BT12203 BUSINESS ACCOUNTING
CHAPTER 6: COST-VOLUME-PROFIT ANALYSIS
TUTORIAL QUESTIONS
The following information is for questions 1 until 6:
The following is Addison Corporation's contribution format income statement for last month:
The company has no beginning or ending inventories. A total of 20,000 units were produced and
sold last month.
1. What is the company's contribution margin ratio?
A. 250%
B. 150%
C. 70%
D. 30%
2. What is the company's break-even in units?
A. 20,000 units
B. 0 units
C. 18,000 units
D. 12,000 units
3. If sales increase by 100 units, by how much should net operating income increase?
A. $400
B. $4,800
C. $1,500
D. $2,500
4. How many units would the company have to sell to attain the target profit of $150,000?
A. 22,000
B. 37,500
C. 25,000
D. 26,667
5. What is the company's margin of safety in dollars?
A. $400,000
B. $600,000
C. $120,000
D. $880,000
6. What is the company's degree of operating leverage?
A. 0.12
B. 2.5
C. 0.4
D. 3.3
The following information is for questions 7 until 8:
McGordon Corporation has provided the following data:
7. The contribution margin is:
A. $240,000
B. $560,000
C. $632,000
D. $72,000
8. The break-even point in sales dollars is:
A. $240,000
B. $560,000
C. $728,000
D. $408,000
The following information is for questions 9 until 11:
A tile manufacturer has supplied the following data:
9. What is the company's unit contribution margin?
A. $0.86
B. $2.35
C. $4.10
D. $1.75
10. The company's contribution margin ratio is closest to:
A. 42.7%
B. 57.3%
C. 45.8%
D. 21.0%
11. If the company increases its unit sales volume by 3% without increasing its fixed expenses,
then total net operating income should be closest to:
A. $459,380
B. $453,667
C. $13,380
D. $482,660
The following information is for questions 12 until 14:
A company that makes organic fertilizer has supplied the following data:
12. The company's margin of safety in units is closest to:
A. 115,128
B. 16,111
C. 168,986
D. 100,444
13. The company's unit contribution margin is closest to:
A. $4.50
B. $6.90
C. $3.60
D. $4.20
14. The company's degree of operating leverage is closest to:
A. 1.27
B. 26.90
C. 3.45
D. 12.41
The following information is for questions 15 until 16:
Vandinter Corporation produces and sells a single product. Data concerning that product appear
below:
15. The break-even in monthly unit sales is closest to:
A. 8,101
B. 3,352
C. 4,190
D. 16,760
16. The break-even in monthly dollar sales is closest to:
A. $536,320
B. $670,400
C. $2,681,600
D. $1,296,160
The following information is for questions 17 until 18:
Pedaci Corporation produces and sells a single product. Data concerning that product appear
below:
17. Assume the company's monthly target profit is $15,000. The unit sales to attain that target
profit is closest to:
A. 3,212
B. 5,265
C. 8,235
D. 5,571
18. Assume the company's monthly target profit is $17,000. The dollar sales to attain that target
profit is closest to:
A. $387,392
B. $635,069
C. $671,925
D. $993,313
19. On a cost-volume-profit graph, the break-even point is located:
A. at the origin.
B. where the total revenue line intersects the volume axis.
C. where the total expenses line intersects the dollars axis.
D. where the total revenue line intersects the total expenses line.
20. Once the break-even point is reached:
A. the total contribution margin changes from negative to positive.
B. net operating income will increase by the unit contribution margin for each additional
item sold.
C. variable expenses will remain constant in total.
D. the contribution margin ratio begins to decrease.
