ACCTG 233
CVP Analysis Theories Reviewer
Hulguin, Alyssa Isabel D.
BSA - 2
1. Cost-volume-profit analysis assumes that over
the relevant range
A. Variable costs are nonlinear.
B. Fixed costs are nonlinear.
C. Selling prices are unchanged.
D. Total costs are unchanged. (aicpa)
2. Breakeven analysis assumes linearity over the
relevant range with respect to
Total costs Total revenue Total costs Total revenue
A. Yes No C. No Yes
B. Yes Yes D. No No (aicpa)
3. The amount of variable cost per unit and total
fixed cost within a relevant range behave this way
in relation to production level:
A. Production increases, unit variable cost
increases, total fixed cost increases.
B. Production decreases, unit variable cost
decreases, total fixed cost decreases.
C. Production increases, unit variable cost remains
constant, total fixed cost remains the same.
D. Production increases, unit variable cost
decreases, total fixed cost remains the same.
(rpcpa)
4. One of the major assumptions limiting to
reliability of break-even analysis is that
A. The cost of productivity will continually
increase.
B. The cost of production factors varies with
changes in technology.
C. Total variable cost will remain unchanged over
the relevant range.
D. Total fixed cost will remain unchanged over the
relevant range. (rpcpa)
5. At breakeven point, fixed cost is always
A. Less than contribution margin.
B. Equal to contribution margin.
C. More than variable cost.
D. More than the contribution margin. (rpcpa)
6. Contribution margin is the excess of revenues
over
A. Direct cost.
B. Manufacturing cost.
C. Cost of good sold.
D. All variable costs. (rpcpa)
7. Cost-volume-profit relationships that are
curvilinear may be analyzed linearly by considering
only
A. Fixed and semi-variable costs.
B. Relevant fixed costs.
C. Relevant variable costs.
D. A relevant range of volume. (aicpa)
8. The rate or amount that sales may decline
before losses are incurred is called:
A. Sensitive level of income.
B. Variable sales ratio.
C. Margin safety .
D. Residual income rates. (rpcpa)
9. Given the following notations, what is the
breakeven sales level in units?
SP = selling price per unit
FC = total fixed costs
VC = variable cost per unit
A. SP (FC VC). C. VC (SP – FC).
B. FC 1 – (VC SP) . D. FC (SP – VC).
Questions x and xi are based on the following
selected budgeted data of Russel Gil Company for
the coming
year:
Selling price per unit P 12.00
Budgeted sales 600,000
Fixed expenses 150,000
Variable cost per unit 8.00
10. What is the breakeven in sales in units?
A. 35,000 C. 40,000
B. 37,500 D. 45,000
11. What is the margin of safety ratio in percent?
A. 15% C. 30%
B. 20% D, 25% (rpcpa)
12. For the period just ended Chanda, Inc.,
generated the following operating results in
percentages
Total sales amounted to P3.0 million. at what level
is break-even sales?
A. P3,750,000 C. P1,875,000
B. P1,850,000 D. P2,500,000 (rpcpa)
13. Which of the following will result in raising the
breakeven point?
A. A decrease in the variable cost per unit.
B. An increase in the semi-variable cost per unit.
C. An increase in the contribution margin per unit.
D. A decrease in income tax rates. (cia)
14.A company manufactures a single product.
Estimated cost data regarding this product and
other
information for the product and the companies
are as follows:
Sales price per unit P40
Total variable production cost per unit P22
Sales commission (on sales) 5%
Fixed costs and expenses:
Manufacturing overhead P5,598,720
General and administrative P3,732,480
Effective income tax rate 40%
The number of units the company must sell in the
coming year in order to reach its breakeven point
is
A. 388,800 units. C. 583,200 units.
B. 518,400 units. D. 972,000 units. (cia)
15. Fely Company reported the following for the
year just ended:
Budgeted sales P 3,000,000
Break-even sales 2,100,000
Budgeted contribution margin 1,800,000
Cashflow break-even 600,000
The company’s margin of safety is
A. P 900,000 C. P1,200,000
B. P2,400,000 D. P1,500,000 (rpcpa)
Questions xvi and xvii are based on the following
information. Lan Pala Tropical Stuff Toys
manufactures
and sells dolls. The following information relates
to the operating results for the last quarter:
Stuff toys sold 19,375
Breakeven point in number of toys 15,500
Breakeven point in peso sales P65,875
Total fixed costs P47,275
16. What was Lan’s variable cost per doll?
A. P 4.25 C. P 1.20
B. P 3.05 D. P 0.96 (rpcpa)
17. Bulacan Gold, Inc. manufactures and sells key
rings embossed with college names and slogans.
Last year, the key rings sold for P75 each, and the
variable costs to manufacture them were P22.50
per
unit. The company needed to sell 20,000 key rings
to break-even. The net income last year was
P50,400. The company expects the following for
the coming year:
The selling price of the key rings will be P90.
Variable manufacturing costs per unit will
increase by one-third.
Fixed cost will increase by 10%.
The income tax rate will remain unchanged.
For the company to break-even the coming year,
the company should sell
A. 21,600 C. 21,250
B. 2,600 D. 19,250
18. Ipil-ipil Company would like to market a new
product at a selling price of P15 per unit. Fixed
costs for his product are P1,000,000 for less than
500,000 units of output and P1,500,000 for
500,000 or more units of output. The contribution
margin percentage is 20%. How many units of this
product must be sold to earn a target operating
income of P1 million?
A. 754,900 C. 825,530
B. 833,334 D. 785,320 (rpcpa)
Questions xix and xx are based on the following
information. The data below pertain to two types
of
products manufactured by Korn Corporation:
Unit sales price Unit variable costs
Product Y P 120 P 70
Product Z 500 200
Fixed costs total P300,000 annually. The expected
mix in units is 60% for product Y and 40% for
product Z.
19.How much is Korn’s breakeven sales in units?
A. 857 C. 2,000
B. 1,111 D. 2,459 (aicpa / rpcpa)
20. How much is Korn’s breakeven sales in pesos?
A. P300,000 C. P475,000
B. P420,000 D. P544,000 (aicpa)