Cost & Management Accounting for Competitive Exams

Cost & Management Accounting

Q. What does CVP analysis primarily help management to determine?

A. The total cost of production
B. The contribution margin
C. The break-even point
D. The return on investment

Solution

CVP analysis helps management determine the break-even point, where total revenues equal total costs.

Correct Answer: C — The break-even point

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Q. What does CVP analysis primarily help managers understand?

A. The relationship between cost, volume, and profit
B. The impact of fixed costs on profitability
C. The break-even point of a product
D. The effect of taxes on net income

Solution

CVP analysis helps managers understand the relationship between cost, volume, and profit.

Correct Answer: A — The relationship between cost, volume, and profit

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Q. What does the term 'cost driver' refer to in activity-based costing?

A. A factor that causes a change in cost
B. A method of allocating fixed costs
C. A type of variable cost
D. A measure of production efficiency

Solution

A cost driver is a factor that causes a change in the cost of an activity, used in activity-based costing to allocate costs accurately.

Correct Answer: A — A factor that causes a change in cost

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Q. What happens to the contribution margin if the selling price increases while variable costs remain constant?

A. Decreases
B. Increases
C. Remains the same
D. Becomes negative

Solution

If the selling price increases while variable costs remain constant, the contribution margin increases.

Correct Answer: B — Increases

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Q. What happens to the contribution margin if variable costs increase while selling price remains constant?

A. Increases
B. Decreases
C. Remains the same
D. Cannot be determined

Solution

If variable costs increase while selling price remains constant, the contribution margin decreases.

Correct Answer: B — Decreases

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Q. What is the break-even point in CVP analysis?

A. The point where total revenue equals total costs
B. The point where fixed costs are covered
C. The point where variable costs exceed fixed costs
D. The point where profit is maximized

Solution

The break-even point is where total revenue equals total costs, resulting in neither profit nor loss.

Correct Answer: A — The point where total revenue equals total costs

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Q. What is the break-even point in sales dollars if the break-even point in units is 1,000 and the selling price per unit is $25?

A. $15,000
B. $20,000
C. $25,000
D. $30,000

Solution

Break-even Sales = Break-even Units * Selling Price per Unit = 1,000 * $25 = $25,000.

Correct Answer: C — $25,000

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Q. What is the break-even point in sales dollars if the fixed costs are $100,000 and the contribution margin ratio is 40%?

A. $250,000
B. $400,000
C. $100,000
D. $150,000

Solution

Break-even point in sales dollars = Fixed Costs / Contribution Margin Ratio = $100,000 / 0.40 = $250,000.

Correct Answer: A — $250,000

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Q. What is the break-even point in sales dollars?

A. Fixed costs divided by contribution margin ratio
B. Total costs divided by total sales
C. Total variable costs divided by contribution margin
D. Sales revenue minus total costs

Solution

The break-even point in sales dollars is calculated by dividing fixed costs by the contribution margin ratio.

Correct Answer: A — Fixed costs divided by contribution margin ratio

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Q. What is the break-even point in units if fixed costs are $10,000 and the contribution margin per unit is $25?

A. 400 units
B. 500 units
C. 600 units
D. 300 units

Solution

Break-even point (units) = Fixed costs / Contribution margin per unit = $10,000 / $25 = 400 units.

Correct Answer: B — 500 units

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Q. What is the break-even point in units if fixed costs are $10,000 and the contribution margin per unit is $50?

A. 100 units
B. 200 units
C. 300 units
D. 400 units

Solution

Break-even point (units) = Fixed costs / Contribution margin per unit = $10,000 / $50 = 200 units.

Correct Answer: B — 200 units

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Q. What is the break-even point in units if fixed costs are $10,000, selling price per unit is $50, and variable cost per unit is $30?

A. 500 units
B. 1,000 units
C. 250 units
D. 750 units

Solution

Break-even point (units) = Fixed Costs / (Selling Price - Variable Cost) = $10,000 / ($50 - $30) = 500 units.

Correct Answer: B — 1,000 units

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Q. What is the break-even point in units if fixed costs are $100,000, variable cost per unit is $20, and selling price per unit is $50?

A. 2,000 units
B. 1,500 units
C. 4,000 units
D. 5,000 units

Solution

Break-even point (units) = Fixed Costs / (Selling Price - Variable Cost) = $100,000 / ($50 - $20) = 2,000 units.

Correct Answer: A — 2,000 units

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Q. What is the break-even point in units if fixed costs are $12,000 and the contribution margin per unit is $40?

A. 300 units
B. 400 units
C. 500 units
D. 600 units

Solution

Break-even point (units) = Fixed costs / Contribution margin per unit = $12,000 / $40 = 300 units.

Correct Answer: B — 400 units

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Q. What is the break-even point in units if fixed costs are $20,000 and contribution margin per unit is $5?

A. 4,000 units
B. 5,000 units
C. 2,000 units
D. 10,000 units

Solution

Break-even point (units) = Fixed Costs / Contribution Margin per unit = $20,000 / $5 = 4,000 units.

Correct Answer: B — 5,000 units

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Q. What is the break-even point in units if fixed costs are $40,000, selling price per unit is $80, and variable cost per unit is $50?

A. 800 units
B. 1,000 units
C. 1,200 units
D. 600 units

Solution

Break-even point (units) = Fixed Costs / (Selling Price - Variable Cost) = $40,000 / ($80 - $50) = 1,000 units.

Correct Answer: B — 1,000 units

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Q. What is the break-even point in units if fixed costs are $50,000, selling price per unit is $25, and variable cost per unit is $15?

A. 2,500 units
B. 5,000 units
C. 3,000 units
D. 4,000 units

Solution

Break-even point = Fixed Costs / (Selling Price - Variable Cost) = 50000 / (25 - 15) = 2500 units.

Correct Answer: A — 2,500 units

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Q. What is the break-even point in units if fixed costs are $50,000, variable cost per unit is $20, and selling price per unit is $50?

A. 1,000 units
B. 2,000 units
C. 1,500 units
D. 2,500 units

Solution

Break-even point = Fixed Costs / (Selling Price - Variable Cost) = 50,000 / (50 - 20) = 1,000 units.

Correct Answer: B — 2,000 units

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Q. What is the break-even point in units?

A. Total fixed costs divided by contribution margin per unit
B. Total variable costs divided by selling price
C. Total sales revenue divided by total costs
D. Total fixed costs divided by selling price

Solution

The break-even point in units is calculated by dividing total fixed costs by the contribution margin per unit.

Correct Answer: A — Total fixed costs divided by contribution margin per unit

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Q. What is the contribution margin if the selling price is $200 and variable costs are $120?

A. $80
B. $120
C. $200
D. $320

Solution

Contribution Margin = Selling Price - Variable Costs = $200 - $120 = $80.

Correct Answer: A — $80

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Q. What is the contribution margin if the selling price is $200, variable costs are $120, and fixed costs are $50?

A. $80
B. $120
C. $50
D. $200

Solution

Contribution Margin = Selling Price - Variable Costs = $200 - $120 = $80.

Correct Answer: A — $80

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Q. What is the contribution margin in CVP analysis?

A. Sales revenue minus fixed costs
B. Sales revenue minus variable costs
C. Total costs minus total revenue
D. Net income before taxes

Solution

The contribution margin is calculated as sales revenue minus variable costs.

Correct Answer: B — Sales revenue minus variable costs

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Q. What is the contribution margin in marginal costing?

A. Sales Revenue - Variable Costs
B. Sales Revenue - Fixed Costs
C. Total Costs - Profit
D. Sales Revenue - Total Costs

Solution

The contribution margin is calculated as Sales Revenue minus Variable Costs.

Correct Answer: A — Sales Revenue - Variable Costs

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Q. What is the contribution margin per unit if the selling price is $80 and variable costs are $50?

A. $30
B. $50
C. $80
D. $20

Solution

Contribution Margin per unit = Selling Price - Variable Costs = $80 - $50 = $30.

Correct Answer: A — $30

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Q. What is the effect of an increase in variable costs on the break-even point?

A. It decreases the break-even point
B. It has no effect on the break-even point
C. It increases the break-even point
D. It eliminates the break-even point

Solution

An increase in variable costs raises the break-even point because it reduces the contribution margin per unit.

Correct Answer: C — It increases the break-even point

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Q. What is the effect on contribution margin if the variable cost per unit increases by $5 while the selling price remains unchanged?

A. Increases by $5
B. Decreases by $5
C. Remains the same
D. Increases by $10

Solution

Contribution margin decreases by the same amount as the increase in variable cost, which is $5.

Correct Answer: B — Decreases by $5

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Q. What is the effect on contribution margin if variable costs increase by $20 while the selling price remains the same?

A. Increase by $20
B. Decrease by $20
C. No effect
D. Increase by $40

Solution

If variable costs increase by $20, the contribution margin decreases by $20.

Correct Answer: B — Decrease by $20

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Q. What is the effect on the contribution margin if fixed costs increase by $5,000 while sales and variable costs remain unchanged?

A. Increase
B. Decrease
C. No effect
D. Cannot determine

Solution

Contribution margin is unaffected by changes in fixed costs; it only depends on sales and variable costs.

Correct Answer: C — No effect

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Q. What is the formula for calculating the budgeted profit margin?

A. Budgeted Sales - Budgeted Costs
B. Budgeted Sales / Budgeted Costs
C. Budgeted Costs / Budgeted Sales
D. Budgeted Sales + Budgeted Costs

Solution

The budgeted profit margin is calculated as Budgeted Sales - Budgeted Costs.

Correct Answer: A — Budgeted Sales - Budgeted Costs

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Q. What is the formula for calculating the contribution margin ratio?

A. Contribution Margin / Sales
B. Sales / Contribution Margin
C. Fixed Costs / Variable Costs
D. Variable Costs / Sales

Solution

The contribution margin ratio is calculated as Contribution Margin divided by Sales.

Correct Answer: A — Contribution Margin / Sales

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Cost & Management Accounting

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