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CVP - Practice Probs

The document contains 10 multiple choice questions about business and accounting concepts such as break-even analysis, contribution margin, operating leverage, and fixed and variable costs.

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cadizelvin
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30 views2 pages

CVP - Practice Probs

The document contains 10 multiple choice questions about business and accounting concepts such as break-even analysis, contribution margin, operating leverage, and fixed and variable costs.

Uploaded by

cadizelvin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1. August Company sells Product Rhey for P 5 per unit.

The fixed cost is P 210,000 and the variable


cost is 60% of the selling price. What amount of sales is needed to realize a profit of 10% of sales?
a. P 700,000 c. P 472,500
b. P 525,000 d. P 420,000
2. Julie Company, which is subject to 40% tax, had the following operating data for the period just
ended:
Selling price per unit P 60
Variable cost per unit P 22
Fixed Costs P 504,000
Management plans to improve the quality of its only product by way of implementing the
following:
- Replacing a component that costs P 3.50 with a higher-grade unit that costs P 5.50, and
- Acquiring a P 180,000 packaging machine. Julie will depreciate the machine over a 10 year
period with no estimated salvage value by the straight-line method of depreciation.
If the company wants to earn after-tax of P 172,800 in the coming year, how many units must be
sold?
a. 10,300 units c. 22,500 units
b. 21,316 units d. 27,000 units
3. Kris Company sells Products S, T and D. Kris sells three units of S for each unit of D and two units of
T for each unit of S. the contribution margins are P 1 per unit of S, P 1.50 per unit of T, and P 3 per
unit of D. fixed costs are P 600,000. How many units of S would Kris sell at the break-even point?
a. 40,000 units c. 240,000 units
b. 120,000 units d. 400,000 units
4. Ubi Company’s variable costs are 75% of sales. At a sales level of P 400,000, the company’s degree
of operating leverage is 8. At this level, fixed costs equal
a. 87,500 c. 50,000
b. 100,000 d. 75,000
5. Heather Company has a contribution margin ratio of 20%, a margin of safety ratio of 33 1/3% and an
income of P 5,000. What was Heather Company’s break-even peso sales?
a. P 15,000 c. P 60,000
b. P 50,000 d. P 75,000
6. At 40,000 units of sales, Zhad Corporation had an operating loss of P 3.000 per unit. When sales
were 70,000 units, the company had a profit of P 1.20 per unit. What is the number of units to break-
even?
a. 35,000 units c. 52,500 units
b. 45,000 units d. 57,647 units
7. Harry Manufacturing incurs annual fixed costs of P 250,000 in producing and selling a single product.
Estimated unit sales are 125,000. An after-tax income of P 75,000 is desired by management. The
company projects its income tax rate at 40%. What is the maximum amount that Harry can expend for
variable costs per unit and still meet its profit objective if the sales price per unit is estimated at P 6?
a. P 3.37 c. P 3.00
b. P 3.59 d. P 3.70
8. For its most recent fiscal year, a firm reported that its contribution margin was equal to 40% of sales
and that its net income amounted to 10% of sales. If its fixed costs for the year were P 60,000, how
much was the margin of safety?
a. P 150,000 c. P 600,000
b. P 200,000 d. P 50,000
9. The following information relates to Hero Corporation for last year:
Sales P 500,000
Net operating income P 25,000
Degree of operating leverage 5
Sales at Hero are expected to be P 600,000 next year. Assuming no change in cost structure, this means
that net operating income for next year should be:
a. P 30,000 c. P 50,000
b. P 45,000 d. P 125,000
10. Ralph Company is expecting an increase of fixed costs by P 78,750 upon moving their place of
business to the downtown area. Likewise, it is anticipating that the selling price per unit and the
variable expenses will not change. At present scenario, the sales volume necessary to breakeven is P
750,000 but with the expected increase in fixed costs, the sales volume necessary to breakeven
would go up to P 975,000. Based on these projections, what would be the total fixed costs after the
increase of P 78,750?
a. P 341,250 c. P 183,750
b. P 262,500 d. P 300,000

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