1.

1. In constructing a cost-volume-profit (CVP) graph, the total expense line and the total
revenue line will intersect at what level on the vertical axis?
a. $200,000
b. $160,000
c. $240,000
d. $320,000

2. An organization's break-even point is 4,000 units at a sales price of $50 per unit,
variable cost of $30 per unit, and total fixed costs of $80,000. If the company sells 500
additional units, by how much will its profit increase?
a. $25,000
b. $15,000
c. $10,000
d. $37,000

3. The Break-even Point of a company is that level of sales income which will equal the
sum of its fixed cost
a. True
b. False

4. Which of the following are characteristics of B.E.P?

a. There is no loss and no profit to the firm.
b. Total revenue is equal to total cost.
c. Contribution is equal to fixed cost
d. All of the above.

5. Which of the following are assumptions for break-even analysis?

A. Elements of cost cannot be divided in different groups.
B. Fixed cost remains certain from zero production to full capacity.
C. Behavior of different costs is linear
D. Selling per price unit remains constant.
a. A, B, C
b. B, C, D
c. A, C, D
d. A, B, D

6. While measuring break-even analysis, it is considered that during a specific period

there will be no change in general price level, i.e., labor, cost of material and other
overheads.
a. True
b. False

7. Which of the following are limitations of break-even analysis?

a. Static concept
b. Capital employed is taken into account.
c. Limitation of non-linear behavior of costs
d. Limitation of presence of perfect competition

8. Break-even analysis is used in “Make or Buy” decision.

a. True
b. False

9. Using equation method, Break-even point is calculated as

a. Sales = Variable expenses + Fixed expenses + Profit
b. Sales = Variable expenses + Fixed expenses - Profit
c. Sales = Variable expenses - Fixed expenses + Profit
d. None of the above

10. Given selling price is Rs 10 per unit, variable cost is Rs 6 per unit and fixed cost is Rs
5,000. What is break-even point?
a. 500 units
b. 1,000 units
c. 1,250 units
d. None of the above

11. Contribution is also known as

a. Contribution margin
b. Net Margin
c. Both a and b
d. None of the above

12. Given selling price is Rs 20 per unit, variable cost is Rs 16 per unit contribution is
a. Rs 1.25 per unit
b. Rs 4 per unit
c. Rs 0.8 per unit
d. None of the above

13. Which of the following costs would be a fixed cost for Carl; a confectionery
manufacturer?
a. Sugar
b. Electricity costs to run the manufacturing machines
c. Hourly paid wages
d. Supervisor's salary

14. Which of the following is a definition for variable costs

a. Costs that remain the same whatever the level of output
b. Costs that contain a fixed and variable element
c. Costs that vary directly with the number of units produced
d. Costs that will remain fixed as output increases until the activity reaches a level where the
costs have to increase sharply.

15. Luke is arranging for a party to be held in the students' union. The use of the hall
will be free but security costs of £300 will have to be met. The cost of the main band
will be £2,500 and the supporting band will cost £450. Tickets will be priced at £15
each. On arrival, every ticket holder will be given a bottle of water, worth £1 per
bottle. What are the total fixed costs for this event?
a. £3,250
b. £2,500
c. £1
d. £15

16. Luke is arranging for a party to be held in the students' union. The use of the hall
will be free but security costs of £300 will have to be met. The cost of the main band
will be £2,500 and the supporting band will cost £450. Tickets will be priced at £15
each. On arrival, every ticket holder will be given a bottle of water, worth £1 per
bottle. What is the break-even number of tickets for this event?
a. 179 tickets
b. 167 tickets
c. 217 tickets
d. 233 tickets

17. Luke is arranging for a party to be held in the students' union. The use of the hall
will be free but security costs of £300 will have to be met. The cost of the main band
will be £2,500 and the supporting band will cost £450. Tickets will be priced at £15
each. On arrival, every ticket holder will be given a bottle of water, worth £1 per
bottle. If Luke sells 400 tickets as he anticipates, what profit will he make?
a. £3,085
b. £2,505
c. £5,600
d. £2,338

18. Which of the following is a definition of break-even point?

a. The difference between the selling price of a product and the variable costs incurred in
producing that product
b. The fixed plus variable costs of the business
c. The situation where neither a profit nor a loss is made
d. The situation where a profit is made

19. If the contribution per unit is £25 and the break-even point is 80,000 units. Which of
the following statements could NOT be true?
a. The selling price per unit is £55 and the variable cost per unit is £30
b. The fixed costs are £2,000,000
c. To make a profit of £300,000, 92,000 units would have to be sold
d. To make a profit of £500,000, 95,000 units would have to be sold

20. Which of the following is the least secure margin of safety for a business to have?
a. A margin of safety of 3,000 units and a percentage margin of safety of 20%
b. A margin of safety of 300 units and a percentage margin of safety of 30%
c. A margin of safety of 300 units and a percentage margin of safety of 35%
d. A margin of safety of 3,000 units and a percentage margin of safety of 25%

21. Jenny expects to produce and sell 7,000 units at £15 each. Each unit will cost her £9
to produce and fixed costs will be £60,000 per annum. What is the break-even point
in unit
a. 6,667 units
b. 4,000 units
c. 10,000 units
d. 1,000 units

22. Which of the following is not an underlying assumption of break-even analysis?

a. Costs can easily be divided into fixed and variable.
b. Fixed costs remain static over a relevant range.
c. The unit selling price will remain constant throughout the relevant range.
d. Raw materials unit costs may diminish with increased output

23. Profit margin is negative if

a. profit contribution > fixed costs
b. profit contribution < fixed costs
c. fixed cost is zero
d. profit contribution > fixed costs

24. Fixed cost is $150,000 USD and break even point is 7500 units then contribution to
fixed cost and profit is Fixed cost⁄contribution to fixed cost and profit is formula used
to calculate
a. break even level output
b. break even level input
c. break even variable cost
d. break even fixed cost

25. Fixed cost⁄contribution to fixed cost and profit is formula used to calculate

a. break even level output

b. break even level input
c. break even variable cost
d. break even fixed cost

26. Breakeven point is 5000 units, price per unit is $60 USD and variable cost of each
 unit is $20 USD then fixed cost is

a. $100,000
b. $200,000
c. $300,000
d. $400,000

27. Fixed cost is $100,000 USD, price per unit is $50 USD and variable cost per unit is
$40 USD then output level break even point is

a. 3000 units
b. 10000 units
c. 5000 units
d. 4000 units

28. Cost volume-profit (CVP) analysis can be used to summarize the effects on which of

the following?

a. An organization’s volume of activity on its costs, revenues, and profit.

b. Profit on changes in selling prices and service fees

c. Profit on the organization’s mix of products or services

d. All of the above.

29. Which of the following is not an assumption of CVP Analysis?

a. The behavior of total revenue is linear

b. Unit variable expenses remain unchanged as activity varies.

c. The number of units produced exceeds the number of units sold

d. Fixed costs remain constant as activity changes

30. Budgeted sales revenues are $320,000, fixed costs are $80,000, and variable costs are

$120,000. What is the safety margin?

a. $200,000

b. $20,000
c. $192,000

d. $128,000