Matric no: ________ Name: ______________________________ Group: ____Att.

List no.___

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

BUDGETING)
Due Date:

18 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.
B.
C.
D.

Revenues and costs behave in a linear manner

Costs can be categorized as variable, fixed, or semi-variable
Worker efficiency and productivity remain constant
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 costs
C. total contribution margin equals the sum of variable costs plus fixed costs
D. sales revenue equals total variable costs
4. Maximo's budget for the upcoming year revealed the following figures:
Sales revenue
Contribution margin

RM840,000
RM504,000
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Net income
RM54,000
If the company's break-even sales total RM750,000, Maximo's safety margin would be:
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.
B.
C.
D.
6.

Revenues and costs behave in a linear manner

Worker efficiency and productivity remain constant
In multiproduct organizations, the sales mix remains constant
All of the above

A company that desires to lower its break-even point should strive to:
A.
B.
C.
D.

sell more units

increase fixed costs
decrease selling prices
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.
B.
C.
D.

(Sales revenue - variable costs) CMR

Fixed costs CMR
CMR fixed costs
(Fixed costs + variable costs) CMR

8. If a company desires to increase its safety margin, it should:

A. increase fixed costs
B. stimulate sales volume
C. decrease selling prices
D. decrease the contribution margin

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.
B.
C.
D.

contribution margin
selling price
variable cost
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. RM380,000
B. RM95,000
C. RM14,250
D. 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.
B.
C.
D.

RM700,000
RM525,000
RM350,000
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. RM1,500,000
B. RM1,200,000
C. RM240,000
D. RM60,000
14.

CVP analysis DOES NOT consider:

A. level of activity
B. variable cost per unit
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C. fixed cost per unit

D. 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?

A. 53.1%

B. 38%

C. 62%

D. 32%
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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.
C.

Costs classifications are reasonably accurate

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 department
B. the budgeting system requires central guidance
C. most company prepare at least one annual budget
D. 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 Malaysia
B. purchase of office supplies amounting to RM3,000, where only half of the amount
required
C. to produce 1,300 units per day with normal capacity of 1,000 units per day
D. all of the above
23. The benefit(s) and importance of budgeting is/are:
A. management can evaluate the business operations against some norm
B. attitudes of employees are affected by the performance evaluation by management
C. a written budget is best way of communicating the managements specific goals to
employees
D. all of the above
24. The closing balance in a cash budget means:
A. the total cash inflows during the period
B. the totalcash ouflows during the period
C. how much cash the business has at the start of the budget period
D. how much cash the business is expected to have at the end of the budgeted period
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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. RM315,000
B. RM285,000
C. RM120,000
D. RM90,000
26. In preparing a flexible budget, __________change in direct proportion to changes in volume
while __________remain constant, regardless of the volume.
A.
B.
C.
D.

total variable costs; total fixed costs

direct materials costs; direct labour costs
rent; total direct labour
total fixed costs; total variable costs

27. The following are benefit derived from budgeting EXCEPT:

A.
B.
C.
D.

budgeting focuses management's attention on the existing position

budgeting provides coordination of departments
budgeting provides a basis for evaluating performance
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 control
B. Budgets create standards for performance evaluation
C. Budgets help coordinate the activities of the entire organization
D. 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.
B.
C.
D.

participatory budgeting
capital budgeting
balanced budgeting
continuous budgeting

30. Financial budgets include all the following EXCEPT the:

A. sales budget
B. budgeted balance sheet
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C. budgeted income statement

D. cash budget

END OF QUESTIONS

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

Tutorial 7: Chapter 9+10- BUDGETING
Due Date
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