Review of Chapter 6 w/ answers

# Review of Chapter 6 w/ answers - Chapter 6...

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Chapter 6 Cost-Volume-Profit Relationships Multiple Choice Questions 1. Which of the following is correct? The break-even point occurs on the CVP graph where: A) total profit equals total expenses. B) total profit equals total fixed expenses. C) total contribution margin equals total fixed expenses. D) total variable expenses equal total contribution margin. Answer: C LO: 1,2 2. If a company decreases its total fixed expenses while increasing the variable expense per unit, the total expense line relative to its previous position on a cost-volume-profit graph will: A) shift upward and have a steeper slope. B) shift upward and have a flatter slope. C) shift downward and have a steeper slope. D) shift downward and have a flatter slope. Answer: C LO: 2 3. East Company manufactures and sells a single product with a positive contribution margin. If the selling price and the variable expense per unit both increase 5% and fixed expenses do not change, what is the effect on the contribution margin per unit and the contribution margin ratio? Contribution Contributio n margin per unit margin ratio A) No change No change B) Increase Increase C) Increase No change D) Increase Decrease Answer: C LO: 3,4 4. Mossfeet Shoe Company is a single product firm. Mossfeet is predicting that a price increase next year will not cause unit sales to decrease. What effect would this price increase have on the following items for next year? Contribution Break- even Margin Point

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Chapter 6 Cost-Volume-Profit Relationships Ratio A) Increase Decrease B) Decrease Decrease C) Increase No effect D) Decrease No effect Answer: A LO: 3,5 5. The contribution margin ratio is equal to: A) Total manufacturing expenses/Sales. B) (Sales - Variable expenses)/Sales. C) 1 - (Gross Margin/Sales). D) 1 - (Contribution Margin/Sales). Answer: B LO: 3 6. If a company increases its selling price by \$2 per unit due to an increase in its variable labor cost of \$2 per unit, the break-even point in units will: A) decrease. B) increase. C) not change. D) change but direction cannot be determined. Answer: C LO: 5 7. Salinas Corporation has a degree of operating leverage of 8. This means that a 1% change in sales dollars at Salinas will generate an 8% change in: A) variable expenses. B) fixed expenses. C) contribution margin. D) net operating income. Answer: D LO: 8 8. The following information relates to the break-even point at Pezzo Corporation: Sales dollars. .................... \$120,00 0 Total fixed expenses. ........ \$30,000 If Pezzo wants to generate net operating income of \$12,000, what will its sales dollars have to be? A) \$132,000
Chapter 6 Cost-Volume-Profit Relationships B) \$136,000 C) \$168,000 D) \$176,000 Answer: C LO: 1,3,5,6 9. The following information relates to Snowbird Corporation: Sales at the break-even point. ........ \$312,50

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## This note was uploaded on 04/17/2008 for the course PSYCH 335 taught by Professor Georgewade during the Spring '08 term at UMass (Amherst).

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Review of Chapter 6 w/ answers - Chapter 6...

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