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Exam 18: Cost Volume Profit Analysis

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Question 1

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Econ Pty Ltd produced and sold 45 000 units of a single product last year.Data concerning the year's profit and loss statement is as follows: Assuming sales revenue increases by 15 per cent,what will be the percentage increase in profit before income tax?

A) 15%
B) 45%
C) 60%
D) 75%

E) None of the above
F) A) and B)

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Question 2

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Cost volume profit applied to the service industry A hotel has 10 000 room nights available per annum,charges $50 per room per night,pays fixed costs of $150 000 per annum and variable costs of $16 for each night a room is occupied.If the price per room per night is increased by 5 per cent,the break-even occupancy rate as a percentage (rounded) is:

A) 38%
B) 41%
C) 44%
D) 50%

E) All of the above
F) A) and C)

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Question 3

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Epex Pty Ltd makes a single product.Annual fixed expenses are $48 000 and the contribution margin ratio is 30 per cent.What volume in sales dollars is necessary for Epex to achieve a target profit of $15 000?

Would you expect the following to be high or low in a labour-intensive firm: (1) operating leverage, (2) safety margin and (3) profit potential?

Under an activity-based costing system,the break-even point in units is calculated by:

Maxie Pty Ltd makes and sells two types of shoes,Plain and Fancy.Product data is as follows: Sixty per cent of the sales in units are Plain and annual fixed expenses are $45 000 and the sales mix remains constant.How many units of Fancy must Maxie Pty Ltd sell to earn a target profit of $31 500?

Maxie Pty Ltd makes and sells two types of shoes,Plain and Fancy.Product data is as follows: Sixty per cent of the sales in units are Plain and annual fixed expenses are $45 000 and the sales mix remains constant.Assume an income tax rate of 20 per cent.The break-even point for this data is 5000 units in total.How will the calculation of the break-even point change (if at all) if the relative percentages of the products in the mix change from 60 per cent Plain shoes to 40 per cent Fancy shoes?

If the contribution margin is $10,the selling price per unit is $25 and the fixed costs are $45 000,to earn a targeted net profit of $50 000 the total dollar value of sales must be at least:

Which of the following do limitations of cost volume profit include? i.Not all costs can be classified as fixed or variable ii.Revenue changes may not be linear. iii.Sales volume is the only cost driver.iv.Inventory levels do not change.

Maxie Pty Ltd makes and sells two types of shoes,Plain and Fancy.Product data is as follows: Sixty per cent of the sales in units are Plain and annual fixed expenses are $45 000 and the sales mix remains constant.Determine the number of units of Plain and Fancy respectively that Maxie Pty Ltd must sell to break even.

Econ Pty Ltd produced and sold 45 000 units of a single product last year.Data concerning the year's profit and loss statement is as follows: What was Econ's break-even point in dollar sales?

Econ Pty Ltd produced and sold 45 000 units of a single product last year.Data concerning the year's profit and loss statement is as follows: What was Econ's break-even point (rounded) in unit sales?

Although the cost structure of a firm considers the proportions of fixed and variable costs,these structures will differ depending on the firm itself and the particular industry.

Would you expect the following to be high or low in a labour-intensive industry: (1) operating leverage, (2) break-even point and (3) safety margin?

If the operating leverage factor is known,which of the following can be determined?

One of the biggest criticisms of cost volume profit (CVP)analysis is that it is merely a simplified model that needs to be used with a lot of caution.

The contribution margin per unit is calculated as the difference between:

Cost volume profit analysis is based on certain general assumptions.Which of the following statements about these assumptions is/are true?

The contribution margin ratio is calculated as follows:

When calculating a breakeven point with activity-based costing,all costs from unit,batch,product and facility levels are used in the formula.