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activity based questions




Question;MULTIPLE CHOICE QUESTIONSUse the;following to answer questions 31-32;31. Line A is the;A. fixed cost line.;B. variable cost line.;C. total cost line.;D. total revenue line.;E. profit line.;32. The triangular area between the horizontal;axis and Line A, to the right of 4,000, represents;A. fixed cost.;B. variable cost.;C. profit.;D. loss.;E. sales revenue.;33. A recent income statement of Oslo Corporation;reported the following data;Units sold;8,000;Sales revenue;$7,200,000;Variable costs;4,000,000;Fixed costs;1,600,000;If;the company desired to earn a target net profit of $480,000, it would have to;sell;A. 1,200 units.;B. 2,800 units.;C. 4,000 units.;D. 5,200 units.;E. an amount other than those above.;34. Yellow, Inc., sells a single product for;$10. Variable costs are $4 per unit and;fixed costs total $120,000 at a volume level of 10,000 units. What dollar sales level would Yellow have to;achieve to earn a target net profit of $240,000?;A. $400,000.;B. $500,000.;C. $600,000.;D. $750,000.;E. $900,000.;Use the;following to answer questions 35-37;Archie sells a;single product for $50. Variable costs;are 60% of the selling price, and the company has fixed costs that amount to;$400,000. Current sales total 16,000;units.;35. Archie;A. will break-even by selling 8,000 units.;B. will break-even by selling 13,333 units.;C. will break-even by selling 20,000 units.;D. will break-even by selling 1,000,000 units.;E. cannot break-even because it loses money on;every unit sold.;36. Each unit that the company sells will;A. increase overall profitability by $20.;B. increase overall profitability by $30.;C. increase overall profitability by $50.;D. increase overall profitability by some other;amount.;E. decrease overall profitability by $5.;37. In order to produce a target profit of;$22,000, Archie's dollar sales must total;A. $8,440.;B. $21,100.;C. $1,000,000.;D. $1,055,000.;E. an amount other than those above.;38. The difference between budgeted sales revenue;and break-even sales revenue is the;A. contribution margin.;B. contribution-margin ratio.;C. safety margin.;D. target net profit.;E. operating leverage.;39. Maxie's budget for the upcoming year revealed;the following figures;Sales revenue;$840,000;Contribution margin;504,000;Net income;54,000;If;the company's break-even sales total $750,000, Maxie's safety margin would be;A. $(90,000).;B. $90,000.;C. $246,000.;D. $336,000.;E. $696,000.;40. If a company desires to increase its safety;margin, it should;A. increase fixed costs.;B. decrease the contribution margin.;C. decrease selling prices, assuming the price;change will have no effect on demand.;D. stimulate sales volume.;E. attempt to raise the break-even point.;41. Dana sells a single product at $20 per;unit. The firm's most recent income;statement revealed unit sales of 100,000, variable costs of $800,000, and fixed;costs of $400,000. If a $4 drop in;selling price will boost unit sales volume by 20%, the company will experience;A. no change in profit because a 20% drop in;sales price is balanced by a 20% increase in volume.;B. an $80,000 drop in profitability.;C. a $240,000 drop in profitability.;D. a $400,000 drop in profitability.;E. a change in profitability other than those;above.;42. Grimes is studying the profitability of a;change in operation and has gathered the following information;Current;Operation;Anticipated;Operation;Fixed costs;$38,000;$48,000;Selling price;$16;$22;Variable cost;$10;$12;Sales (units);9,000;6,000;Should;Grimes make the change?;A. Yes, the company will be better off by;$6,000.;B. No, because sales will drop by 3,000 units.;C. No, because the company will be worse off by;$4,000.;D. No, because the company will be worse off by;$22,000.;E. It is impossible to judge because additional;information is needed.;43. Gleason sells a single product at $14 per;unit. The firm's most recent income;statement revealed unit sales of 80,000, variable costs of $800,000, and fixed;costs of $560,000. Management believes;that a $3 drop in selling price will boost unit sales volume by 20%. Which of the following correctly depicts how;these two changes will affect the company's break-even point?;Drop in;Sales Price;Increase in;Sales Volume;A.;Increase;Increase;B.;Increase;Decrease;C.;Increase;No effect;D.;Decrease;Increase;E.;Decrease;Decrease;44. All other things being equal, a company that;sells multiple products should attempt to structure its sales mix so the;greatest portion of the mix is composed of those products with the highest;A. selling price.;B. variable cost.;C. contribution margin.;D. fixed cost.;E. gross margin.;45. O'Dell;sells three products: R, S, and T.;Budgeted information for the upcoming accounting period follows.;Product;Sales Volume (Units);Selling Price;Variable Cost;R;16,000;$14;$9;S;12,000;10;6;T;52,000;11;8;The company's weighted-average unit;contribution margin is;A. $3.00.;B. $3.55.;C. $4.00.;D. $19.35.;E. an;amount other than those above.;46. Wells Corporation has the following sales mix;for its three products: A, 20%, B, 35%, and C, 45%. Fixed costs total $400,000 and the;weighted-average contribution margin is $100.;How many units of product A must be sold to break-even?;A. 800.;B. 4,000.;C. 20,000.;D. An amount other than those above.;E. Cannot be determined based on the information;presented.;Use the;following to answer questions 47-50;Lamar;Co., makes and sells two types of shoes, Plain and Fancy. Data concerning these products are as;follows;Plain;Fancy;Unit selling;price;$20.00;$35.00;Variable cost;per unit;12.00;24.50;Sixty percent;of the unit sales are Plain, and annual fixed expenses are $45,000.;47. The weighted-average unit contribution margin;is;A. $4.80.;B. $9.00.;C. $9.25.;D. $17.00.;E. an amount other than those above.;48. Assuming that the sales mix remains constant;the total number of units that the company must sell to break even is;A. 2,432.;B. 2,647.;C. 4,737.;D. 5,000.;E. an amount other than those above.;49. Assuming that the sales mix remains constant;the number of units of Plain that the company must sell to break even is;A. 2,000.;B. 3,000.;C. 3,375.;D. 5,000.;E. 5,625.;50. Assuming that the sales mix remains constant;the number of units of Fancy that the company must sell to break even is;A. 2,000.;B. 3,000.;C. 3,375.;D. 5,000.;E. 5,625.;51. Which of the following underlying assumptions;form(s) the basis for cost-volume-profit analysis?;A. Revenues and costs behave in a linear manner.;B. Costs can be categorized as variable, fixed;or semivariable.;C. Worker efficiency and productivity remain;constant.;D. In multiproduct organizations, the sales mix;remains constant.;E. All of the above are assumptions that;underlie cost-volume-profit analysis.;52. Cost-volume-profit analysis is based on;certain general assumptions. Which of;the following is not one of these assumptions?;A. Product prices will remain constant as volume;varies within the relevant range.;B. Costs can be categorized as fixed, variable;or semivariable.;C. The efficiency and productivity of the;production process and workers will change to reflect manufacturing advances.;D. Total fixed costs remain constant as activity;changes.;E. Unit variable cost remains constant as;activity changes.;53. The assumptions on which cost-volume-profit;analysis is based appear to be most valid for businesses;A. over the short run.;B. over the long run.;C. over both the short run and the long run.;D. in periods of sustained profits.;E. in periods of increasing sales.;54. The contribution income statement differs;from the traditional income statement in which of the following ways?;A. The traditional income statement separates;costs into fixed and variable components.;B. The traditional income statement subtracts;all variable costs from sales to obtain the contribution margin.;C. Cost-volume-profit relationships can be;analyzed more easily from the contribution income statement.;D. The effect of sales volume changes on profit;is readily apparent on the traditional income statement.;E. The contribution income statement separates;costs into product and period categories.;55. Which of the following does not;typically appear on a contribution income statement?;A. Net income.;B. Gross margin.;C. Contribution margin.;D. Total variable costs.;E. Total fixed costs.;56.;Which;of the following does not typically appear on an income statement;prepared by using a traditional format?;A.;Cost;of goods sold.;B.;Contribution;margin.;C.;Gross;margin.;D.;Selling;expenses.;E.;Administrative;expenses.;57. The extent to which an organization uses;fixed costs in its cost structure is measured by;A. financial leverage.;B. operating leverage.;C. fixed cost leverage.;D. contribution leverage.;E. efficiency leverage.;58. A manager who wants to determine the;percentage impact on net income of a given percentage change in sales would;multiply the percentage increase/decrease in sales revenue by the;A. contribution margin.;B. gross margin.;C. operating leverage factor.;D. safety margin.;E. contribution-margin ratio.;59. Which of the following calculations can be;used to measure a company's degree of operating leverage?;A. Contribution margin ? sales.;B. Contribution margin ? net income.;C. Sales ? contribution margin.;D. Sales ? net income.;E. Sales ? fixed costs.;60. You are analyzing Becker Corporation and;Newton Corporation and have concluded that Becker has a higher operating;leverage factor than Newton. Which one;of the following choices correctly depicts (1) the relative use of fixed costs;(as opposed to variable costs) for the two companies and (2) the percentage;change in income caused by a change in sales?;Relative Use of Fixed;Costs as Opposed to;Variable Costs;Percentage Change in;Income Caused by;a Change in Sales;A.;Greater;for Becker;Greater;for Becker;B.;Greater;for Becker;Lower;for Becker;C.;Greater;for Becker;Equal;for both;D.;Lower;for Becker;Greater for;Becker;E.;Lower;for Becker;Lower;for Becker


Paper#44968 | Written in 18-Jul-2015

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