Theories end

59.Introducing income taxes into cost-volume-profit analysis

A.raises the break-even point.

B.lowers the break-even poi

C.increases unit sales needed to earn a particular target profit.

D.decreases the contribution margin percentage. Bobadilla

60.If a company is earning a profit, its fixed costs

A.are less than total contribution margin.

B.are equal to total contribution margin.

C.are greater than total variable costs.

D.can be greater than or less than total contribution margin. Bobadilla

61.A cost-volume-profit graph reflects relationships

A.that are expected to hold over the relevant range.

B.of results over the past few years.

C.that the company's managers would like to have happen.

D.likely to prevail for the industry. Bobadilla

62.The following diagram is a cost-volume-profit graph for a manufacturing company.

Volume

The difference between line AB and line AC (area BAC) is the

A.contribution ratio. C.total variable cost.

B.contribution margin per unit. D.total fixed cost. Bobadilla

63.Select the answer that best describes the labeled item on the diagram.

A.Area CDE represents the area of net loss.

B.Line AC graphs total fixed costs.

C.Point D represents the point at which the contribution margin per unit increases.

D.Line AC graphs total costs. Bobadilla

64.In a cost-volume-profit graph

A.the total revenue line crosses the horizontal axis at the breakeven point. Bobadilla

B.beyond the breakeven sales volume, profits are maximized at the sales volume where total

revenues equal total costs.

C.an increase in unit variable costs would decrease the slope of the total cost line.

D.an increase in the unit selling price would shift the breakeven point in units to the left.

65.An increase in the income tax rate

A.raises the break-even point.

B.lowers the break-even point.

C.decreases sales required to earn a particular after-tax profit.

D.increases sales required to earn a particular after-tax profit. Bobadilla

66.If the sales mix shifts toward higher contribution margin products, the break-even point

A.decreases.

B.increases.

C.remains constant.

D.it is impossible to tell without more information. Bobadilla

67.Target costing is

A.a substitute for CVP analysis.

B.used by companies that cannot classify their costs by behavior.

C.inappropriate if a company has already established a target profit.

D.used in decisions to offer a new product or enter a new market. Bobadilla

68.In order for the break-even computation to be meaningful to management, sales mix should be

computed using the

A.expected mix C.most desirable mix

B.least desirable mix D.traditional mix Bobadilla

69.Which of the following is a true statement about sales mix?

A.Profits may decline with an increase in total peso of sales if the sales mix shifts to sell

more of the high contribution margin product.

B.Profits may decline with an increase in total peso of sales if the sales mix shifts to sell
more of the lower contribution margin product.

C.Profits will remain constant with an increase in total peso of sales if the total sales in units

remains constant.

D.Profits will remain constant with a decrease in total peso of sales if the sales mix also

remains constant.