accounting test 2 CVP analysis helps managers prepare for and respond to economic changes, such as increasing costs and pressure to drop sales price

1. CVP analysis helps managers prepare for and respond to economic changes, such as increasing costs and pressure to drop sales price.
   TRUE
   FALSE

TRUE

2. Sensitivity Analysis is a "what if" technique that asks what a result will be if an underlying assumption changes
   TRUE
   FALSE

TRUE

3. The margin of safety is the "cushion" or drop in sales, a company can absorb without incurring a loss
   TRUE
   FALSE

TRUE

4. The margin of safety is the excess of expected sales over breakeven sales
   TRUE
   FALSE

TRUE

5. The operating leverage factor will be exactly 1 only if a company has no fixed costs
   TRUE
   FALSE

TRUE

6. A company's margin of safety can be stated
   (a) as a percentage of sales
   (b) in dollars
   (c) in units
   (d) any of the above

(d) any of the above

7. By multiplying the operating leverage factor by the anticipated percentage change in volume, one can find
   (a) the anticipated change in fixed expenses
   (b) the anticipated change in sales rev
   (c) the anticipated change in contribution margin
   (d) the anticipated change in operating income

(d) the anticipated change in operating income

8. Operating leverage refers to the relative amount of fixed and variable costs that make up total costs for a company
   TRUE
   FALSE

TRUE

9. Corny and Sweet grows and sells sweet corn at its roadside produce stand. The selling prce per dozen is $3.75, variable costs are $1.25 per dozen, and total fixed costs are $750. how many dozens of ears of corn must Corny and Sweet sell to breakeven?
   (a) 175
   (b) 1,125
   (c) 300
   (d) 200

(c) 300

10. Hickory Point Amusement Park sells admission tickets for $50 per person for one visit. variable costs are $15 per visitor and fixed costs are $60,000,000 per month. The company's relevant range extends to 2,000,000 visitors per month. What is Hickory Point's projected operating income if 1,750,000 visitors come to the park during the month?
    (a) $1,250,000
    (b) $27,500,000
    (c) $61,250,000
    (d) $87,500,000

(a) $1,250,000