Q1. Breeze Company has a contribution margin of $4,000 and fixed costs of $1,000.

If the Plan B: Sell the dog collars through the company retail stores in a special packaging that
total contribution margin increases by $1,000, operating profit would: highlights the locater chip function. The packaging costs are $5 per unit. There will be an
additional $10,000 in fixed monthly costs for retail shelfing and administration. Sales price
increase by more than $1,000. would be $55 per collar. Estimated monthly sales are 5,500 units.
remain unchanged.
decrease by $1,000. Plan C: Sell the dog collars using commissioned sales representatives. The special
increase by $1,000. packaging would be used at $5 per unit. There are no additional fixed costs. The sales
commission is 15% on the sales price of $60 per collar. Estimated monthly sales are 6,000
Q2. Which of the following statements accurately describes the cost behavior of fixed costs units.
in response to changes in business volume levels that take place within the relevant range
of activity? Rank the three marketing plans in order of operating income from lowest to highest.

Total fixed costs change with increases or decreases in volume.

Total fixed costs remain constant within the relevant range of activity. Plan A, Plan B, Plan C
Fixed costs on a total and per unit basis both remain constant within the relevant range Plan C, Plan B, Plan A
of activity. Plan B, Plan A, Plan C
Fixed costs on a total and per-unit basis both change with increases or decreases in Plan A, Plan C, Plan B
volume.
Q6. Swimtech, Inc. produces professional-grade racing swim goggles. The marketing
Q3. Which of the following statements accurately describes the cost behavior of variable department is projecting a wide range of sales for one of the company's new goggle
costs in response to changes in business volume levels that take place within the relevant products. The production team has established the expected cost structure across several
range of activity? production levels that represent shifts in variable costs and fixed costs due to necessary
adjustments to production processes. These cost shifts represent movements across relevant
Variable costs per unit change with increases or decreases in volume. manufacturing ranges for the range of potential sales. Manufacturing is analyzing the
Variable costs on a total and per-unit basis both remain constant within the relevant market potential for its specialty turbines. The cost and price data for each production
range of activity. range are presented below.
Variable costs on a total and per-unit basis both change with increases or decreases in
volume. Units produced and sold 1,000 to 5,999 6,000 to 10,999 11,000 to 15,999 16,000 to 20,000
Variable costs on a per-unit basis remain constant. Total fixed costs $200,000 $400,000 $600,000 $800,000
Unit variable cost $50 $50 $45 $45
Q4. Sales revenue minus total variable costs is equal to: Unit sales price $100 $100 $100 $100

gross profit margin. Which one of the following production and sales levels would produce the highest
net operating profit. operating income for Swimtech?
contribution margin.
breakeven margin. 8,000 units
17,000 units
Q5. PetFriends Products has just developed a new electronic dog collar with a locater chip. 14,000 units
The variable manufacturing costs are $30 per unit with monthly fixed costs of $50,000. The 11,000 units
marketing team has put together three different plans to market and sell these new dog
collars.

Plan A: Sell the dog collars online at $50 per unit. There are no additional selling costs.
The customer pays for shipping. Estimated monthly sales are 4,200 units.
Q7. Alton Industries is considering introducing a new product that will require a $500,000
investment of capital. The necessary funds would be obtained with a bank loan at an
interest rate of 10%. The fixed operating costs associated with the product would be
$200,000, while the contribution margin percentage would be 35%. Assuming a selling
price of $30 per unit, determine the number of units (rounded to the nearest whole unit)
Alton would have to sell to generate earnings before interest and taxes (EBIT) of 25% of
the amount of capital invested in the new product. (Round to the nearest unit.)
10,833 units
16,667 units
30,952 units
66,667 units
Q8. Kipper Company has set the price for its single product at $50 per unit. The
contribution margin ratio is 30%, and fixed costs are $10,000. Sales were 3,000 units in
June and 4,000 units in July. How much greater is the July operating income than the June
operating income?
$35,000
$45,000
$15,000
$20,000
Q11. Romashka, Inc., plans on introducing a new product. The marketing manager
forecasts a unit selling price of $500. The variable cost per unit is estimated to be $100 per
unit. In addition, there is a total of $110,000 fixed administrative support cost and $150,000
in fixed production costs associated with these units.
What quantity will the company have to sell to breakeven?
650 units
520 units
375 units
275 units
Q12. Which of the following results in an increase in the breakeven point?
Costs per unit decrease and sales price remains unchanged.
Costs per unit decrease and sales price increases.
Costs per unit remain unchanged and sales price increases.
Costs per unit increase and sales price remains unchanged.

Q9. Kipper Company has set the price for its single product at $50 per unit. The
contribution margin ratio is 30%, and fixed costs are $10,000. Sales were 3,000 units in
June and 4,000 units in July. How much greater is the July operating income than the June
operating income?

$35,000
$45,000
$15,000
$20,000

Q10. The financial analyst for the company calculates that the breakeven point in revenue
Q13. Given a unit selling price of $100, fixed costs of $3,000, variable costs per unit of
for a product is $250,000. The product sells for $25 per unit. Fixed costs are $100,000.
$75, and a total quantity of 150 units actually sold, what is the breakeven point?
What is the contribution margin per unit?
60 units
$15.00
40 units
$10.00
120 units
$5.00
30 units
$8.00
Q14. Breakeven quantity is defined as the volume of output at which revenues are equal to: If the selling price is $24 per unit, the breakeven point in units (rounded to the nearest
hundred) for shirts is:
total costs.
marginal costs. 16,745 units
variable costs. 23,333 units
fixed costs. 7,500 units
20,000 units
Q15. Zeffer Corporation is a producer of ice cream that it wholesales to grocery stores by
the carton. Zeffer is preparing next year's budget. The pro forma income statement for the Q17. What aspect of C-V-P analysis is represented by the number of units produced or the
current year is presented below. number of units sold?
Sales $1,100,000
Cost of sales: The activity level in the business process
Direct materials $100,000 The behavior of costs (fixed versus variable)
Direct labor 50,000 The contribution margin that covers fixed costs
Variable overhead 140,000 The target profit for the organization
Fixed overhead 100,000 (390,000)
Gross profit $710,000 Q18. Finn Products, a start-up company, wants to use cost-based pricing for its only
Selling and G&A product, a unique new video game. Finn expects to sell 10,000 units in the upcoming year.
Variable $150,000 Variable costs will be $65 per unit and annual fixed operating costs (including
Fixed 150,000 (300,000) depreciation) amount to $80,000. Finn's balance sheet is shown here.
Operating income $410,000
Assets Liabilities and Equity
What is Zeffer's budgeted breakeven point for the upcoming year? (Round to the nearest Current assets $100,000 Accounts payable $25,000
dollar.) Plant and equipment $425,000 Debt $200,000
Equity $300,000
$416,667
$464,789 What price on the new product is needed if Finn wants to earn a 20% return on equity
$625,000 (ROE) and the tax rate is 25%?
$733,333
$73.00 per unit
Q16. Western Wear Co. is launching a new line of shirts. The following cost information $81.00 per unit
relates to the product line. $87.00 per unit
Unit Costs $65.00 per unit
Direct Materials $9.25
Direct Labor $4.00 Q19. Carson Inc. manufactures only one product and is preparing its budget for next year
Distribution $1.75 based on the following information:

Direct Materials, Direct Labor, and Distribution are all variable costs. The company will Selling price per unit $100
incur $180,000 of additional fixed costs associated with this new product. A corporate fixed Variable costs per unit 75
charge of $30,000 currently absorbed by other products will be allocated to this new Fixed costs 250,000
product (on top of the $180,000 fixed costs associated directly with this new product). Effective tax rate 35%
If Carson wants to achieve a net after-tax income of $1.3 million next year, its sales must Q22. MultiFrame Company has the following revenue and cost budgets for the two
be: products it sells.
90,000 units. Plastic Frames Glass Frames
70,000 units. Sales price $ 10.00 $ 15.00
80,000 units. Direct materials 2.00 3.00
62,000 units. Direct labor 3.00 5.00
Fixed overhead 3.00 4.00
Q20. Delphi Company has developed a new product that will be marketed for the first time Net income per unit $ 2.00 $ 3.00
during the next fiscal year. Although the Marketing Department estimates that 35,000 units Budgeted unit sales 100,000 300,000
could be sold at $36 per unit, Delphi's management has allocated only enough
manufacturing capacity to produce a maximum of 25,000 units of the new product The budgeted unit sales equal the current unit demand, and total fixed overhead for the
annually. The fixed costs associated with the new product are budgeted at $450,000 for the year is budgeted at $975,000. Assume that the company plans to maintain the same
year which includes $60,000 for depreciation on new manufacturing equipment. Data proportional mix. In numerical calculations, MultiFrame rounds to the nearest cent and
associated with each unit of product are presented below. Delphi is subject to a 40% unit.
income tax rate.
The total number of frames needed to break even is:
Variable Costs
Direct material $7.00 37,500 total frames.
Direct labor 3.50 150,000 total frames.
Manufacturing overhead 4.00 112,500 total frames.
Total variable manufacturing cost 14.50 162,500 total frames.
Selling expenses 1.50
Total variable cost $16.00 Q23. Simon's Wholesale Flowers produces two types of flower bouquets that it distributes
to retail shops: simple bouquets and upgraded bouquets. Total fixed costs for the firm are
Delphi Company's management has stipulated that it will not continue to approve the $184,000. Variable costs and sales data for these bouquets are presented here.
continued manufacture of the new product unless the after-tax profit is at least $75,000 the
first year. The unit selling price to achieve this target profit must be at least: Simple Bouquets Upgraded Bouquets
Selling price per unit $24.00 $40.00
$39.00. Variable cost per unit $20.00 $32.00
$41.40. Budgeted sales (units) 20,000 30,000
$36.60.
$35.50. How many bouquets will be required to reach the breakeven point?

Q21. Carl's Corp is experiencing significant competition that is driving down price from
$60 to $50 per unit. If the company chooses to match the new price in the market, the
marketing team estimates that sales will rise from 700,000 to 800,000 units. Carl's Corp's
current variable cost per unit is $45, and total fixed costs are $500,000. Suppose Carl's
Corp would like to maintain a 25% target contribution margin on its sales revenue. To
achieve this target, the company must lower its variable production costs by how much?
10,615 simple bouquets and 17,692 upgraded bouquets
15,333 simple bouquets and 15,333 upgraded bouquets
10,952 simple bouquets and 17,524 upgraded bouquets
11,500 simple bouquets and 17,250 upgraded bouquets

$0.00 per unit

$7.50 per unit
$11.45 per unit
$15.00 per unit
Q24. Simon's Wholesale Flowers produces two types of flower bouquets that it distributes
to retail shops: simple bouquets and upgraded bouquets. Total fixed costs for the firm are
$184,000. Variable costs and sales data for these bouquets are presented here.

Simple Bouquets Upgraded Bouquets

Selling price per unit $24.00 $40.00
Variable cost per unit $20.00 $32.00
Budgeted sales (units) 20,000 30,000

How many bouquets will be required to reach the breakeven point?

10,615 simple bouquets and 17,692 upgraded bouquets

15,333 simple bouquets and 15,333 upgraded bouquets
10,952 simple bouquets and 17,524 upgraded bouquets
11,500 simple bouquets and 17,250 upgraded bouquets

Q25. Magan Company carries three household cleaning products: Waxen, Buffo, and
Bright. Waxen is the company's most profitable product (highest contribution margin).
Bright is the least profitable. Which of the following events will definitely increase the
firm's overall breakeven point for the upcoming accounting period?

An increase in Bright's selling price

A decrease in anticipated sales of Waxen relatives to sales of Buffo and Bright
A decrease in Waxen's raw material cost
The installation of new computer-controlled machinery and subsequent layoff of
.