Quiz 14 - Financial Management
Quiz 14 - Financial Management
Quiz 14 - Financial Management
1. It involves a systematic examination of the relationships among costs, cost driver and
profit
2. CVP analysis may be used by managers in planning and decision making, which may
involve the following, except:
c. One inherent, simplifying assumption in CVP analysis is that, production equals sales
d. Unit variable costs charge directly with the cost driver or activity level
6. Management may use CVP analysiss to determine the relative profitability of a product
by
a. Determining the unit contribution margin and the projected profits at various levels of
production
b. Controlling the physical production of the products
c. Assigning costs to a product in such a way that the contribution margin is maximized
d. Keeping all costs to an absolute minimum
b. Fixed and variable manufacturing costs are combined as one level item
c. Fixed costs are shown separately from variable costs
d. Manufacturing costs are shown separately from variable manufacturing costs, but fixed and
variable operating costs are combines as one line item
a. Is done through various possible scenarios and computes the impact on profit of various
predictions of future events
b. Is done through various possible scenarios and determines the effect of the cost accounting
systems used in each scenario
c. Allows the decision maker to introduce probabilities in the evaluation of decision alternatives
d. Allows managers to study how total fixed costs vary with cost drivers.
10. The assumptions under which CVP analysis operates primarily hinge on certainty.
However, when uncertainty enters the situation, the results may not be so clear. In this
case, the MAS consultant should:
a. Use a sample from the entire population of data to generate a decision model and make the
decision for management.
b. Do nothing. It is not the MAS consultant’s responsibility to be concerned with the uncertainty
of the results and/or assumptions.
c. Ascertain the probabilities of various outcomes and work with management on understanding
those probabilities in reference to the CVP decision
d. Refer the case to another consultant who is an expert in making accurate predictions.
11. It is the level of output sales at which total revenues equal total costs, that is, the point at
which operating income is zero.
a. Indifference point
b. Break-even point
c. Sangley point
QUIZ - 14 FINANCIAL MANAGEMENT
d. Order point
12. A calculation used in CVP analysis is the break-even point. At this point, total revenue
equals total costs. Beyond the break-even point, operating income will increase by the:
13. One of the major assumptions limiting the reliability of break-even analysis is that
a. Unit variable costs and total fixed costs will vary directly with the change in units sold
b. There is a relevant range in which the various relationships are true for a given period of time
c. Productive efficiency will increase as more units are produced
d. Changes in inventory are significant in amount
14. The type of costing system that will provide the best information for CVP and BE
analyses if inventories are expected to change is
a. Process costing
b. Job-order costing
c. Absorption (full costing)
d. Variable (direct costing)
a. All other factors remaining constant, a 10% decrease in the selling price of a given product
will have the same effect on profit as a 10% increase in the unit variable cost of such product
b. Other things as they are, a P10,000 decrease in fixed costs will increase operating profit by
the same amount
QUIZ - 14 FINANCIAL MANAGEMENT
c. A change in the amount of fixed costs will not affect the ratio of variable costs to sales
d. A change in fixed costs has no effect on the contribution margin
17. The conventional break-even chart adopted by businessmen and accountant does not take
for granted that
18. It is the excess of sales price over the related variable cost, contributing to the recovery of
fixed expenses
a. Gross margin
b. Margin of Safety
c. Contribution margin
d. Gross profit
At break-even
QUIZ - 14 FINANCIAL MANAGEMENT
20. The alternative that would increase the contribution margin pert unit the most is a
21. Which of the following changes in cost-volume profit factors will reduce the break-even
point?
a. Equal percentage increases in both the selling price and variable cost per unit will cause the
break-even point in sales pesos to remain unchanged
b. Equal percentage increases in both the selling price and variable cost per unit will cause the
contribution margin ratio to remain unchanged
c. Equal peso increases in both the selling price and variable cost per unit will cause the break-
even point in units to remain unchanged
d. Equal peso increases in both the selling price and variable cost per unit will cause the break-
even point in pesos to remain unchanged.
QUIZ - 14 FINANCIAL MANAGEMENT
23. The margin of safety is a key concept of CVP analysis. Which off the following is not a
correct description of margin of safety?
a. It is the amount of sales which may be reduced without resulting into a loss
b. It is the difference between budgeted sales and breakeven sales
c. It may be expressed in terms of units or in pesos
d. Its presence means that the company earns profit
a. If Product 1 has a higher unit contribution margin than Product 2, then Product 1 will always
have a higher CM ratio than Product 2.
b. If the product mix changes, the break-even point may change
c. For a given increase in peso sales, a high CM ratio will result in a greater increase in profits
than with a low CM ratio
d. If a company’s cost structure shifts toward greater fixed costs and lower variable costs, one
would expect the company’s CM ratio to rise
25. As a company’s sales move farther from its break-even point, one would expect the
degree of operating leverage to
a. Increase
b. Decrease
c. Remain unchanged
d. Vary in direct proportion to changes in the activity level
26. If sales increase form P800,000 to P900,000, and if the degree of operating leverage is 5,
one would expect profit to increase by
a. 62.5%
b. 12.5%
c. 5.0%
d. 2.5%
QUIZ - 14 FINANCIAL MANAGEMENT
27. A company has an operating leverage factor of 4. When its sales increased to P500,000,
its profit before tax increased by 100%. Its variable cost ratio is 40%. How much is the
company’s fixed costs?
a. P100,000
b. P240,000
c. P180,000
d. P120,000
A company sells two products: Product 1 and Product 2. Three units of Product 1 are sold for every two
units of Product 2. Fixed costs is P234,000 per year.
Product 1 is sold for P20 per unit and the variable costs identified with the production and sale of each
unit of the product amounts to P14. Product 2 is sold for P24 per unit and the variable costs identified
with the production and sale of each unit of the product amounts to P20.
a. P25
b. P10
c. P50
d. P5.20