Chapter 5

Question 1

Break even point in units (BEPu)

Answer 1

Fixed expense divided by unit CM

Question 2

Breaking Point in Sales (BEPs)

Answer 2

Fixed expense divided by ratio CM

Question 3

Ratio CM

Answer 3

CM divided by sales

Question 4

Profit Analysis

Answer 4

Fixed Expense + Projected Profit divided by unit CM

Question 5

Marginal Safety

Answer 5

Sales - Break even sales

Question 6

Profit

Answer 6

CM Ratio Times sales - fixed expense

Question 7

Break even point

Answer 7

Level of sales at which profit is zero

Question 8

What happens to net income once the break even point is reached

Answer 8

Will increase the amount of the unit contribution margin for each additional unit sold

Question 9

CVP Analysis

Answer 9

Cost volume profit

Question 10

Leverage

Answer 10

Contribution margin divided by net income

Question 11

Formula for operating leverage

Answer 11

Leverage times increase in sales = increase in profit

Question 12

If the level of activity increases within the relevant range what will happen

Answer 12

Total cost will increase and fixed cost per unit will decrease

Question 13

Assuming unit sales are unchanged the total contribution margin will decrease if

Answer 13

Variable expense per unit increases

Question 14

To obtain the break even point in terms of dollar sales total fixed expenses are divided by

Answer 14

Contribution margin ratio

Question 15

At break even point of 400 units sold variable expenses were 4000 and fixed expenses were 2000 what will the 401st unit sold contribute to profit

Answer 15

400=2000/?

2000/400
5 dollars

Question 16

A company sells a product for 30 dollars variable expenses are 15 dollars per unit fixed costs are 5 dollars per unit and selling commissions are 10% per unit the contribution margin per unit is

Answer 16

30X.1 = 3
30-15= 15
30-3-15
12

Question 17

What is incremental analysis

Answer 17

An analytical approach that focuses only on those costs and revenues that change as a result of A DECISION (ONE DECISION)