of the following
comparative statements about firms A and Bis true?
A.A has a lower break-even point than B, but A's profit grows faster after the break-even.
B.A has a higher break-even point than B, but A's profit grows slower after the break-even.
C.B has a lower break-even point than A, but A's profit grows faster after break-even.
D.B has a lower break even point than A, and profit grows the same rate for both companies after the
breakeven point.

Question 10
The concept of operating leverage involves the use of returns at high levels of operation.
A. Fixed costs
B. Variable costs
C. Marginal costs
D. Semi-variable costs

Question 3
If a firm has a break-even point of 20,000 units and the contribution margin on the firm's single product
is P3.00 per unit and
fixed costs are P60,000, what will the firm's net income be at ,sales of 30,000 units?
A. P90,000
B. P30,000
C. P15,000
D. P45,000
Question 27
Which of the following is concerned with the change in operating profit as a result of a change in
volume?
A. Financial leverage
B. Break-even point
C. Operating leverage
D. Combined leverage

Question 33
The systematic examination of the relationships among selling prices, volume of sales and production
costs, and profits
termed:
A. Contribution margin analysis
B. Cost volume profit analysis
C. Budgetary analysis
D. gross profit analysis

Question 5
21.Under which of the following conditions could the overuse of financial leverage be detrimental to the
firm?
A. Stable industry
B. Cyclical demand for the firm's products.
C. Upswing of business cycle.
D.Low interest cost compared to return on assets.

Question 46
The term contribution margin is best defined as the:
A. difference between fixed costs and variable Costs.
B. difference between revenue and fixed costs
C. Amount available to covet fired costs-and profit.
D. amount available to cover variable costs.

Question 14
When a firm employs no debit
A. It has a financial leverage of one.
B. It has a financial leverage of zero.
C. Its operating leverage is equal to its financial leverage.
D. It will not be profitable.