Module 2 Mastery Test

docx

School

Colorado State University, Global Campus *

*We aren’t endorsed by this school

Course

460

Subject

Accounting

Date

Feb 20, 2024

Type

docx

Pages

7

Uploaded by UltraSparrowPerson823

Report
Question 1 1 / 1 pts On a cost-volume-profit graph, if the revenue line for a particular sales point is ________ the total cost line, a profit results. above below perpendicular to all of the above Correct! If the revenue line is above the total cost line, a profit is achieved. The revenue line is graphed with one endpoint at the $0 revenue, 0 units and another anywhere using a selected number of units and the units times the selling price, which is total revenue. The cost line is plotted as the fixed costs and zero output at one end, and the total costs at a given output level at the other end. Question 2 1 / 1 pts Sweet Charity Company manufactures candy bars for fundraising initiatives for children’s nonprofits. Candy bars are sold to organizations at $.90 each. Variable costs of production and packaging are $.45 and company fixed costs are $500,000. The company’s current sales level is $1,500,000. What is Sweet Charity’s margin of safety in dollars? $100,000 $144,000 $500,000
$250,000 Correct! Contribution margin ratio = $.90 - $.45 = $.45 or 50% and breakeven point in revenues (BEP) = $500,000/50% = $1,000,000. $1,500,000 sales - $1,000,000 BEP= $500,000 Margin of Safety (MoS). Question 3 1 / 1 pts Contribution margin does not include costs of ________ and, therefore, cannot be used for external GAAP reporting. variable manufacturing overhead fixed manufacturing overhead fixed nonmanufacturing items None of the above. Contribution margin is acceptable for GAAP reporting. Correct! Contribution margin does not include fixed manufacturing overhead, so it is not permissible to publish external financial statements that reflect a contribution margin. Gross margin must be reflected for external financial statements to be GAAP compliant. Question 4 1 / 1 pts Sweet Charity Company manufactures candy bars for fundraising initiatives for children’s nonprofits. Candy bars are sold to organizations at $1.00 each. Variable costs of production and packaging are $.60, and company fixed costs are $700,000. The company’s current sales level is $2,000,000. What is Sweet Charity’s breakeven point in units? 17,50,000 13,00,000
20,00,000 7,00,000 Correct! Contribution margin ratio = $1.00 - $.60 = $.40 and breakeven point in units = $700,000/.40 = 1,750,000. Question 5 1 / 1 pts As fixed costs of a business increase, assuming everything stays the same, the margin of safety will ________. decrease since the units sold will decrease increase as variable costs will increase as well decrease since the breakeven point will increase increase since contribution margin will increase Correct! The margin of safety is the difference between the breakeven point and the current or budgeted level of sales. If fixed costs increase, the breakeven point will increase, and hence, the margin of safety will decrease, all else being equal. Incorrect Question 6 0 / 1 pts Glacier Express offers week-long Alaska vacations for tourists. The average cost to a family of four for their vacation package is $7,825. The annual fixed costs of the company are $820,000. The variable costs for each package are: Airfare $2,300 Ground transportation $350 Meals $700 Hotel rooms $2,475 Excursions $800
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
  • Access to all documents
  • Unlimited textbook solutions
  • 24/7 expert homework help
Total $6,625 How much in revenue needs to be generated in order to get a targeted operating income of $54,800? $5,502,605 $5,704,425 $729,000 $1,110,000 Try again! Please review Chapter 9 in the Blocher et al. (2022) textbook, in the section entitled "CVP Analysis for Profit Planning." Question 7 1 / 1 pts Which of the following is true regarding CVP analysis? CVP analysis is used only in manufacturing environments because service businesses do not have inventory. Changes in revenues and costs occur only because of changes in the number of units sold. Fixed costs per unit are known and remain constant. Costs do not need to be separated into fixed and variable. Correct! In CVP analysis, changes in revenues and costs occur only because of increases or decreases in the number of units sold.
Question 8 1 / 1 pts Indulgent Luxuries Manufacturing Company manufactures scented candles for sales throughout the year. The sales and variable costs for their top sellers are given in the following table:   Mint chocolate candle per unit Vanilla caramel candle per unit Sell price to retailer $ 9.00 $ 15.00 Cost of raw materials (wax/scent/coloring) $ 2.00 $ 3.00 Cost of packaging (glass jars) $ 3.00 $ 2.00 Cost of labor (manufacturing and packing) $ 1.50 $ 2.50 Cost of selling commission (per jar) $ 0.125 $ 0.50 Cost of shipping (per jar) $ 0.25 $ 0.25 The ratio of sales units is two mint chocolate candles for each vanilla caramel candle sold. Indulgent Luxuries Manufacturing Company’s fixed costs are $100,000. How many units of each product must be sold to achieve an operating profit of $10,000? 10,000 mint chocolate candles and 10,000 vanilla caramel candles 20,000 mint chocolate candles and 10,000 vanilla caramel candles 10,000 mint chocolate candles and 20,000 vanilla caramel candles 20,000 mint chocolate candles and 20,000 vanilla caramel candles Correct! Note calculation as shown:
Question 9 1 / 1 pts Which of the following costs would not be deducted from the revenue per unit to arrive at contribution margin? Cost of direct labor for a pharmaceutical company Cost of steel for a building construction company Cost of high-end paper for a printing company Cost of depreciation for the manufacturing equipment for a cell phone manufacturer
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
  • Access to all documents
  • Unlimited textbook solutions
  • 24/7 expert homework help
Correct! Depreciation cost is a fixed cost; thus, it does not vary according to the number of units produced. Only variable costs are deducted from revenues to arrive at contribution margin. Question 10 1 / 1 pts The formula to calculate net income is ________. operating income + nonoperating revenues - nonoperating expenses contribution margin – fixed expenses contribution margin - fixed expenses +/- net nonoperating revenue or expense operating income + nonoperating revenues – nonoperating expenses - income taxes Correct! Net income's main differentiators from operating income are the inclusion of nonoperating items and income taxes.