Scribd
Upload
17K views7 pages

CVP Multiple Choice Questions With Answer

The document contains 20 multiple choice questions that test understanding of concepts related to cost-volume-profit (CVP) analysis, break-even point, contribution margin, unit contribution margin, and how changes in variables like selling price, variable costs, fixed costs, and sales volume impact profitability. The questions cover calculating and interpreting break-even point, contribution margin, unit contribution margin, and the effects of changes in costs and sales on profitability and the break-even point. An answer key is provided with the correct response for each question.

Uploaded by

Carla Garcia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
17K views7 pages

CVP Multiple Choice Questions With Answer

The document contains 20 multiple choice questions that test understanding of concepts related to cost-volume-profit (CVP) analysis, break-even point, contribution margin, unit contribution margin, and how changes in variables like selling price, variable costs, fixed costs, and sales volume impact profitability. The questions cover calculating and interpreting break-even point, contribution margin, unit contribution margin, and the effects of changes in costs and sales on profitability and the break-even point. An answer key is provided with the correct response for each question.

Uploaded by

Carla Garcia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 7

Multiple Choice Questions

1. CVP analysis can be used to study the effect of:


A. changes in selling prices on a company's profitability.
B. changes in variable costs on a company's profitability.
C. changes in fixed costs on a company's profitability.
D. changes in product sales mix on a company's profitability.
E. all of the above.

2. The break-even point is that level of activity where:


A. total revenue equals total cost.
B. variable cost equals fixed cost.
C. total contribution margin equals the sum of variable cost plus fixed cost.
D. sales revenue equals total variable cost.
E. profit is greater than zero.

3. The unit contribution margin is calculated as the difference between:


A. selling price and fixed cost per unit.
B. selling price and variable cost per unit.
C. selling price and product cost per unit.
D. fixed cost per unit and variable cost per unit.
E. fixed cost per unit and product cost per unit.

4. Which of the following would produce the largest increase in the contribution
margin per unit?
A. A 7% increase in selling price.
B. A 15% decrease in selling price.
C. A 14% increase in variable cost.
D. A 17% decrease in fixed cost.
E. A 23% increase in the number of units sold.
5. Which of the following would take place if a company were able to reduce its
variable cost per unit?
Contribution Break-even
Margin Point
A. Increase Increase
B. Increase Decrease
C. Decrease Increase
D. Decrease Decrease
E. Increase No effect

6. Which of the following would take place if a company experienced an increase in


fixed costs?
A. Net income would increase.
B. The break-even point would increase.
C. The contribution margin would increase.
D. The contribution margin would decrease.
E. More than one of the above events would occur.

7. Assuming no change in sales volume, an increase in a firm's per-unit contribution


margin would:
A. increase net income.
B. decrease net income.
C. have no effect on net income.
D. increase fixed costs.
E. decrease fixed costs.

8. A company that desires to lower its break-even point should strive to:
A. decrease selling prices.
B. reduce variable costs.
C. increase fixed costs.
D. sell more units.
E. pursue more than one of the above actions.
9. A company has fixed costs of P900 and a per-unit contribution margin of P3. Which
of the following statements is (are) true?
A. Each unit "contributes" P3 toward covering the fixed costs of P900.
B. The situation described is not possible and there must be an error.
C. Once the break-even point is reached, the company will make money at the
rate of P3 per unit.
D. The firm will definitely lose money in this situation.
E. Statements "A" and "C" are true.

10. Sanderson sells a single product for P50 that has a variable cost of P30. Fixed costs
amount to P5 per unit when anticipated sales targets are met. If the company sells one unit
in excess of its break-even volume, the bottom-line profit will be:
A. P15.
B. P20.
C. P50.
D. an amount that cannot be derived based on the information presented.
E. an amount other than those in choices "A," "B," and "C" but one that can be
derived based on the information presented.

11. At a volume of 15,000 units, Toronto reported sales revenues of P600,000, variable
costs of P225,000, and fixed costs of P120,000. The company's contribution margin per
unit is:
A. P17.
B. P25.
C. P47.
D. P55.
E. an amount other than those above.

12. A recent income statement of Fairbanks Corporation reported the following data:
Sales revenue P8,000,000
Variable costs 5,000,000
Fixed costs 2,200,000

If these data are based on the sale of 20,000 units, the contribution margin per unit would
be:
A. P40.
B. P150.
C. P290.
D. P360.
E. an amount other than those above.
13. A recent income statement of Hield Corporation reported the following data:

Sales revenue P3,600,000


Variable costs 1,600,000
Fixed costs 1,000,000

If these data are based on the sale of 10,000 units, the break-even point would be:
A. 2,000 units.
B. 2,778 units.
C. 3,600 units.
D. 5,000 units.
E. an amount other than those above.

14. A recent income statement of Kwisket Corporation reported the following data:

Sales revenue P2,500,000


Variable costs 1,500,000
Fixed costs 800,000

If these data are based on the sale of 5,000 units, the break-even sales would be:
A. P2,000,000.
B. P2,206,000.
C. P2,500,000.
D. P10,000,000.
E. an amount other than those above.

15. The following information relates to Pareno Company:

Sales revenue P10,000,000


Contribution margin 4,000,000
Net income 1,000,000

If a manager at Pareno desired to determine the percentage impact on net income of a


given percentage change in sales, the manager would multiply the percentage
increase/decrease in sales revenue by:

A. 0.25.
B. 0.40.
C. 2.50.
D. 4.00.
E. 10.00.
Use the following to answer questions 16-17:

Edco Company produced and sold 45,000 units of a single product last year, with the
following results:

Sales revenue P1,350,000


Manufacturing costs:
Variable 585,000
Fixed 270,000
Selling costs:
Variable 40,500
Fixed 54,000
Administrative costs:
Variable 184,500
Fixed 108,000

16. Edco's operating leverage factor was:


A. 4.
B. 5.
C. 6.
D. 7.
E. 8.

17. If Edco's sales revenues increase 15%, what will be the percentage increase
in income before income taxes?
A. 15%.
B. 45%.
C. 60%.
D. 75%.
E. An amount other than those above.

18. When advanced manufacturing systems are installed, what effect does such
installation usually have on fixed costs and the break-even point?

Fixed Costs Break-even Point


A. Increase Increase
B. Increase Decrease
C. Decrease Increase
D. Decrease Decrease
E. Do not change Does not change
19. Barney, Inc., is subject to a 40% income tax rate. The following data pertain to the
period just ended when the company produced and sold 45,000 units:

Sales revenue P1,350,000


Variable costs 810,000
Fixed costs 432,000

How many units must Barney sell to earn an after-tax profit of P180,000?
A. 42,000.
B. 45,000.
C. 51,000.
D. 61,000.
E. An amount other than those above.

20. Wells Corporation has the following sales mix for its three products: A, 20%; B,
35%; and C, 45%. Fixed costs total P400,000 and the weighted-average
contribution margin is P100. 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.

ANSWER KEY

1. E 11. B
2. A 12. B
3. B 13. D
4. A 14. A
5. B 15. D
6. B 16. B
7. A 17. D
8. B 18. A
9. E 19. D
10. B 20. A

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy