4) Sky High sells helicopters. During the current year, 100 helicopters were sold resulting in $820,000 of sales revenue, $250,000 of variable costs, and $342,000 of fixed costs. Breakeven point in units is ________. A) 80 units B) 64 units C) 60 units D) 78 units Answer: C
Explanation: C) Explanation: Contribution margin per unit = ($820,000 - $250,000) / 100 = $570,000 / 100 = $5,700 per unit.
Breakeven point = $342,000 / $5,700 = 60 units
Diff: 2
Objective: 2
AACSB: Application of knowledge
5) Sky High sells helicopters. During the current year, 100 helicopters were sold resulting in $820,000 of sales revenue, $250,000 of variable costs, and $342,000 of fixed costs. The number of helicopters that must be sold to achieve $300,000 of operating income is ________. A) 113 units B) 102 units C) 96 units D) 100 units Answer: A
Explanation: A) Number of helicopters to be sold to achieve an operating income of $300,000 = ($342,000 + $300,000) / $5,700 = 112.6 units = 113 units
Diff: 2
Objective: 2
AACSB: Application of knowledge
6) At the breakeven point of 2,000 units, variable costs total $4,000 and fixed costs total $6,000. The 2,001st unit sold will contribute ________ to profits. A) $1 B) $2 C) $3 D) $5
Answer: C
Explanation: C) Fixed costs of $6,000/2,000 units = Contribution Margin of $3 per unit.
Diff: 2
Objective: 2
AACSB: Application of knowledge
7) The breakeven point is the activity level where ________. A) revenues equal fixed costs B) revenues equal variable costs
C) contribution margin equals total costs
D) revenues equal the sum of variable and fixed costs Answer: D
Diff: 1
Objective: 2
AACSB: Analytical thinking
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8) Breakeven point in units is ________.
A) total costs divided by profit margin per unit
B) contribution margin per unit divided by total cost per unit C) fixed costs divided by contribution margin per unit
D) the sum of fixed and variable costs divided by contribution margin per unit Answer: C
Diff: 1
Objective: 2
AACSB: Analytical thinking
9) Sales total $400,000 when variable costs total $300,000 and fixed costs total $50,000. The breakeven point in sales dollars is ________. A) $200,000 B) $120,000 C) $170,000 D) $210,000 Answer: A
Explanation: A) Contribution margin percentage = ($400,000 ? $300,000) / $400,000 = 25%; BE sales = $50,000 / 0.25 = $200,000
Diff: 3
Objective: 2
AACSB: Application of knowledge
10) The breakeven point revenues is calculated by dividing ________. A) fixed costs by total revenues
B) fixed costs by contribution margin percentage C) total revenues by fixed costs
D) contribution margin percentage by fixed costs Answer: B
Diff: 2
Objective: 2
AACSB: Analytical thinking
11) At breakeven point, ________. A) operating income is equal to zero
B) contribution margin minus fixed costs is equal to profits earned C) revenues equal fixed costs minus variable costs
D) breakeven revenues equal fixed costs divided by the variable cost per unit Answer: A
Diff: 2
Objective: 2
AACSB: Analytical thinking
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12) The breakeven point decreases if ________. A) the variable cost per unit increases B) the total fixed costs decrease
C) the contribution margin per unit decreases D) the selling price per unit decreases Answer: B
Diff: 2
Objective: 2
AACSB: Application of knowledge
13) Assume only the specified parameters change in a CVP analysis. The contribution margin percentage increases when ________. A) total fixed costs increase B) total fixed costs decrease
C) variable costs per unit increase D) variable costs per unit decrease Answer: D
Diff: 1
Objective: 2
AACSB: Analytical thinking
14) What is the breakeven point in units, assuming a product's selling price is $100, fixed costs are $16,000, unit variable costs are $20, and operating income is $5,200? A) 100 units B) 300 units C) 400 units D) 200 units Answer: D
Explanation: D) Unit contribution margin = $100 ? $20 = $80. Breakeven point in units = $16,000 / $80 = 200 units
Diff: 2
Objective: 2
AACSB: Application of knowledge
15) If unit outputs exceed the breakeven point ________. A) there will be an increase in fixed costs B) total sales revenue will exceed fixed costs C) total sales revenue will exceed variable costs D) there will be a profit Answer: D
Diff: 2
Objective: 2
AACSB: Application of knowledge
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16) How many units would have to be sold to yield a target operating income of $23,000, assuming variable costs are $25 per unit, total fixed costs are $2,000, and the unit selling price is $30? A) 4,800 units B) 4,400 units C) 5,000 units D) 5,200 units Answer: C
Explanation: C) Desired sales = ($2,000 + $23,000) / ($30 ? $25) = 5,000 units
Diff: 3
Objective: 2
AACSB: Application of knowledge
17) If the breakeven point is 1,000 units and each unit sells for $50, then ________. A) selling 1,040 units will result in a loss B) selling $60,000 will result in a loss
C) selling $50,000 will result in zero profit D) selling $45,000 will result in profit Answer: C
Explanation: C) 1,000 × $50 = $50,000 of BE sales
Diff: 2
Objective: 2
AACSB: Application of knowledge
18) If breakeven point is 1,000 units, each unit sells for $30, and fixed costs are $10,000, then on a graph the ________.
A) total revenue line and the total cost line will intersect at $30,000 of revenue B) total cost line will be zero at zero units sold C) revenue line will start at $10,000
D) total revenue line and the total cost line will intersect at $40,000 of revenue Answer: A
Diff: 3
Objective: 2
AACSB: Application of knowledge
19) When fixed costs are $50,000 and variable costs are 60% of the selling price, then breakeven sales are ________. A) $115,000 B) $125,000 C) $175,000 D) $275,000 Answer: B
Explanation: B) $50,000 / (1 ? 0.60) = $125,000 in BE sales
Diff: 2
Objective: 2
AACSB: Application of knowledge
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