1 A company makes two products: tables and chairs. While performing a multi-product Cost-Volume-Profit Analysis for this company, you noticed that break-even sales INCREASED due to
A a decrease in the total fixed cost.
B a decrease in the variable cost per unit for tables.
C a decrease in the selling price per unit for tables.
D an increase in the selling price per unit for chairs.
2 A company makes two products: tables and chairs. While performing a multi-product Cost-Volume-Profit Analysis for this company, you noticed that break-even sales DECREASED due to
A an increase in the total fixed cost.
B an increase in the variable cost per unit for tables.
C an increase in the variable cost per unit for chairs.
D an increase in the contribution margin ratio.
3 A company makes two products: tables and chairs. While performing a multi-product Cost-Volume-Profit Analysis for this company, you noticed that break-even units for chairs INCREASED due to
A a decrease in the total fixed cost.
B an increase in the variable cost per unit for tables.
C a decrease in the variable cost per unit for chairs.
D None of the above
4 Which of the following is TRUE about allocating overhead using a volume-based overhead rate?
A You need to know the budgeted overhead and budgeted cost driver to compute the predetermined overhead rate.
B You need to know the budgeted overhead and actual cost driver to compute the predetermined overhead rate.
C You need to know the actual overhead and budgeted cost driver to compute the predetermined overhead rate.
D You need to know the actual overhead and actual cost driver to compute the predetermined overhead rate.
5 As volume increases, what happens to your total variable cost?
A it increases within the relevant range
B it decreases within the relevant range
C it stays constant within the relevant range
D it stays constant between relevant ranges
6 When are fixed costs going to be constant?
A In total between relevant ranges
B In total within the relevant range
C Per unit between relevant ranges
D Per unit within the relevant range
7 Which of the following is FALSE about allocating overhead using activity-based costing overhead rates?
A You need to know the budgeted overhead amount for each activity pool to compute the predetermined overhead rate for that activity.
B You need to know the budgeted cost driver amount for each activity to compute the predetermined overhead rate for that activity.
C You need to know the actual overhead amount for each activity pool to allocate overhead to that activity.
D You need to know the actual cost driver amount for each activity to allocate overhead to that activity.
1 A company makes two products: tables and chairs. While performing a multi-product Cost-Volume-Profit Analysis for this company, you noticed that break-even sales INCREASED due to
A a decrease in the total fixed cost.
B a decrease in the variable cost per unit for tables.
C a decrease in the selling price per unit for tables.
D an increase in the selling price per unit for chairs.
2 A company makes two products: tables and chairs. While performing a multi-product Cost-Volume-Profit Analysis for this company, you noticed that break-even sales DECREASED due to
A an increase in the total fixed cost.
B an increase in the variable cost per unit for tables.
C an increase in the variable cost per unit for chairs.
D an increase in the contribution margin ratio.
3 A company makes two products: tables and chairs. While performing a multi-product Cost-Volume-Profit Analysis for this company, you noticed that break-even units for chairs INCREASED due to
A a decrease in the total fixed cost.
B an increase in the variable cost per unit for tables.
C a decrease in the variable cost per unit for chairs.
D None of the above
4 Which of the following is TRUE about allocating overhead using a volume-based overhead rate?
A You need to know the budgeted overhead and budgeted cost driver to compute the predetermined overhead rate.
B You need to know the budgeted overhead and actual cost driver to compute the predetermined overhead rate.
C You need to know the actual overhead and budgeted cost driver to compute the predetermined overhead rate.
D You need to know the actual overhead and actual cost driver to compute the predetermined overhead rate.
5 As volume increases, what happens to your total variable cost?
A it increases within the relevant range
B it decreases within the relevant range
C it stays constant within the relevant range
D it stays constant between relevant ranges
6 When are fixed costs going to be constant?
A In total between relevant ranges
B In total within the relevant range
C Per unit between relevant ranges
D Per unit within the relevant range
7 Which of the following is FALSE about allocating overhead using activity-based costing overhead rates?
A You need to know the budgeted overhead amount for each activity pool to compute the predetermined overhead rate for that activity.
B You need to know the budgeted cost driver amount for each activity to compute the predetermined overhead rate for that activity.
C You need to know the actual overhead amount for each activity pool to allocate overhead to that activity.
D You need to know the actual cost driver amount for each activity to allocate overhead to that activity.
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Related questions
If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would:
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Each question refers to the same initial data. Treat each question separately. Ignore income taxes. Assume no beginning or ending inventories. Calculations and backup should be completed and submitted in Excel. Use proper Contribution Income Statement formatting. Analysis can either be typed into cells in Excel (formatted to be easily legible) or typed into a text box in Excel.
Data for all questions: Tamâs Tables produces wooden kitchen and dining room tables. Their tables are sold at many local furniture stores. The cost of manufacturing and marketing their tables, at their normal factory volume of 2,000 tables per month, is shown in the table below. These tables sell for $700 each. Tamâs Tables is making a small profit, but would prefer to increase profitability.
(Note: Fixed costs are shown on a per-unit basis in the table based on normal volume. However, fixed costs as a total do not change when volume changes, so you will need to determine total fixed costs first.)
| Per Unit | Per Unit | |
| Unit Manufacturing Costs: | ||
| Variable Materials | $ 175.00 | |
| Variable Labor | $ 125.00 | |
| Variable Overhead | $ 50.00 | |
| Fixed Overhead | $ 150.00 | |
| Total Unit Manufacturing Costs: | $ 500.00 | |
| Unit Marketing Costs: | ||
| Variable Marketing Costs | $ 75.00 | |
| Fixed Marketing Costs | $ 100.00 | |
| Total Unit Marketing Costs: | $ 175.00 |
Question 1: What is the break-even point? A) In units? B) In sales dollars?
Question 2: A large furniture chain has offered to purchase 2,000 tables (one time for their family dinner advertising campaign) if the sales price was lowered to $575 per table. Tamâs Tablesâ maximum capacity is 3,000 units. A) Based on the cost data provided, what would be the impact of the price decrease on sales, costs, and operating income if Tamâs Tables accepted this sale? Use a contribution margin income statement to show your results. B) Do you think Tamâs Tables should accept this sale? Support your decision with evidence and analysis.
Question 3: Some of the furniture stores have been asking for granite-topped tables. Tamâs Tables would be able to produce a granite-topped table with their wooden frame and legs on their existing assembly line if they purchased a new machine to shape the granite top. This would increase fixed overhead costs by $150,000 per month (still based on normal production volume of 2,000 units). The variable materials costs for the granite tables would also be double the cost of the variable materials for the granite tables (the granite is more expensive than the wood). Maximum production for both types of tables together would still be 3,000 units because the same assembly line would be used. The granite tables would sell for $1,000 each. A) What would be the break-even point if Tamâs Tables only sold granite tables? (In units and sales dollars) B) Create a contribution income statement for a month in which Tamâs Tables sold 1,000 wooden tables, and 1,500 granite tables. C) Explain, in your own words, how the changes to fixed and variable costs for the granite tables impact profitability.