CVP Chapter-

Analysis 10

1) A company's weekly costs ($C) were plotted against production level (P) for the last 50
weeks and a regression line calculated to be C = 1,000 +250P. Which statement about
the breakdown of weekly costs is true?
a) Fixed costs are $1,000, variable costs per unit are$5
b) Fixed costs are $250, variable costs per unit are $1000
c) Fixed costs are $1,000, variable costs per unit are$250
d) Fixed costs are $20, variable costs per unit are$5

2) Dane makes and sells a single product which has a selling price of $26, prime costs are
$10 and overheads (all fixed) are absorbed at 50% of prime cost. Fixed overheads are
$50,000. What is the break-even point (to the nearest whole unit)?
a) 1,923
b) 3,125
c) 4,545
d) 5,000

3) The standard cost of the only type of product made in the factory of SD, based on an
expected monthly level of production and sales of 1,000 is as follows:
$
Variable production costs 5.60
Fixed production costs 5.80
Variable Selling costs 3.40
Fixed selling costs 4.60
Profit 5.50
Selling price $24.90
The break-even point is:
a) 365 units
b) 513 units
c) 654 units
d) 920 units

4) If both the selling price per unit and variable cost per unit of a company rise by 10%, the
breakeven point will:
a) remain constant
b) increase
c) fall
d) be impossible to determine without further information

5) AL makes a single product which it sells for $10 per unit. Fixed costs are $48,000 per
month and the product has a contribution to sales ratio of 40%. In a period when actual sales
were $140,000, AL's margin of safety, in units, was:
a) 2,000
b) 6,000
c) 8,000
d) 14,000

6) The following information relates to Product P:

$ per unit
Selling price 65

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CVP Chapter-
Analysis 10
Direct materials cost 22
Direct labour cost 14
Variable production overhead cost 9
Fixed production overhead cost 10
Budgeted output of Product P for the year is 12,000 units. Assuming that no inventory of
Product P is held, what number of units must be made and sold to make a profit of
$18,000 in the year?
a) 4,759 units
b) 6,000 units
c) 6,900 units
d) 13,800 units

7) GG manufactures a product that has a selling price of $15 and a variable cost of $6 per
unit. Annual fixed costs are $43,875 and annual sales demand is 6,000 units.
New manufacturing methods are being considered for the product. These would result in a rise of 20%
in fixed costs and a reduction in the variable cost per unit to $5. The new manufacturing methods would
create a higher quality product and sales demand would increase to 7,000 units each year at a higher
sales price of $20 per unit. If the changes in manufacturing methods are implemented, and
if the selling price is raised to $20, the break-even level would be:
a) 975 units higher
b) 1,365 units higher
c) 1,950 units lower
d) 1,365 units lower

8) A company has established a budgeted sales revenue for the forth coming period of
$500,000 with an associated contribution of $275,000. Fixed production costs are
$137,500 and fixed selling costs are $27,500. What is the break-even sales revenue?
a) $76,625
b) $90,750
c) $250,000
d) $300,000

9) A company has established the following information for the costs and revenues at an
activity level of 500 units:
$
Direct materials 2,500
Direct labour 5,000
Production overheads 1,000
Selling costs 1,250
Total cost 9,750
Sales revenue 17,500
Profit 7,750
20% of the selling costs and 50% of the production overheads are fixed overall levels of
activity. What would be the profit at an activity level of 1,000 units?
a) $15,500
b) $16,250
c) $16,500
d) $17,750

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CVP Chapter-
Analysis 10
10) A company has calculated its margin of safety as 20% on budgeted sales and budgeted
sales are 5,000 units per month. What would be the budgeted fixed costs if the budgeted
contribution was $25 per unit?
a) $100,000
b) $125,000
c) $150,000
d) $160,000

11) Which of the following describes the margin of safety?

a) Actual contribution margin achieved compared with that required to breakeven
b) Actual sales compared with sales required to breakeven
c) Actual versus budgeted net profit margin
d) Actual versus budgeted sales

The following information relates to questions 12 and 13:

Sales units 128,000
Sales revenue $640,000
Variable costs $384,000
Fixed costs $210,000
12) What sales revenue is required to earn a profit of $65,000?
a) $458,333
b) $590,000
c) $687,500
d) $705,000

13) How many sales units are required to earn a profit of $52,000?
a) 52,400 units
b) 87,333 units
c) 131,000 units
d) 160,500 units

14) The following data relates to a company with a single product:

Selling price $12.50 per unit
Fixed production costs $77,000 per period
Fixed non-production costs $46,000 per period
Break-even sales per period 24,600 units
What is the contribution per unit?
a) $3.13
b) $5.00
c) $7.50
d) $9.37

The following information relates to questions 15 and 16:

The following planned results are available for a company with a single product:
Sales units 112,000
Sales revenue $100,800
Variable costs $60480
Fixed costs $36,000

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CVP Chapter-
Analysis 10
15) What sales revenue is required to earn a profit of$5,000?
a) $68,333
b) $90,000
c) $102,500
d) $113,889

16) What is the margin of safety (sales units)?

a) 10,800
b) 12,000
c) 22,000
d) 100,000

17) E plc operates a marginal costing system. For the forthcoming year, variable costs are
budgeted to be 60% of sales value and fixed costs are budgeted to be 10% of sales value.
If E plc increases its selling prices by 10%, and if fixed costs, variable costs per unit and sales volume
remain unchanged, the effect on E plc's contribution would be:
a) a decrease of 2%
b) an increase of 10%
c) an increase of 25%
d) an increase of 66.67%

18) An organisation currently produces one product. The cost per unit of that product is as
follows:
$
Selling price 130
Direct materials 22
Direct labour 15
Direct expenses 3
Variable overheads 10
Total cost 50
Total fixed costs for the period amount to $1,600,000. How many units (to the nearest
whole unit) will the organization need to produce and sell to generate a profit of
$250,000?
a) 20,000
b) 20,555
c) 23,125
d) 26,428

19) A company has a single product. The following budgeted information relates to a period:
Sales units 800,000
Sales revenue $1,000,000
Total variable costs $590,000
Total fixed costs $350,000
What sales revenue (to the nearest $000) is required to break even?
a) $350,000
b) $593,000
c) $683,000
d) $854,000

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CVP Chapter-
Analysis 10
20) What will be the effect on the margin of safety If unit variable costs and total fixed costs
both increases, assuming no change in selling price or sales volume?
a) Decrease
b) Increase
c) Stay the same
d) Impossible to determine without more information

21) A product has the following unit costs:

Variable manufacturing $7.60
Variable non-manufacturing $1.40
Fixed manufacturing $3.70
Fixed non-manufacturing $2.70
The selling price of the product is $17.50 per unit. What is the contribution/sales ratio?
a) 12.0%
b) 48.6%
c) 51.4%
d) 56.6%

22) Which statement is true with reference to the following profit/volume (P/V)chart?

a) Company A has lower break-even sales revenue than Company A

b) Company A has a higher contribution to sales ratio than Company B
c) Company A has higher fixed costs than Company B
d) Company A has higher profit than Company B

23) A profit / volume chart is shown. Two lines indicate the break-even point for the sales
of 50 units of each of the two products.

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CVP Chapter-
Analysis 10
What are the total fixed costs allocated to the two products?
a) $10,000
b) $15,000
c) $20,000
d) $25,000

24) A company has a product which sells for $1 per unit. The variable costs are $0.60 per
unit, and production of 200,000 units is planned. Fixed costs are $0.20 per unit at the
budgeted production level. What is the break-even level?
a) 40,000 units
b) 66,667 units
c) 100,000 units
d) 160,000 units

25) It is now expected that the variable production cost per unit and the selling price per
unit will each increase by 10% and fixed production costs will rise by25%.
Selling price 6.00
Variable production O H 1.20
Variable selling cost 0.40
Fixed production 4.00
Fixed selling O H 0.80
Budgeted activity level = 10,000units
What will be the new breakeven point, to the nearest whole unit?
a) 8,788 units
b) 11,600 units
c) 11,885 units
d) 12,397 units

26) A Ltd makes a single product which it sells for $10 per unit. Fixed costs are $48,000 per
month and the product has a contribution to sales ratio of 40%. In a month when actual sales
were $140,000, A Ltd’s margin of safety, in units, was
a) 2,000
b) 12,000
c) 14,000
d) 20,000

27) A single product company has a contribution to sales ratio of 40%. Fixed costs amount
to $90,000 per annum. The number of units required to break even is
a) 36,000
b) 150,000
c) 225,000
d) Impossible to calculate without further information

28) A company’s breakeven point is 6,000 units per annum. The selling price is $90 per unit
and the variable costs is $40 per unit. What are the company’s annual fixed costs?
a) $120
b) $240,000
c) $300,000
d) $540,000

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CVP Chapter-
Analysis 10
29) Consider the breakeven chart below:

Which is the breakeven point?

a) C
b) R
c) T
d) P

30) A company sells a product for $88 per unit, and incurs variable costs of $66 per unit.
What is the contribution/sales ratio?
a) 17.5%
b) 30%
c) 75%
d) 25%

31) Consider the breakeven chart below:

What does the area CTS represent?

a) Marginal cost
b) Total cost
c) Profit
d) Loss

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