TUTORS COPY

ACCT2112 Management Accounting

Tutorial Questions with Suggested Answers
Chapter 3: Cost-Volume-Profit Analysis

Section A: Multiple Choice Questions

Instruction: Select the best answers for the following questions.
1.

Cost-volume-profit analysis is used PRIMARILY by management

a.
b.
c.
d.
e.

2.

A revenue driver is defined as

a.
b.
c.
d.
e.

3.

as a planning tool.
for control purposes.
to prepare external financial statements.
to attain accurate financial results.
none of the above.

any factor that affects costs and revenues.

any factor that affects revenues.
only factors that can influence a change in selling price.
only factors that can influence a change in demand.
none of the above.

The selling price per unit less the variable cost per unit is the
a.
b.
c.
d.
e.

fixed cost per unit.

gross margin.
margin of safety.
contribution margin per unit.
none of the above.

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 4 THROUGH 7.

Kaisers Kraft Korner sells a single product. 7,000 units were sold resulting in $70,000 of sales
revenue; $28,000 of variable costs; and $12,000 of fixed costs.
4.

Contribution margin per unit is

a.
b.
c.
d.
e.

$4.00.
$4.29.
$6.00.
12.00.
none of the above.

($70,000 - $28,000) / 7,000 units = $6 per unit

5.

Breakeven point in units is

a.
b.
c.
d.
e.

2,000 units.
3,000 units.
5,000 units.
6,000 units.
none of the above.

10X 4X 12,000 = 0; X = 2000 units

6.

The number of units that must be sold to achieve $60,000 of operating income is
a.
b.
c.
d.
e.

10,000 units.
11,666 units.
12,000 units.
24,000 units.
none of the above.

10X 4X 12,000 = 60,000; X = 12,000 units

7.

If sales increase by $25,000, operating income will increase by

a.
b.
c.
d.
e.

$10,000.
$15,000.
$22,200.
$30,000.
none of the above.

[($70,000 - $28,000) / $70,000] x $25,000 = $15,000

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 8 AND 9.

XYZ Company recently produces two new bicycles: Mountaineering model and touring model.
The following information was compiled by the accounting department.
Model
Mountaineering
bike
$88.00
$52.80

Selling price per unit

Variable costs per unit

Touring
bike
$80.00
$52.80

Fixed costs will total $369,600 if the mountaineering model is produced but will be only
$316,800 if the touring model is produced. XYZ Company is subject to a 40% income tax rate.

8.

If XYZ Company desires an after tax net income of $22,080, how many units of touring
bike will the company have to sell?
a.
b.
c.
d.
e.

9,000 units.
11,000 units.
13,000 units.
15,000 units.
none of the above.

Number of units of sales required to earn target after-tax income:

(Fixed expense + [Target after tax net income) (1 tax rate)]) Unit contribution margin
X = ($316,800 + [$22,080 (1 40%)]) ($80.00 - $52.80)
X = 13,000 units

9.

Suppose management decided to produce both models and sell them in equal
proportions. If the total fixed costs amount to $468,000, what is the firms break-even
point in units?
a.
b.
c.
d.
e.

9,000 units.
11,000 units.
13,000 units.
15,000 units.
none of the above.

Weighted-average unit contribution margin:

(50% x $35.20) + (50% x $27.20) = $31.20
Break-even point (in units) = Fixed cost Weighted-average contribution margin
= $468,000 $31.20
= 15,000 units (or 7,500 of each type)
3

Section B: Questions/Problems
Note to students: The assigned questions/problems are based on Horngren, CT, Datar, SM &
Rajan, M. (2015). Cost Accounting: A Managerial Emphasis. Global Edition, 15th Edition.
Prentice Hall: Upper Saddle River.
Chapter
3

Topic
Cost-Volume-Profit Analysis

Assigned Questions /
Problems
3-39 (Reguirement#3 only)*

*Hint: Students must do Problem 3-38 before attempting this question.

3-39 CVP analysis, shoe stores (continuation of 3-38).

3.

HighStep Shoe Company

Operating Income Statement, 2014
Revenues (9,500 pairs $60) + (1,500 pairs $50)
Cost of shoes, 11,000 pairs $37
Commissions = Revenues 5% = $645,000 0.05
Contribution margin
Fixed costs
Operating income

$645,000
407,000
32,250
205,750
180,000
$
25,750

Page 5