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Quiz On CVP Analysis

The document contains multiple choice questions about cost-volume-profit (CVP) analysis. Key points: 1) CVP analysis assumes sales mix, not total sales, remains constant. Total fixed costs remain constant over the relevant range, while fixed costs per unit vary inversely with activity. 2) Break-even point is reached when contribution margin equals total fixed costs, not when sales equal fixed costs. 3) Break-even point is calculated by dividing total fixed costs by the contribution margin ratio. 4) Breakeven point increases if unit contribution margin decreases due to higher costs or lower prices. 5) CVP analysis assumes revenues are linear and variable costs may change over the

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Rodolfo Manalac
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2K views

Quiz On CVP Analysis

The document contains multiple choice questions about cost-volume-profit (CVP) analysis. Key points: 1) CVP analysis assumes sales mix, not total sales, remains constant. Total fixed costs remain constant over the relevant range, while fixed costs per unit vary inversely with activity. 2) Break-even point is reached when contribution margin equals total fixed costs, not when sales equal fixed costs. 3) Break-even point is calculated by dividing total fixed costs by the contribution margin ratio. 4) Breakeven point increases if unit contribution margin decreases due to higher costs or lower prices. 5) CVP analysis assumes revenues are linear and variable costs may change over the

Uploaded by

Rodolfo Manalac
Copyright
© © All Rights Reserved
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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1. Which of the following statements is true? 1.

( B ), first statement is false, sales mix is


multiple products, not the sales itself
i. In CVP analysis, one of the key assumptions is that sales is always constant Third statement is false, total fixed cost is c
if the company sells multiple products while fixed cost per unit vary inversely with
ii. In CVP analysis, one of the key assumptions is that production volume is range
always equal with the sales volume
iii. In CVP analysis, one of the key assumptions is that fixed costs per unit is
always constant over a relevant range

a. I only c. III only


b. II only d. All of the above are true

2. Which of the following statements is true? 2. ( C ), first statement is false, at break-eve


is equal to fixed cost
i. Break-even point analysis is the point at which sale is equal to fixed cost
ii. One way to compute break-even point is to divide fixed cost by contribution
margin
iii. Once the break-even point has been reached, net income will increase by
the contribution margin of each unit sold

a. I and II only c. II and III only


b. I and III only d. All of the above are true

3. The peso amount of revenues needed to attain a desired income is calculated 3. ( D )


by dividing the contribution margin ratio into

a. Fixed Cost
b. Desired Income
c. Desired Income less Fixed Cost
d. Desired Income plus Fixed Cost

4. The breakeven point per unit increases when unit costs 4. ( A ), break-even point will increase if the
decreases (higher cost or lower sales)
a. Increase and sales price remains unchanged
b. Decrease and sales price remains unchanged
c. Remain unchanged and sales price increase
d. Increase and sales price increases

5. CVP analysis assumes that over the relevant range, total 5. ( A )


a. Revenues are linear
b. Costs are unchanged
c. Variable costs are nonlinear
d. Fixed costs are nonlinear
rst statement is false, sales mix is constant if the company sells
products, not the sales itself
tement is false, total fixed cost is constant over a relevant range
ed cost per unit vary inversely with the cost driver over a relevant

rst statement is false, at break-even point, contribution margin


o fixed cost

reak-even point will increase if the contribution margin


s (higher cost or lower sales)
Czarina Company 's operating percentages were as follows:

Revenues 100%
Cost of Goods Sold
Variable 50%
Fixed 10% 60%
Gross Profit 40%
Operating Expenses
Variable 20%
Fixed 15% 35%
Net Operating Income 5%

Czarina's revenue total Php2,000,000.

6. At what revenue level would Czarina break-even?

a. 1,900,000 c. 1,250,000
b. 1,666,667 d. 833,333

FOR ITEMS# 7 and 8


Two companies are expected to have annual sales of Php1,000,000
decks of playing cards next year. Estimates for next year are presented
below:

Company A Company B
Selling price per deck 3.00 3.00
Cost of paper per deck 0.62 0.65
Printing ink per deck 0.13 0.15
Labor per deck 0.75 1.25
Variable overhead per deck 0.30 0.35
Fixed Costs 960,000.00 252,000.00

7. Given these data, what is their break-even point per unit?

a. 420,000 units for Co. A and 800,000 units for Co. B


b. 800,000 units for Co. A and 420,000 units for Co. B
c. 533,334 units for Co. A and 105,000 units for Co. B
d. 105,000 units for Co. A and 533,334 units for Co. B

8. What is the sales volume per unit wherein profits of Co. A and B will be equal?

a. 1,180,000 c. 708,000
b. 1,000,000 d. Their profits will never be equal

FOR ITEMS# 9 AND 10


A company has revenues of Php500,000, variable costs of Php300,000, and
a net income of Php150,000. If the company increased the sales price per
unit by 10%,reduced fixed costs by 20%, and left variable cost per unit
unchanged.

9. What breakeven point in pesos prior to the change?

a. 88,000 c. 110,000
b. 100,000 d. 125,000

10. What is the new breakeven point in pesos after implementing the changes

a. 88,000 c. 110,000
b. 100,000 d. 125,000
2,000,000.00

1,000,000.00
200,000.00
800,000.00

400,000.00 8%
300,000.00 6%
100,000.00

Company A Company B
Fixed Costs 960,000.00 252,000.00
Contribution Margin per Unit 1.20 0.60
7. Break-even point in units ( B ) 800,000.00 420,000.00
8. Sales volume per unit ( A )

Revenue, with 10% increase 550,000.00


Variable Cost 300,000.00
Contribution Margin 250,000.00
Fixed Cost, with 20% decrease 40,000.00
Net Income 210,000.00

Fixed Cost 40,000.00


CMR 45%
10. Break-even point in peso ( A ) 88,000.00
Revenues 100% 2,000,000.00

Total Variable Cost 70% 1,400,000.00

Contribution Margin 30% 600,000.00

Total Fixed Cost 16% 500,000.00 1,666,666.67

Total Fixed Cost 500,000.00


Divided by: CMR 30%
6. Break-even in Peso ( B ) 1,666,666.67

V(.62+.13+.75+.30) + 960,000 = V(.65+.15+1.25+.35) + 252,000


V(1.80) + 960,000 = V(2.40) + 252,000
960,000 - 252,000 = V(2.40) - V(1.80)
708,000 = V(0.60)
708,000 / .60 = V
1,180,000.00

Revenue 500,000.00
Variable Cost 300,000.00
Contribution Margin 200,000.00 0.40
Fixed Cost 50,000.00 125,000.00
Net Income 150,000.00

Fixed Cost 50,000.00


CMR 40%
9. Break-even point in peso ( D ) 125,000.00

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