Matric no: ________ Name: ______________________________ Group: ____Att. List no.___

Tutorial 7: Chapter 8+9 (COST VOLUME PROFIT and BUDGETING)

Due Date: 17 December 2014

1. Mahagony Sdn Bhd has variable selling costs. If sales volume increases, how will the total variable costs and the variable costs per unit behave?

Total Variable Costs Variable Costs Per unit

A. Increase Increase

B. Increase Remain constant

C. Increase Decrease

D. Remain constant Decrease

2. What is the underlying assumption for cost-volume-profit analysis? 

A.  Revenues and costs behave in a linear manner B.  Costs can be categorized as variable, fixed, or semi-variable C.  Worker efficiency and productivity remain constant D.  All of these are assumptions that underlie cost-volume-profit analysis

3. The break-even point is that level of activity where: A.  total revenue equals total costs

B.  variable cost equals fixed costsC.  total contribution margin equals the sum of variable costs plus fixed costsD.  sales revenue equals total variable costs

4. Maximo's budget for the upcoming year revealed the following figures:

Sales revenue RM840,000 Contribution margin RM504,000 Net income RM54,000

If the company's break-even sales total RM750,000, Maximo's safety margin would be: 1

A.  ( RM90,000)

B.  RM90,000

C.  RM246,000

D.  RM336,000

5. Cost-volume-profit analysis is based on certain general assumptions. Which of the following underlying assumptions form(s) the basis for cost-volume-profit analysis is TRUE? 

A. Revenues and costs behave in a linear mannerB. Worker efficiency and productivity remain constantC. In multiproduct organizations, the sales mix remains constantD. All of the above

6. A company that desires to lower its break-even point should strive to:

A. sell more unitsB. increase fixed costsC. decrease selling pricesD. reduce variable costs

7. Which of the following expressions can be used to calculate the break-even point with the contribution-margin ratio (CMR)?

A. (Sales revenue - variable costs) ÷ CMRB. Fixed costs ÷ CMRC. CMR ÷ fixed costsD. (Fixed costs + variable costs) CMR

8. If a company desires to increase its safety margin, it should:A. increase fixed costsB. stimulate sales volumeC. decrease selling pricesD. decrease the contribution margin

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9. All other things being equal, a company that sells multiple products should ensure that it increases the sales volume of these products of highest:

A. contribution marginB. selling priceC. variable costD. fixed cost

10. Calculate the break-even point (in RM) if fixed costs are RM285,000, the sales price per unit is RM80 per unit, and the variable cost per unit is RM20.A. RM380,000B. RM95,000C. RM14,250D. RM4,750

11. If sales, variable costs and operating income are RM400,000, RM200,000 and RM100,000 respectively, what is the contribution margin ratio?A. 75%B. 50%C. 25%D. 0%

12. Donia Productions has fixed costs of RM200,000 and variable costs are 30% of sales. What are the required sales (in RM) if the company desires net income of RM10,000?

A. RM700,000B. RM525,000C. RM350,000D. RM300,000

13. If a company had a contribution margin of RM300,000 and a contribution margin ratio of 20%, what is the total variable costs?A. RM1,500,000B. RM1,200,000C. RM240,000D. RM60,000

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14. CVP analysis DOES NOT consider:

A. level of activityB. variable cost per unitC. fixed cost per unitD. sales mix

15. The breakeven point is

A. where fixed and variable costs reach the upper level of the relevant range.

B. the level of activity where all fixed costs are recovered.

C. where total revenue equals total costs.

D. where fixed costs meet variable costs.

16. Which of the following is an example of a cost that varies in total as the number of units produced changes?

A. Salary of a production supervisor

B. Direct materials cost

C. Property taxes on factory buildings

D. Straight-line depreciation on factory equipment

17.Contribution margin is

A. the excess of sales revenue over variable cost

B. another term for volume in the "cost-volume-profit" analysis

C. profit

D. the same as sales revenue

18. If sales are RM820,000, variable costs are 62% of sales, and operating income is RM260,000, what is the contribution margin ratio?

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A. 53.1% B. 38%

C. 62% D. 32%

19.Costs that change in total dollar amount as the level of activity changes are called:

A. fixed costs B. mixed costs

C. opportunity costs D. variable costs

20.Which of the following is NOT an underlying assumption of CVP analysis?

A. Changes in the activity are the only factors that affect costs

B. Costs classifications are reasonably accurateC. Beginning inventory is larger than ending inventory

D. Sales mix is constant

21. Choose the FALSE statement about budgeting:A. the preparation of budget is the sole responsibility of any one departmentB. the budgeting system requires central guidanceC. most company prepare at least one annual budgetD. larger organization requires longer time to prepare their budget compared to smaller

organizations

22. An example of budgetary slack is:A. a confectionary producer acquiring one unit of delivery van covering the whole

northern region of West MalaysiaB. purchase of office supplies amounting to RM3,000, where only half of the amount

requiredC. to produce 1,300 units per day with normal capacity of 1,000 units per dayD. all of the above

23. The benefit(s) and importance of budgeting is/are:A. management can evaluate the business operations against some normB. attitudes of employees are affected by the performance evaluation by managementC. a written budget is best way of communicating the management’s specific goals to

employeesD. all of the above

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24.The closing balance in a cash budget means:A. the total cash inflows during the periodB. the totalcash ouflows during the periodC. how much cash the business has at the start of the budget periodD. how much cash the business is expected to have at the end of the budgeted period

25.Supadupa Sdn Bhd sets RM300,000 as targeted sales for January 2014. The company expects to begin its January operation with RM35,000 and to end with RM50,000 worth of inventory. With the cost of 35% on sales, what would be the budgeted cost of purchases for January 2014? A. RM315,000B. RM285,000C. RM120,000D. RM90,000

26. In preparing a flexible budget, __________change in direct proportion to changes in volume while __________remain constant, regardless of the volume.

A. total variable costs; total fixed costsB. direct materials costs; direct labour costsC. rent; total direct labourD. total fixed costs; total variable costs

27. The following are benefit derived from budgeting EXCEPT:

A. budgeting focuses management's attention on the existing positionB. budgeting provides coordination of departmentsC. budgeting provides a basis for evaluating performanceD. budgeting provides motivation for managers and employees

28. Which of the following statements about budgeting is FALSE?A. Budgeting is an aid to planning and controlB. Budgets create standards for performance evaluationC. Budgets help coordinate the activities of the entire organizationD. The master budget should only be prepared by top management

29. Adding a new budget each period so that the budgets always cover the same number of future period, is called:

A. participatory budgetingB. capital budgetingC. balanced budgetingD. continuous budgeting

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30. Financial budgets include all the following EXCEPT the:

A. sales budgetB. budgeted balance sheetC. budgeted income statementD. cash budget

“END OF QUESTIONS”

Matric no: ________ Name: ______________________________ Group: ____Att. List no.___

Tutorial 7: Chapter 9+10- BUDGETINGDue Date: 17th Dec. 2014

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