Q: Which of the following is the correct formula for the break-even point in sales dollars?

$$\text{Break-even point in dollars} = \dfrac{\text{Fixed costs}}{\text{Contribution margin ratio}}$$

Question 1

Which of the following best describes the primary focus of managerial accounting compared to financial accounting?

Accepted Answer

Managerial accounting is primarily concerned with providing information for internal planning and control.

Question 2

A company’s monthly rent is $5,000 regardless of the number of units produced. What type of cost behavior does this represent?

Accepted Answer

Fixed cost

Question 3

Which of the following is a likely example of a variable cost for a manufacturing company?

Accepted Answer

Raw materials used in production

Question 4

Why is expressing fixed costs on a per unit basis potentially misleading?

Accepted Answer

It suggests that fixed costs change with activity level, which is not true.

Question 5

A company’s utility bill consists of a $$100 fixed charge plus 0.05 $$per kilowatt hour used. What is the correct formula for total utility cost ($$Y) if$$ $$X is $$the number of kilowatt hours?

Accepted Answer

$$Y = 100 + 0.05X$$

Question 6

Using the high-low method, if the highest activity level is 10,000 units with a cost of $$15,000 and the lowest is 6,000 units with a cost of 11$$,400, what is the variable cost per unit?

Accepted Answer

$$0.90$$ 	ext{ per unit}$

Question 7

Which of the following best describes the contribution margin?

Accepted Answer

Sales revenue minus total variable costs

Question 8

If a company’s contribution margin ratio is $$40\%$$, what is the increase in total contribution margin if sales increase by $50,000?

Accepted Answer

$$20,000$$

Question 9

Which income statement format is most useful for analyzing the impact of cost and sales volume changes on operating income?

Accepted Answer

Contribution margin income statement

Question 10

A company has fixed costs of $$24,000 and a contribution margin per unit of 6. $$What is the break-even point in units?

Accepted Answer

$$4,000$$ 	ext{ units}$

Question 11

If a company wants to earn an operating income of $$10,000, has fixed costs of 30$$,000, and a contribution margin per unit of $5, how many units must it sell?

Accepted Answer

$$8,000$$ 	ext{ units}$

Question 12

Which of the following best explains the concept of operating leverage?

Accepted Answer

It measures how sensitive net income is to percentage changes in sales.

Question 13

If a company has high operating leverage, what is the likely effect of a 10% increase in sales revenue?

Accepted Answer

Net income will increase by more than 10%.

Question 14

Which of the following is most likely to be a mixed (semivariable) cost?

Accepted Answer

Utility bill with a fixed and variable component

Question 15

A company sells two products: Product A with a contribution margin ratio of $$60\%$$ and Product B with a ratio of $$30\%. If $$the sales mix shifts toward more of Product A, what happens to the company’s overall contribution margin ratio?

Accepted Answer

It increases.

Question 16

Which of the following is the correct formula for the break-even point in sales dollars?

Accepted Answer

$$	ext{Break-even point in dollars} = \dfrac{	ext{Fixed costs}}{	ext{Contribution margin ratio}}$$

Question 17

Which of the following costs is most likely to remain unchanged in total as activity level increases within the relevant range?

Accepted Answer

Supervisory salaries

Question 18

If a company’s sales increase by $$10,000 and its contribution margin ratio is 25$$\%$, by how much will operating income increase, assuming fixed costs do not change?

Accepted Answer

$$2,500$$

Question 19

Which of the following statements about the relevant range is correct?

Accepted Answer

Fixed costs may change outside the relevant range.

Question 20

A company’s total cost equation is $$Y = 2,000 + 3X$$, where $$Y is $$total cost and $$X is $$units produced. What is the total cost if 500 units are produced?

Accepted Answer

$$3,500$$ 	ext{ (correct calculation: } Y = 2,000 + 3 	imes 500 = 3,500)$

Managerial Accounting and Cost-Volume-Profit Relationships: Study Notes

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