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CVP Multiple Choice Questions
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Multiple Choice Questions

1. CVP analysis can be used to study the effect of:

A. changes in selling prices on a company's proitability.
B. changes in variable costs on a company's proitability.
C. changes in ixed costs on a company's proitability.
D. changes in product sales mix on a company's proitability.
E. all of the above.

2. The break-even point is that level of activity where:

A. total revenue equals total cost.
B. variable cost equals ixed cost.
C. total contribution margin equals the sum of variable cost plus ixed cost.
D. sales revenue equals total variable cost.
E. proit is greater than zero.

3. The unit contribution margin is calculated as the difference between:

A. selling price and ixed cost per unit.
B. selling price and variable cost per unit.
C. selling price and product cost per unit.
D. ixed cost per unit and variable cost per unit.
E. ixed cost per unit and product cost per unit.

4. Which of the following would produce the largest increase in the contribution
margin per unit?
A. A 7% increase in selling price.
B. A 15% decrease in selling price.
C. A 14% increase in variable cost.
D. A 17% decrease in ixed cost.
This website stores data such as E. A 23% increase in the number of units sold.
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5. Which of the following would take place if a company were able to reduce its
variable cost per unit?
Contribution Break-even
Margin Point
A. Increase Increase
B. Increase Decrease
C. Decrease Increase
D. Decrease Decrease
E. Increase No effect

6. Which of the following would take place if a company experienced an increase in

ixed costs?
A. Net income would increase.
B. The break-even point would increase.
C. The contribution margin would increase.
D. The contribution margin would decrease.
E. More than one of the above events would occur.

7. Assuming no change in sales volume, an increase in a irm's per-unit contribution

margin would:
A. increase net income.
B. decrease net income.
C. have no effect on net income .
D. increase ixed costs.
E. decrease ixed costs.

8. A company that desires to lower its break-even point should strive to:
A. decrease selling prices.
B. reduce variable costs.
C. increase ixed costs.
D. sell more units.
E. pursue more than one of the above actions.

9. A company has ixed costs of P900 and a per-unit contribution margin of P3. Which
of the following statements is (are) true?
A. Each unit "contributes" P3 toward covering the ixed costs of P900.
B. The situation described is not possible and there must be an error.
C. Once the break-even point is reached, the company will make money at the
rate of P3 per unit.
D. The irm will deinitely lose money in this situation.
E. Statements "A" and "C" are true.

10. Sanderson sells a single product for P50 that has a variable cost of P30. Fixed costs
amount to P5 per unit when anticipated sales targets are met. If the company sells one unit
in excess of its break-even volume, the bottom-line proit will be:
A. P15.
B. P20.
C. P50.
D. an amount that cannot be derived based on the information presented.
E. an amount other than those in choices "A," "B," and "C" but one that can be
derived based on the information presented.

11. At a volume of 15,000 units, Toronto reported sales revenues of P600,000, variable
costs of P225,000, and ixed costs of P120,000. The company's contribution margin per
unit is:
A. P17.
B. P25.
C. P47.
This website stores data such as D.
E.
P55.
an amount other than those above.
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A recent income statement of Fairbanks Corporation reported the following data:

functionality, as marketing, Sales revenue

Variable costs
P8,000,000
5,000,000

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Fixed costs 2,200,000

If these data are based on the sale of 20,000 units, the contribution margin per unit would
remaining on this website yoube:
A. P40.
indicate your consent. B. P150.

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D.
P290.
P360.
E. an amount other than those above.

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13. A recent income statement of Hield Corporation reported the following data:
days
Sales revenue P3,600,000
Variable costs 1,600,000
Fixed costs 1,000,000

If these data are based on the sale of 10,000 units, the break-even point would be:
A. 2,000 units.
B. 2,778 units.
C. 3,600 units.
D. 5,000 units.
E. an amount other than those above.

14. A recent income statement of Kwisket Corporation reported the following data:

Sales revenue P2,500,000

Variable costs 1,500,000
Fixed costs 800,000

If these data are based on the sale of 5,000 units, the break-even sales would be:
A. P2,000,000.
B. P2,206,000.
C. P2,500,000.
D. P10,000,000.
E. an amount other than those above.

15. The following information relates to Pareno Company:

Sales revenue P10,000,000

Contribution margin 4,000,000
Net income 1,000,000

If a manager at Pareno desired to determine the percentage impact on net income of a

given percentage change in sales, the manager would multiply the percentage
increase/decrease in sales revenue by:

A. 0.25.
B. 0.40.
C. 2.50.
D. 4.00.
E. 10.00.

Use the following to answer questions 16-17:

Edco Company produced and sold 45,000 units of a single product last year, with the
following results:

Sales revenue P1,350,000

Manufacturing costs:
Variable 585,000
Fixed 270,000
Selling costs:
Variable 40,500
Fixed 54,000
Administrative costs:
Variable 184,500
Fixed 108,000

16. Edco's operating leverage factor was:

A. 4.
B. 5.
C. 6.
D. 7.
E. 8.

17. If Edco's sales revenues increase 15%, what will be the percentage increase
in income before income taxes?

This website stores data such as A.

B.
15%.
45%. 
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D.
60%.
75%.

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18.
Cancel By
When advanced manufacturing systems are installed, what effect does such
installation anytime.
usually have on ixed costs and the break-even point?

remaining on this website you Fixed Costs Break-even Point

A. Increase Increase
indicate your consent. B. Increase Decrease

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C. Decrease
D.
Increase
Decrease Decrease
E. Do not change Does not change

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