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9 Student: _______________________________________________________________________________________ 1. The contribution income statement would require a firm to: A. Separate fixed and variable costs. B. Separate revenue into different categories. C. Round off amounts to the nearest dollar. D. Ignore some estimated fixed expenses, such as depreciation. E. Restructure its entire accounting system. 2. From a strategic management perspective, the primary reason a firm performs CVP analysis for breakeven planning is to find the level of sales that: A. Assures the firm a desired level of profit. B. Will allow the firm to compete in a market place. C. Will just cover all fixed costs. D. Promises a satisfactory growth in revenue. E. Reduces the threat of bankruptcy. 3. CVP analysis for revenue and cost planning has the primary objective of: A. Maximizing revenue. B. Minimizing costs. C. Both revenue maximization and cost minimization. D. Achieving the desired level of sales and profits. E. Consistently producing sales above the breakeven level. 4. The breakeven point is: A. The point at which revenues equal total cost plus a desired profit. B. The point at which revenues equal variable cost and profit is zero. C. The point at which revenues equal fixed cost and profit is zero. D. The point at which revenues meet the budget target. 5. CVP analysis using activity-based costs will tend to shift cost from fixed to variable classifications, resulting in: A. Lower breakeven sales. B. Higher breakeven sales. C. Breakeven sales can be higher or lower, depending on batch size. D. A higher contribution margin per unit. E. A lower contribution margin per unit. 6. Calculating the margin of safety measure will help a firm answer which of the following questions? A. Will we break even? B. Are we using our debt wisely? C. How much will profits change if sales change? D. How much profit will we earn? E. How much revenue can we lose before we drop below the breakeven point? 7. 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. E. Requires heavy fixed cost to produce or sell. 8. High operating leverage is a measure of the risk of change in profit a firm assumes when it has relatively: A. High variable cost. B. High fixed cost. C. High sales. D. High turnover. E. High sales expectations. 9. CVP analysis with multiple products assumes that sales will continue at the same mix of products, expressed in either sales units or sales dollars. This assumption is essential, because a change in the product mix will probably change: A. The average sales price.
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