IMANET IMANET Certifications IMANET-CMA Questions & Answers

• Question 461:

  The breakeven point in units sold for Tierson Corporation is 44,000. If fixed costs for Tierson are equal to $880, 000 annually and variable costs are $10 per unit1 what is the contribution margin per unit for Tierson Corporation?

  A. $0.05

  B. $20.00

  C. $44.00

  D. $88.00

  Correct Answer: B

  The breakeven point in units is equal to the fixed costs divided by the contribution margin per unit. Thus, the UCM is $20.00 ($880 .000 ?44,000 units).

• Question 462:

  Which one of the following is true regarding a relevant range?

  A. Total variable costs will not change.

  B. Total fixed costs will not change.

  C. Actual fixed costs usually fall outside the relevant range.

  D. The relevant range cannot be changed after being established.

  Correct Answer: B

  The relevant range is the range of activity over which unit variable costs and total fixed costs are constant. The incremental cost of one additional unit of production will be equal to the variable cost.

• Question 463:

  For a profitable company, the amount by which sales can decline before losses occur is known as the

  A. Sales volume variance.

  B. Hurdle rate.

  C. Variable sales ratio.

  D. Margin of safety.

  Correct Answer: D

  The margin of safely measures the amount by which sales may decline before losses occur. It equals budgeted or actual sales minus sales at the BEP. It may be stated in either units sold or sales revenue.

• Question 464:

  The breakeven point in units increases when unit costs

  A. Increase and sales price remains unchanged.

  B. Decrease and sales price remains unchanged.

  C. Remain unchanged and sales price increases.

  D. Decrease and sales price increases.

  Correct Answer: A

  The breakeven point in units is calculated by dividing the fixed costs by the contribution margin per unit. If selling price is constant and costs increase, the unit contribution margin will decline, resulting in an increase of the breakeven point.

• Question 465:

  Which of the following is a characteristic of a contribution income statement?

  A. Fixed and variable expenses are combined as one line.

  B. Fixed expenses are listed separately from variable expenses.

  C. Fixed and variable manufacturing costs are combined as one line item, but fixed operating expenses are shown separately from variable operating expenses.

  D. Fixed and variable operating expenses are combined as one line item, but fixed manufacturing expenses are shown separately from variable manufacturing expenses.

  Correct Answer: B

  The contribution income statement emphasizes the distinction between fixed and variable costs. Making this distinction facilitates determination of CVP relationships and the effects of changes in sales volume on income. Thus, fixed manufacturing costs and other fixed costs are separated from variable manufacturing costs and other variable costs. The basic categories in the contribution income statement are variable costs, contribution margin, fixed costs, and operating income.

• Question 466:

  Two companies produce and sell the same product in a competitive industry. Thus, the selling price of the product for each company is the same. Company 1 has a contribution margin ratio of 40% and fixed costs of $25 million. Company 2 is more automated, making its fixed costs 40% higher than those of Company 1. Company 2 also has a contribution margin ratio that is 30% greater than that of Company 1. By comparison, Company 1 will have the breakeven point in terms of dollar sales volume and will have the dollar profit potential once the indifference point in dollar sales volume is exceeded.

  

  A. Option A

  B. Option B

  C. Option C

  D. Option D

  Correct Answer: A

• Question 467:

  A company's breakeven point in sales dollars may be affected by equal percentage increases in both selling price and variable cost per unit (assume all other factors are constant within the relevant range). The equal percentage changes in selling price and variable cost per unit will cause the breakeven point in sales dollars to

  A. Decrease by less than the percentage increase in selling price.

  B. Decrease by more than the percentage increase in the selling price.

  C. Increase by the percentage change in variable cost per unit.

  D. Remain unchanged.

  Correct Answer: D

• Question 468:

  Which of the following will result in raising the breakeven point?

  A. A decrease in the variable cost per unit.

  B. An increase in the semivariable cost per unit.

  C. An increase in the contribution margin per unit.

  D. A decrease in income tax rates.

  Correct Answer: B

  The BEP equals fixed cost divided by the UCM (selling price -- unit variable cost). An increase in semivariable costs increases fixed costs and/or variable costs. An increase in either will raise the BEP. If fixed costs increase, more units must be sold, assuming the same UCM, to cover the greater fixed costs. If variable costs increase, the UCM will decrease and again more units must be sold to cover the fixed costs.

• Question 469:

  Product A accounts for 75% of a company's total sales revenue and has a variable cost equal to 60% of its selling price. Product B accounts for 25% of total sales revenue and has a variable cost equal to 85% of its selling price. What is the breakeven point given fixed costs of $150,000?

  A. $375,000

  B. $444,444

  C. $500,000

  D. $545,455

  Correct Answer: B

• Question 470:

  Marston Enterprises sells three chemicals: petrol, septine, and tridol. Petrol is the company's most profitable product tridol is the least profitable. Which one of the following events will definitely decrease the firm's overall breakeven point for the upcoming accounting period?

  A. The installation of new computer-controlled machinery and subsequent layoff of assembly-line workers.

  B. A decrease in tridol's selling price.

  C. An increase in the overall market for septine.

  D. An increase in anticipated sales of petrol relative to sales of septine and tridol.

  Correct Answer: D

  A company's breakeven point will be reduced if fixed costs are lowered or the average unit contribution margin is increased. Given that petrol is the company's most profitable product, and assuming that it has a higher unit contribution margin than septine and tridol, an increase in sales of petrol relative to the other products will result in a higher average unit contribution margin and a lower breakeven point (fixed costs ? average UCM).