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QUEZON UNIVERSITY
Integrated Review 2
Management Advisory Services
Rogienel L. Reyes, CPA
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Module 3: Cost-Volume-Profit Analysis R. L. REYES
1. Which of the following changes would cause a company's breakeven point in sales to increase?
A. The company's contribution-margin rate increases.
B. The company's variable cost per unit decreases.
C. The company's total fixed cost increases.
D. The company's selling price per unit increases.
2. Which of the following costs would decrease if production levels were increased within the relevant range?
A. Total fixed costs C. Total variable costs
B. Variable costs per unit D. Fixed costs per unit
3. Ticker Company sells two products. Product A provides a contribution margin of P3 per unit, and Product B
provides a contribution margin of P4 per unit. If Ticker’s sales mix shifts toward Product A, which one of the
following statements is correct?
A. The total number of units necessary to break even will decrease.
B. The overall contribution margin ratio will increase.
C. Operating income will decrease if the total number of units sold remains constant.
D. The contribution margin ratios for Products A and B will change.
4. All of the following are assumptions of cost-volume-profit analysis except
A. Total fixed costs do not change with a change in volume.
B. Revenues change proportionately with volume.
C. Variable costs per unit change proportionately with volume.
D. Sales mix for multi-product situations do not vary with volume changes.
5. Breakeven quantity is defined as the volume of output at which revenues are equal to
A. Marginal costs C. Variable costs
B. Total costs D. Fixed costs
6. When using graph method, if unit output exceeds break-even point,
A. Total sales exceed total cost.
B. Expenses are extremely high relative to revenues.
C. There is profit since the total cost line exceeds the total revenue line.
D. There is loss because the total cost line exceeds the total revenue line.
7. The most important use of CVP graph is to show
A. The relationship among volume, costs, revenues over wide ranges of activity.
B. The break-even point.
C. The cost/margin ratio at various levels of sale activity.
D. The determination of cross-over point.
8. Which of the following statements is true?
A. A shift in sales mix toward less profitable products will cause the overall BEP to fall.
B. One way to compute BEP is to divide total sales by the cost margin ratio.
C. Once the BEP has been reached, net income will increase by the unit contribution margin for each
additional sold.
D. As sales exceed BEP, a high contribution margin ratio will result in lower profit, rather than a low
contribution margin ratio.
9. When used in CVP analysis, sensitivity analysis
A. Determines the most profitable mix of products to be sold.
B. Allows the decision makers to introduce probabilities in the evaluation of decision alternatives.
C. Computes profit per unit of production and determines the optimum production of the company.
D. Is done through various possible scenarios and computes the impact on profits of various predictions of
future events.
10. For a profitable company, the amount by which sales can decline before losses occur is known as the
A. Margin of safety C. Sales volume variance
B. Variable sales ratio D. Marginal income
11. State College is using cost-volume-profit analysis to determine tuition rates for the upcoming school year.
Projected costs for the year are as follows: contribution margin per student of P1,800, variable expenses per
student of P1,000 and total fixed expenses of P360,000. Based on these estimates, what is the approximate
break-even point in number of students?
A. 129 C. 360
B. 200 D. 450
12. Brewster Co. has the following financial information: Fixed costs P20,000 Variable costs 60% Sales price P50
What amount of sales is required for Brewster to achieve a 15% return on sales?
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