THEORIES PAGE 4-5

36.Per-unit variable cost

A.remains constant within the relevant range.

B.increases as volume increases within the relevant range.

C.decreases as volume increases within the relevant range.

D.decreases if volume increases beyond the relevant range. Bobadilla

37.In planning product mix for maximum profit, CVP analysis would stimulate sales of the product

by increasing the:

A.sales price C.contribution margin

B.variable cost per unit D.emphasis on customer priority Bobadilla

38.A relatively low margin of safety ratio for a product is usually an indication that the product:

A.is losing money

B.has a high contribution margin

C.is riskier than higher margin of safety products

D.is less risky than higher margin of safety products Bobadilla

39.Within the relevant range, total revenues and total costs

A.increase, but at a decreasing rate. C.remain constant.

B.decrease. D.can be graphed as straight lines.Bobadilla

40.An assumption in a CVP analysis is that a change in costs is caused by a change in

A.unit direct material cost C.sales commission per unit Bobadilla

B.the number of units D.efficiency due to learning curve effect

41.In CVP analysis, when the number of units changes, which one of the following will remain the

same?

A.Total sales revenues C.Total fixed costs

B.Total variable costs D.Total contribution margin Bobadilla

42.As fixed costs for a firm rise, all other things held constant, the breakeven point will

A.be unchanged C.increase

B.not be affected by fixed costs D.decrease Bobadilla

43.Which of the following would not affect the breakeven point?

A.Number of units sold. C.Total fixed costs.

B.Variable cost per unit. D.Sales price per unit. Bobadilla

44.The margin of safety is a key concept of CVP analysis. The margin of safety is

A.The contribution margin rate.

B.The difference between budgeted contribution margin and actual contribution margin.

C.The difference between budgeted contribution margin and breakeven contribution margin

D.The difference between budgeted sales and breakeven sales. Bobadilla

45.A technique for determining what would happen in a decision analysis if a key prediction or

assumption proves to be wrong is called:

A.CVP analysis. C.Post-audit analysis. Bobadilla

B.Sensitivity analysis. D.Contribution-margin variation analysis.

46.An increase in the unit variable cost will generally cause an increase in all of the following

except

A.the break-even point. C.total variable costs.

B.contribution margin. D.unit selling price. Bobadilla

47.The most likely strategy to reduce the breakeven point would be to

A.Increase both the fixed costs and the contribution margin.

B.Decrease both the fixed costs and the contribution margin.

C.Decrease the fixed costs and increase the contribution margin.

D.Increase the fixed costs and decrease the contribution margin. Bobadilla

48.The break-even point in total sales decreases when:

A.variable cost increases and sales remain unchanged

B.variable cost increases and sales increase

C.fixed cost increases

D.fixed cost decreases Bobadilla

49.Which of the following best describes the impact of an increase in fixed cost?

A.The increase in fixed cost will result in an increase in selling more units.

B.The increase in fixed cost will cause an increase in variable cost.

C.The increase in fixed cost causes net income to decrease and the break-even point to
decrease

D.The increase in fixed cost causes net income to decrease and the break-even point to

increase. Bobadilla

50.A company’s breakeven point in peso sales may be affected by equal percentage increases in

both selling price and variable cost per unit (assume all other factors are equal within the

relevant range). The equal percentage changes in selling price and variable cost per unit will

cause the breakeven point in peso sales to

A.Decrease by less than the percentage increase in selling price.

B.Decrease by more than the percentage increase in the selling price.

C.Increase by less than the percentage increase in selling price.

D.Remain unchanged. Bobadilla

51.If the fixed costs attendant to a product increase while variable costs and sales

price remains constant, what will happen to contribution margin (CM) and

breakeven point (BEP)?

Bobadilla A. B. C. D.

CM Increase Decrease Unchanged Unchanged

BEP Decrease Increase Increase Unchanged

52.Which of the following will decrease the breakeven point? Bobadilla

Decrease in Selling Price Increase in Direct Labor Increase in Fixed Cost

A. YES YES YES

B. YES NO YES

C. NO NO YES

D. NO NO NO

53.Which of the following is an incorrect statement?

A.The contribution income statement that is prepared for internal users is better than the

traditional income statement as a management tool to predict the results of increases or

decreases in sales volume, variable costs, and fixed costs.

B.The greater the proportion of fixed costs in a firm's cost structure, the smaller will be the

impact on profit from a given percentage change in sales revenue.

C.In an economic recession, the highly automated company with high fixed costs will be less

able to adapt to lower consumer demand than will a firm with a more labor-intensive

production process.

D.A major difference between income statements prepared under the traditional format and

those prepared under the contribution format is that expenses under the traditional format

are shown by function, while the expenses shown under the contribution format are shown

by function and cost behavior. Bobadilla

54.If a company is operating at a loss,

A.fixed costs are greater than sales.

B.selling price is lower than the variable cost per unit.

C.selling price is less than the average total cost per unit.

D.fixed cost per unit is greater than variable cost per unit. Bobadilla

55.As volume increases, average cost per unit

A.increases.

B.decreases.

C.remains constant.

D.increases in proportion to the change in volume. Bobadilla

56.If all goes according to plan except that unit variable cost falls,

A.total contribution margin will be lower than expected.

B.the contribution margin percentage will be lower than expected.

C.profit will be higher than expected.

D.per-unit contribution margin will be lower than expected. Bobadilla

57.Which of the following decreases per-unit contribution margin the most for a company that is

currently earning a profit?

A.A 10% decrease in selling price. C.A 10% increase in fixed costs. Bobadilla

B.A 10% increase in variable cost per unit. D.A 10% increase in fixed cost per unit.

58.If variable cost as a percentage of sales increases, the

A.contribution margin percentage increases.

B.selling price increases.

C.break-even point in pesos increases.

D.fixed costs decrease