Final Quiz

Points:
48/50
Correct
1/1 Points
1.The following is the Lux Corporation's contribution format income statement for last month:

 Sales                                 P2,000,000
 Less variable expenses       1,400,000
 Contribution margin             600,000
 Less fixed expenses              360,000
 Net income                      P   240,000

The company has no beginning or ending inventories. A total of 40,000 units were produced
and sold last month. What is the company's degree of operating leverage?

0.12
0.40
2.50
3.30
Correct
1/1 Points
2.Galactica Company has fixed costs of P100,000 and breakeven sales of P800,000.  Based on
this relationship, what is its projected profit at P1,200,000 sales?

P50,000
P200,000
P150,000
P400,000
Correct
1/1 Points
3.Cost-volume-profit analysis cannot be used if which of the following occurs?

Costs cannot be properly classified into fixed and variable costs.

The per unit variable costs change.
The total fixed costs change.
Per unit sales prices change
Correct
1/1 Points
4.The unit contribution margin of Product A is P20 and of Product B is P16. If six units of
Product A and eight units of Product B can be produced per machine hour, the contribution
margin of the products per machine hour is

Product A, P160; Product B, P96

Product A, P120; Product B, P128
Product A, P3.33; Product B, P2.00
Product A, P32.00; Product B, P30.00
Correct
1/1 Points
5.Pansipit Company had a 25 percent margin of safety.  Its after-tax return on sales is 6
percent. The company’s income is subject to tax rate of 40 percent.  If fixed costs amount to
P320,000, how much peso sales did Pansipit make for the year?

P1,066,667
P1,000,000
P1,280,000
P 800,000
Correct
1/1 Points
6.Which of the following assumptions is closely relevant to cost-volume-profit analysis?

for multiple product analysis, the sales mix is not important

inventory levels remain unchanged
total fixed costs and unit variable costs can be identified and remain constant over the relevant range
B and C
Correct
1/1 Points
7.Carribean Company produces a product that sells for P60. The variable manufacturing costs
are P30 per unit. The fixed manufacturing cost is P10 per unit based on the current level of
activity, and fixed selling and administrative costs are P8 per unit. A selling commission of
10% of the selling price is paid on each unit sold.

The contribution margin per unit is:

P24.
P36.
 P30.
P54.
Correct
1/1 Points
8.Which of the following is not a limiting factor of Cost-Volume-Profit analysis?
The process assumes a linear relationship among the variables.
The process assumes variable costs per unit are available.
Efficiency is assumed to be constant.
Inventory levels are assumed to not change.
Correct
1/1 Points
9.As projected net income increases the
degree of operating leverage declines.
margin of safety stays constant.
break-even point goes down.
contribution margin ratio goes up
Correct
1/1 Points
10.Green Corporation expects to sell 3,000 plants a month. Its operations manager estimated
the following monthly costs:
Variable costs                                                                                                       P  7,500
Fixed costs                                                                                                               15,000
What sales price per plant does she need to achieve to begin making a profit if she sells the
estimated number of plants per month?

P7.51
P7.50
P5.00
P2.50
Correct
1/1 Points
11.An increase in the unit variable cost will generally cause an increase in all of the following
except
the break-even point.
contribution margin.
total variable costs.
unit selling price
Incorrect
0/1 Points
12.Bulusan Company has sales of P400,000 with variable costs of P300,000, fixed costs of
P120,000, and an operating loss of P20,000.  How much increase in sales would Bulusan need
to make in order to achieve a target operating income of 10% of sales?

P400,000
P462,000
P500,000
P800,000
Correct
1/1 Points
13.With respect to fixed costs, C-V-P analysis assumes total fixed costs

per unit remains constant as volume changes

remain constant from one period to the next
vary directly with volume
remain constant across changes in volume
Correct
1/1 Points
14.The sales price per unit will increase from P32 to P40. The variable cost per unit will remain
at P24, and the fixed costs will remain unchanged at P400,000. How many fewer units must be
sold to break-even at the new sales price of P40 per unit?
25,000
2,500
10,000
12,500
Correct
1/1 Points
15.The margin of safety is a key concept of CVP analysis.  The margin of safety is

The contribution margin rate.

The difference between budgeted contribution margin and actual contribution margin.
The difference between budgeted contribution margin and breakeven contribution margin
The difference between budgeted sales and breakeven sales.Which of the following would not affect the
breakeven point?
Correct
1/1 Points
16.Which of the following assumptions is inherent to C-V-P analysis?
In manufacturing firms, the beginning and ending inventory levels are the same.
In a multi-product organization, the sales mix varies over time.
The behavior of total revenue is curvilinear.
The relevant range is not a consideration.
Correct
1/1 Points
17.The following data apply to Diva Corporation for the year 2021:

 Total variable cost per unit                                                                                     P3.50

 Contribution margin/sales                                                                                        
30%
 Breakeven sales (present volume)                                                                        
P1,000,000

Diva wants to sell an additional 50,000 units at the same selling price and contribution margin
per unit.  By how much can fixed costs increase to generate a gross margin equal to 10% of
the sales value of the additional 50,000 units to be sold?

P 50,000
P 57,500
P 67,500
P125,000
Correct
1/1 Points
18.Consider the following:

 Fixed expenses                                                                                                     
P78,000
 Unit contribution margin                                                                                               
12
 Target net profit                                                                                                      
42,000

How many unit sales are required to earn the target net profit?

15,000 units
10,000 units
 12,800 units
20,000 units
Correct
1/1 Points
19.In cost-volume-profit analysis, the greatest profit will be earned at
One hundred percent at normal productive capacity.
The production point with the lowest marginal cost.
The production point at which average total revenue exceeds average marginal cost.
The point at which marginal cost and marginal revenue are equal.
Correct
1/1 Points
20.Cost-volume-profit analysis is a technique available to management to understand better
the interrelationships of several factors that affect a firm's profit. As with many such
techniques, the accountant oversimplifies the real world by making assumptions. Which of the
following is not a major assumption underlying CVP analysis?

All costs incurred by a firm can be separated into their fixed and variable components.
The product’s selling price per unit is constant at all volume levels within a relevant range.
Operating efficiency and employee productivity is constant at all volume levels.
For multi-product situations, the sales mix can vary at different volume levels.
Correct
1/1 Points
21.Santos Company is planning its advertising campaign for next year and has prepared the
following budget data based on a zero advertising expenditure:

 Normal plant capacity                  200,000 units

 Sales                                             150,000 units
 Selling price                                  P25 per unit
 Variable manufacturing costs       P15 per unit
 Fixed manufacturing costs           P800,000
 Fixed selling costs                        P700,000

An advertising agency claims that an aggressive advertising campaign would enable Santos to
increase its unit sales by 20%.  What is the maximum amount that Santos Company can pay
for advertising and have an operating profit of P200,000 next year?

P100,000
P200,000
 P300,000
P550,000
Correct
1/1 Points
22.Regal, Inc. sells Product M for P5 per unit.  The fixed costs are P210,000 and the variable
costs are 60% of the selling price.  What would be the amount of sales if Regal is to realize a
profit of 10% of sales?
P700,000
P472,500
P525,000
P420,000
Correct
1/1 Points
23.Which of the following would not affect the breakeven point?

Number of units sold.

Variable cost per unit.
Total fixed costs.
Sales price per unit.
Correct
1/1 Points
24.Seal Yard Ornaments sells lawn ornaments for P15 each. Seal's contribution margin ratio is
40%. Fixed costs are P32,000. Should fixed costs increase 30%, how many additional units will
Seal have to produce and sell in order to generate the same net profit as under the current
conditions?

1,600.
5,333.
6,933.
1,067.
Correct
1/1 Points
25.Advocates of cost-volume-profit analysis argue that:
Fixed costs are irrelevant for decision making.
Fixed costs are mandatory for CVP decision making.
Differentiation between the patterns of variable costs and fixed costs is critical.
Fixed costs are necessary to calculate inventory valuations.
Correct
1/1 Points
26.During 2021, St. Paul Lab supplied hospitals with a comprehensive diagnostic kit for P120. 
At a volume of 80,000 kits, St. Paul had fixed costs of P1,000,000 and operating income before
income taxes of P200,000.  Because of an adverse legal decision, St. Paul’s 2022 liability
insurance increased by P1,200,000 over 2006.  Assuming the volume and other costs are
unchanged, what should the 2022 price be if St. Paul is to make the same P200,000 operating
income before income taxes?
P120
P135
P150
P240
Correct
1/1 Points
27.The most likely strategy to reduce the breakeven point would be to

Increase both the fixed costs and the contribution margin.

Decrease both the fixed costs and the contribution margin.
Decrease the fixed costs and increase the contribution margin.
Increase the fixed costs and decrease the contribution margin
Correct
1/1 Points
28.Marsman Company had a margin of safety ratio of 20%, variable costs of 60% of sales,
fixed costs of P240,000, a break-even point of P600,000, and an operating income of P60,000
for the current year.  What are the current year's sales?

P 500,000
P 600,000
P 750,000
P 900,000
Correct
1/1 Points
29.At the breakeven point, fixed cost is always
Less than the contribution margin
Equal to the contribution margin.
More than the contribution margin
More than the variable cost
Correct
1/1 Points
30.The Hard Company sells widgets.  The company breaks even at an annual sales volume of
80,000 units.  At an annual sales volume of 100,000 units the company reports a profit of
P220,000.  The annual fixed costs for the Hard Company are:

P 880,000
P1,100,000
P 800,000
P1,000,000
Correct
1/1 Points
31.QuestionTo which function of management is CVP analysis most applicable?
Planning
Organizing
Directing
Controlling
Correct
1/1 Points
32.An entity has fixed costs of P200,000 and variable costs per unit of P6.  It plans on selling
40,000 units in the coming year.  If the entity pays income taxes on its income at a rate of
40%, what sales price must the firm use to obtain an after-tax profit of P24,000 on the 40,000
units?

P11.60
P11.36
P12.00
P12.50
Correct
1/1 Points
33.At a break-even point of 5,000 units sold, variable expenses were P10,000 and fixed
expenses were P50,000. The profit from the 5,001st unit would be?
P10
P50
P15
P12
Correct
1/1 Points
34.The most useful information derived from a breakeven chart is the
Amount of sales revenue needed to cover enterprise variable costs.
Amount of sales revenue needed to cover enterprise fixed costs.
Relationship among revenues, variable costs, and fixed costs at various levels of activity.
Volume or output level at which the enterprise breaks even.
Correct
1/1 Points
35.The Red Lions Brotherhood is planning its annual Riverboat Extravaganza.  The
Extravaganza committee has assembled the following expected costs for the event:

 Dinner per person                                         P70

 Programs and souvenir per person               30
 Orchestra                                                     15,000
 Tickets and advertising                                  7,000
 Riverboat rental                                           48,000
 Floor show and strolling entertainment      10,000

The committee members would like to charge P300 per person for the evening’s
activities. Assume that only 250 persons are expected to attend the extravaganza, what ticket
price must be charged to breakeven? 
P420
P350
P320
P390
Correct
1/1 Points
36.Glareless Company manufactures and sells sunglasses.  The price and cost data are as
follows:

 Selling price per pair of  Sunglasses                                 P25.00

 Variable costs per pair of sunglasses:
o Raw materials                                                           P11.00
o Direct labor                                                              5.00
o Manufacturing overhead                                         2.50
o Selling expenses                                                      1.30
o Total variable costs per unit                                    P19.80
 Annual fixed costs:
o Manufacturing overhead                                        P192,000
 o Selling and administrative                                      276,000
o Total fixed costs                                                     P468,000
 Forecasted annual sales volume (120,000 pairs)           P3,000,000
 Income tax rate                                                             40%

Glareless Company estimates that its direct labor costs will increase 8 percent next year.  How
many units will Glareless have to sell next year to reach breakeven?

97,500 units
83,572 units
101,740 units
86,250 units
Correct
1/1 Points
37.The systematic examination of the relationships among selling prices, volume of sales and
production, costs, and profits is termed:
contribution margin analysis
budgetary analysis
cost-volume-profit analysis
gross profit analysis
Correct
1/1 Points
38.Albatross Company has fixed costs of P90,300.  At a sales volume of P360,000, return on
sales is 10%; at a P600,000 volume, return on sales is 20%.  What is the break-even volume?
P225,000
P258,000
P301,000
P240,000
Correct
1/1 Points
39.At the break-even point:

net income will increase by the unit contribution margin for each additional item sold above break-even.
the total contribution margin changes from negative to positive
fixed costs are greater than contribution margin
the contribution margin ratio begins to increase
Correct
1/1 Points
40.Which of the following is not an assumption underlying C-V-P analysis?

The behavior of total revenue is linear.

Unit variable expenses remain unchanged as activity varies.
Inventory levels at the beginning and end of the period are the same.
The number of units produced exceeds the number of units sold.
Incorrect
0/1 Points
41.An organization's break-even point is 4,000 units at a sales price of P50 per unit, variable
cost of P30 per unit, and total fixed costs of P80,000. If the company sells 500 additional units,
by how much will its profit increase?

P25,000
P15,000
P10,000
P12,000
Correct
1/1 Points
42.The CVP model assumes that over the relevant range of activity:
only revenues are linear.
total fixed cost changes.
unit variable cost is not constant.
revenues and total costs are linear.
Correct
1/1 Points
43.Which of the factors is (are) involved in studying cost-volume-profit relationships?

Levels of production
Variable costs
Fixed costs
All of these
Correct
1/1 Points
44.Pines Company has a higher degree of operating leverage than Tagaytay Company. Which
of the following is true?
Pines has higher variable expense.
Pines is more profitable than Tagaytay Company’s.
 Pines is more risky than Tagaytay.
Pines' profits are less sensitive to percentage changes in sales
Correct
1/1 Points
45.The term contribution margin is best defined as the:

Difference between fixed costs and variable costs.

Difference between revenue and fixed costs.
Amount available to cover fixed costs and profit.
Amount available to cover variable costs.
Correct
1/1 Points
46.In 2021 Lucia Company had a net loss of P8,000.  The company sells one product with a
selling price of P80 and a variable cost per unit of P60.  In 2022, the company would like to
earn a before-tax profit of P40,000.  How many additional units must the company sell in 2022
than it sold in 2021?Assume that the tax rate is 40 percent.
1,600
2,400
2,000
5,400
Correct
1/1 Points
47.Cost-volume-profit analysis allows management to determine the relative profitability of a
product by
Highlighting potential bottlenecks in the production process.
Determining the contribution margin per unit and projected profits at various levels of production.
Assigning costs to a product in a manner that maximizes the contribution margin.
Keeping fixed costs to an absolute minimum.
Correct
1/1 Points
48.Delmar Company has the opportunity to increase its annual sales by P125,000 by selling to
a new, riskier group of customers.  The uncollectible expense is expected to be 10%, and
collection costs will be 10%.  The company’s manufacturing and selling expenses are 70% of
sales, and its effective tax rate is 40%.  If Delmar were to accept this opportunity, the
company’s after tax profits would increase by

P 7,500
P 6,000
 P12,500
P15,000
Correct
1/1 Points
49.The following economic data were provided by the corporate planning staff of Heaven,
Inc.:

 Sales volume                            30,000 units

 Sales price per unit                   P30
 Unit variable costs:
o Variable manufacturing     P13
o Other variable costs            8
o Unit variable costs             P21
 Unit contribution margin          P  9

Fixed costs:

 Manufacturing P150,000
 Other fixed costs  P  50,000
 Total fixed costs P200,000

The management is considering installing a new, automated manufacturing process that will
increase fixed costs by P50,000 and reduce variable manufacturing cost by P3 per unit. The
management set a target a profit of P70,000 before and after the acquisition of the
automated machine. After installation of the automated machine, what will be the change in
the units required to achieve the target profit?

6,667 unit increase

5,667 unit decrease
3,333 unit decrease
4,333 unit decrease
Correct
1/1 Points
50.A technique for determining what would happen in a decision analysis if a key prediction
or assumption proves to be wrong is called:
CVP analysis.
Sensitivity analysis.
Post-audit analysis.
Contribution-margin variation analysis.