Instant download and all chapters Test bank Managerial Accounting Decision Makingand Motivating Performance 1st Edition Datar and Rajan https://testbankdata.com/download/test-bank-managerial-accounting-decision- making-motivating-performance-1st-edition-datar-rajan/ Managerial Accounting: Making Decisions and Motivating Performance (Datar/Rajan) Chapter 3 Cost-Volume-Profit Analysis Learning Objective 3-1 1) The term(s) used to describe the behavior and relationship among elements as changes occur in units sold, selling price, variable cost per unit, or fixed costs of product is: A) event. B) revenues. C) probability. D) contribution. E) cost volume profit analysis (CVP). Answer: E Diff: 1 Page Ref: 79 LO: 3-1 EOC: E3-11 AACSB: Reflective Thinking Skills Learning Outcome: MA-11: Define and use cost-volume-profit analysis to analyze the effects of changes in costs and volume on a company's profits. 2) The difference between total revenues and total variable costs is: A) margin of safety. B) sensitivity analysis. C) the breakeven point. D) contribution margin. E) operating leverage. Answer: D Diff: 1 Page Ref: 80 LO: 3-1 EOC: E3-1 AACSB: Reflective Thinking Skills Learning Outcome: MA-11: Define and use cost-volume-profit analysis to analyze the effects of changes in costs and volume on a company's profits. 3) The tool useful for calculating contribution margin and operating income is: A) margin of safety. B) sensitivity analysis. C) the breakeven point. D) contribution margin per unit. E) operating leverage. Answer: D Diff: 3 Page Ref: 80 LO: 3-1 EOC: E3-1 AACSB: Reflective Thinking Skills Learning Outcome: MA-11: Define and use cost-volume-profit analysis to analyze the effects of changes in costs and volume on a company's profits. 4) Managers use contribution margin analysis as a quick and handy way to evaluate the effect of changes in ________ on operating income. A) debits B) credits C) margins D) volume E) revenues Answer: E Diff: 3 Page Ref: 82 LO: 3-1 EOC: E3-11; E3-12 AACSB: Reflective Thinking Skills Learning Outcome: MA-11: Define and use cost-volume-profit analysis to analyze the effects of changes in costs and volume on a company's profits. 5) In the equation method, revenues in each column are calculated as: A) revenues = Selling price (SP) - Quantity of units sold (Q). B) revenues = Selling price (SP) / Quantity of units sold (Q). C) revenues = Selling price (SP) × Variable cost per unit (VCU). D) revenues = Selling price (SP) × Quantity of units sold (Q). E) revenues = Selling price (SP) - Variable cost per unit (VCU). Answer: D Diff: 3 Page Ref: 82 LO: 3-1 EOC: E3-11 AACSB: Analytic Skills Learning Outcome: MA-11: Define and use cost-volume-profit analysis to analyze the effects of changes in costs and volume on a company's profits. 6) Which of the following is not an assumption of cost-volume-profit (CVP) analysis? A) The number of units sold is the only revenue driver and the only cost driver. B) Total costs can be separated into two components. C) When represented graphically, the behaviors of total revenues and total costs are linear. D) Selling price, variable cost per unit, and total fixed costs are known and constant. E) The total costs are never separated into components in this analysis. Answer: E Diff: 2 Page Ref: 84 LO: 3-1 EOC: E3-11 AACSB: Reflective Thinking Skills Learning Outcome: MA-11: Define and use cost-volume-profit analysis to analyze the effects of changes in costs and volume on a company's profits. 7) Just as a cost driver is any factor that affects costs, a ________ ________ is a variable, such as volume, that casually affects revenues. A) mixed cost B) fixed cost C) revenue mover D) revenue driver E) cost factor Answer: D Diff: 2 Page Ref: 84 LO: 3-1 EOC: E3-11 AACSB: Reflective Thinking Skills Learning Outcome: MA-11: Define and use cost-volume-profit analysis to analyze the effects of changes in costs and volume on a company's profits. 8) The Bluebird Factory reported $1,000,000 in total revenues and $60,000 total variable costs during the previous year. Required: Compute the contribution margin. A) $900,000 B) $920,000 C) $940,000 D) $960,000 E) $980,000 Answer: C Explanation: C) [($1,000,000 - $60,000)] = $940,000 Diff: 1 Page Ref: 80 LO: 3-1 EOC: E3-12; E3-16 AACSB: Analytic Skills Learning Outcome: MA-10: Perform fundamental CVP calculations. 9) A shelter sells products and it contributes proceeds to needy people in the community. The selling price of a product is $80.00 and the manager at the shelter reported that the variable cost per unit is $25.00. Required: Compute the contribution margin per unit. A) $40 per unit B) $45 per unit C) $50 per unit D) $55 per unit E) $60 per unit Answer: D Explanation: D) [($80 - $25)] = $55 contribution margin per unit. Diff: 1 Page Ref: 80 LO: 3-1 EOC: E3-10; E3-11 AACSB: Analytic Skills Learning Outcome: MA-10: Perform fundamental CVP calculations. 10) A company reported a contribution margin per unit of $75 and it reported that the managers sold a total of 40 units. Required: Compute the contribution margin. A) $2,500 B) $2,750 C) $3,000 D) $3,500 E) $4,000 Answer: C Explanation: C) [($75 × 40)] = $3,000 Diff: 1 Page Ref: 80 LO: 3-1 EOC: E3-10; E3-11 AACSB: Analytic Skills Learning Outcome: MA-10: Perform fundamental CVP calculations. 11) A manager at the Film Shoppe at the mall reported that the company had a contribution margin of $3,000 and total variable costs were $25.00. Required: Compute the operating income. A) $.83 B) $120 C) $2,750 D) $2,780 E) $75,000 Answer: C Explanation: C) [($3,000 - $25)] = $2,750 total operating income. Diff: 2 Page Ref: 80 LO: 3-1 EOC: E3-12; E3-13; E3-14 AACSB: Analytic Skills Learning Outcome: MA-10: Perform fundamental CVP calculations. 12) A manager at the Food Pantry reported contribution margin of $3,000 and revenues at the store were $8,500. Required: Compute the contribution margin percentage. A) 35.29% B) 35.40% C) 37.50% D) 40.50% E) 42.50% Answer: A Explanation: A) [($3,000 / $8,500)] = .3529% or 35.29% contribution margin percentage Diff: 2 Page Ref: 81 LO: 3-1 EOC: E3-11; E3-16; E3-22 AACSB: Analytic Skills Learning Outcome: MA-10: Perform fundamental CVP calculations. 13) The manager at Mary's Floral Service reported the sale of 600 units of a single product that resulted in $75,000 of sales revenue, $15,000 in variable costs, and $8,000 of fixed costs. Required: Compute the contribution margin percentage. A) 70% B) 75% C) 80% D) 85% E) 90% Answer: C Explanation: C) ($75,000 - $15,000) = $60,000 / $75,000] = 80% Diff: 3 Page Ref: 81-82 LO: 4-1 EOC: E3-11 AACSB: Analytic Skills Learning Outcome: MA-10: Perform fundamental CVP calculations. 14) The only numbers that change from selling different quantities of packages are total revenues. Answer: FALSE Explanation: The only numbers that change from selling different quantities of packages are total revenues and total variable costs. Diff: 1 Page Ref: 80 LO: 3-1 EOC: E3-12 AACSB: Reflective Thinking Skills Learning Outcome: MA-11: Define and use cost-volume-profit analysis to analyze the effects of changes in costs and volume on a company's profits. 15) Contribution margin indicates why operating income changes as the number of units sold changes. Answer: TRUE Diff: 2 Page Ref: 80 LO: 3-1 EOC: E3-11 AACSB: Reflective Thinking Skills Learning Outcome: MA-11: Define and use cost-volume-profit analysis to analyze the effects of changes in costs and volume on a company's profits. 16) The contribution margin per unit is useful because it provides a second way to calculate the contribution margin. Answer: TRUE Diff: 3 Page Ref: 80 LO: 3-1 EOC: E3-11; E3-12; E3-16 AACSB: Reflective Thinking Skills Learning Outcome: MA-11: Define and use cost-volume-profit analysis to analyze the effects of changes in costs and volume on a company's profits. 17) Contribution margin percentage is not a useful tool to calculate the effect of a change in revenues on contribution margin. Answer: FALSE Explanation: The contribution margin is in fact a useful tool to calculate the effect of a change in revenues on the contribution margin. Diff: 3 Page Ref: 81 LO: 3-1 EOC: E3-11; E3-16 AACSB: Reflective Thinking Skills Learning Outcome: MA-11: Define and use cost-volume-profit analysis to analyze the effects of changes in costs and volume on a company's profits. 18) The equation method and the contribution margin method are most useful when managers want to determine operating income at a few specific levels of sales. Answer: TRUE Diff: 3 Page Ref: 82 LO: 3-1 EOC: E3-11 AACSB: Reflective Thinking Skills Learning Outcome: MA-11: Define and use cost-volume-profit analysis to analyze the effects of changes in costs and volume on a company's profits. 19) The graph method is useful to managers because it helps them visualize the relationships between total revenues and total costs. Answer: TRUE Diff: 1 Page Ref: 83 LO: 3-1 EOC: E3-15 AACSB: Reflective Thinking Skills Learning Outcome: MA-11: Define and use cost-volume-profit analysis to analyze the effects of changes in costs and volume on a company's profits. 20) The Factory Shoppe reported the following: Review the following contribution income statement for different quantities of packages sold at the Factory Shoppe. Discuss the effect of the contribution margin as operating income increases. Answer: Students should note that the increase in the contribution margin exactly equals the increase in operating income; and, the decrease in the operating losses. Each additional package that is sold from 1-5 increases the contribution margin and from 25-40 packages sold, there is a positive operating income. Diff: 3 Page Ref: 81 LO: 3-1 EOC: E3-19 AACSB: Analytic Skills Learning Outcome: MA-11: Define and use cost-volume-profit analysis to analyze the effects of changes in costs and volume on a company's profits. 21) List and discuss the steps that managers take when they make profitable decisions in the organization. Answer: The five steps managers should take when they make decisions about the profitability in the organization include (1) Identify the problem and uncertainties, (2) Obtain information, (3) Make predictions about the future, (4) Make decisions by choosing among the alternatives; and, (5) Implement the decision, evaluate performance, and learn. In the first step, managers identify the problem and uncertainties so they can gain confidence about an issue and understand the problem. In the second step, obtain information, managers gather information to gain a better understanding of the problem. In the third step, make predictions about the future, managers use the information to make logical predictions based on the information that they obtained. In the fourth step, managers apply CVP analysis. They make decisions and choose the best option that will enhance the organizational goals. In the fifth step, managers implement their new decisions, evaluate the performance based on that decision and they learn. Diff: 2 Page Ref: 79 LO: 3-1 EOC: E3-11; E3-12; E3-13 AACSB: Reflective Thinking Skills Learning Outcome: MA-11: Define and use cost-volume-profit analysis to analyze the effects of changes in costs and volume on a company's profits. 22) What are the benefits to managers that use CVP analysis? Answer: Managers benefit from CVP analysis because it helps managers understand the behavior of the cost of products and services. For example, managers can understand characteristics of total revenues, operation income as changes occur in the output level, the selling price, variable or fixed costs. Diff: 3 Page Ref: 84 LO: 3-1 EOC: E3-11; E3-12 AACSB: Reflective Thinking Skills Learning Outcome: MA-11: Define and use cost-volume-profit analysis to analyze the effects of changes in costs and volume on a company's profits. Learning Objective 3-2 1) The term that is used to identify the quantity of output sold at which total revenues equal total costs and that quantity of output sold that results in $0 operating income is: A) contribution margin. B) breakeven point (BEP). C) contribution margin per unit. D) contribution margin percentage. E) contribution income statement. Answer: B Diff: 2 Page Ref: 84 LO: 3-2 EOC: E3-13 AACSB: Analytic Skills Learning Outcome: MA-11: Define and use cost-volume-profit analysis to analyze the effects of changes in costs and volume on a company's profits. 2) The store has fixed costs of $25,000 and a contribution margin per unit of $90 per unit. Compute the breakeven quantity in units. A) 266.55 units. B) 275.77 units. C) 277.77 units. D) 288.88 units. E) 299.99 units. Answer: C Explanation: C) [($25,000 / $90)] = 277.77 units Diff: 2 Page Ref: 85 LO: 3-2 EOC: E3-13 AACSB: Analytic Skills Learning Outcome: MA-10: Perform fundamental CVP calculations. 3) The Clock Store's manager reported that there were 25 breakeven quantities in units and a selling price of $10 per unit. The manager needs to determine the breakeven revenues. Required: Compute the breakeven revenues. A) $.25 B) $2.50 C) $25.00 D) $200.00 E) $250.00 Answer: E Explanation: E) [(25 × $10)] = $250 Diff: 3 Page Ref: 85 LO: 3-2 EOC: E3-33; E3-36 AACSB: Analytic Skills Learning Outcome: MA-10: Perform fundamental CVP calculations. 4) The store has a contribution margin per unit of $90 and the products sells for $225. The manager needs to know the contribution margin percentage. Required: Compute the contribution margin percentage. A) 2.5% B) 40% C) 45% D) 245% E) 250% Answer: B Explanation: B) [($90 / $225)] = .40% or 40% Diff: 3 Page Ref: 85 LO: 3-2 EOC: E3-11; E3-16; E3-21; E3-32 AACSB: Analytic Skills Learning Outcome: MA-10: Perform fundamental CVP calculations. 5) The manager at the store needs to determine the breakeven revenues associated with the new and dynamic power blender. The fixed costs associated with the blender are $3,000 and the contribution margin is 50%. Required: Compute the breakeven revenue. A) $.16 B) $160 C) $6,000 D) $7,500 E) $15,000 Answer: C Explanation: C) [($3,000 / 50%)] = $6,000 Diff: 3 Page Ref: 85 LO: 3-2 EOC: E3-33 AACSB: Analytic Skills Learning Outcome: MA-10: Perform fundamental CVP calculations. 6) Sunny Pastures reported the following information: Fixed costs $3,000 Target Operating Income 5,000 Contribution margin per unit 90 Required: Compute the quantity of units required to be sold to have an operating income of $5,000. A) 24.44 units B) 40.22 units C) 64.44 units D) 88.88 units E) 94.44 units Answer: D Explanation: D) [($3,000 + $5,000) / $90] = 88.88 units Diff: 2 Page Ref: 85 LO: 3-2 EOC: E3-11 AACSB: Analytic Skills Learning Outcome: MA-10: Perform fundamental CVP calculations.
Report "Test Bank Managerial Accounting Decision Making and Motivating Performance 1st Edition Datar and Rajan"