L-NU AA-23-02-01-18

LYCEUM-NORTHWESTERN UNIVERSITY
Tapuac District, Dagupan City

COLLEGE OF BUSINESS EDUCATION

FINALS EXAMINATION – CAE 5 Strategic Business Analysis

2nd Semester, AY 2020– 2021
Prepared by: Amie Jane R. Miranda, CPA

Name:_____________________________________ Score:____________________

Student No.: _______________ Year/Section:___________ Date of Exam: ____________

I. MULTIPLE CHOICES. Choose the best answer from the choices and encircle your answer. Strictly “NO
ERASURES”.

1. CVP analysis can be used to study the effect of:

a. changes in selling prices on a company's profitability.
b. changes in variable costs on a company's profitability.
c. changes in fixed costs on a company's profitability.
d. changes in product sales mix on a company's profitability.
e. all of the above.
2. The break-even point is that level of activity where:
a. total revenue equals total cost.
b. variable cost equals fixed cost.
c. total contribution margin equals the sum of variable cost plus fixed cost.
d. sales revenue equals total variable cost.
e. profit is greater than zero.
3. The unit contribution margin is calculated as the difference between:
a. selling price and fixed cost per unit.
b. selling price and variable cost per unit.
c. selling price and product cost per unit.
d. fixed cost per unit and variable cost per unit.
e. fixed cost per unit and product cost per unit.
4. Which of the following would produce the largest increase in the contribution margin per
unit?
a. A 7% increase in selling price.
b. A 15% decrease in selling price.
c. A 14% increase in variable cost.
d. A 17% decrease in fixed cost.
e. A 23% increase in the number of units sold.
5. Which of the following would take place if a company were able to reduce its variable cost
per unit?
Contributio Break-even
n Point
Margin
A. Increase Increase
B. Increase Decrease
C. Decrease Increase
D. Decrease Decrease
E. Increase No effect
6. Which of the following would take place if a company experienced an increase in fixed
costs?
a. Net income would increase.
b. The break-even point would increase.
c. The contribution margin would increase.
d. The contribution margin would decrease.
e. More than one of the above events would occur.

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7. Assuming no change in sales volume, an increase in a firm's per-unit contribution margin
would:
a. increase net income.
b. decrease net income.
c. have no effect on net income.
d. increase fixed costs.
e. decrease fixed costs.
8. A company that desires to lower its break-even point should strive to:
a. decrease selling prices.
b. reduce variable costs.
c. increase fixed costs.
d. sell more units.
e. pursue more than one of the above actions.
9. A company has fixed costs of Php 900 and a per-unit contribution margin of Php 3. Which of
the following statements is (are) true?
a. Each unit "contributes" Php 3 toward covering the fixed costs of Php 900.
b. The situation described is not possible and there must be an error.
c. Once the break-even point is reached, the company will make money at the rate of Php
3 per unit.
d. The firm will definitely lose money in this situation.
e. Statements "A" and "C" are true.
10. Sanderson sells a single product for Php 50 that has a variable cost of Php 30. Fixed costs
amount to Php 5 per unit when anticipated sales targets are met. If the company sells one
unit in excess of its break-even volume, the bottom-line profit will be:
a. Php 15.
b. Php 20.
c. Php 50.
d. an amount that cannot be derived based on the information presented.
e. an amount other than those in choices "A," "B," and "C" but one that can be derived
based on the information presented.
11. At a volume of 15,000 units, Boston reported sales revenues of Php 600,000, variable costs
of Php 225,000, and fixed costs of Php 120,000. The company's contribution margin per unit
is:
a. Php 17.
b. Php 25.
c. Php 47.
d. Php 55.
e. an amount other than those above.
12. A recent income statement of Banks Corporation reported the following data:

Sales revenue Php 8,000,000

Variable costs 5,000,000
Fixed costs 2,200,000

If these data are based on the sale of 20,000 units, the contribution margin per unit would
be:
a. Php 40.
b. Php 150.
c. Php 290.
d. Php 360.
e. an amount other than those above.
13. A recent income statement of Fox Corporation reported the following data:

Sales revenue Php 3,600,000

Variable costs 1,600,000
Fixed costs 1,000,000

If these data are based on the sale of 10,000 units, the break-even point would be:

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 a. 2,000 units.
b. 2,778 units.
c. 3,600 units.
d. 5,000 units.
e. an amount other than those above.
14. A recent income statement of Yale Corporation reported the following data:

Sales revenue Php 2,500,000

Variable costs 1,500,000
Fixed costs 800,000

If these data are based on the sale of 5,000 units, the break-even sales would be:
a. Php 2,000,000.
b. Php 2,206,000.
c. Php 2,500,000.
d. Php 10,000,000.
e. an amount other than those above.
15. Lawton, Inc., sells a single product for Php 12. Variable costs are Php 8 per unit and fixed
costs total Php 360,000 at a volume level of 60,000 units. Assuming that fixed costs do not
change, Lawton's break-even point would be:
a. 30,000 units.
b. 45,000 units.
c. 90,000 units.
d. negative because the company loses Php 2 on every unit sold.
e. a positive amount other than those given above.
16. Green, Inc., sells a single product for Php 20. Variable costs are Php 8 per unit and fixed
costs total Php 120,000 at a volume level of 5,000 units. Assuming that fixed costs do not
change, Green's break-even sales would be:
a. Php 160,000.
b. Php 200,000.
c. Php 300,000.
d. Php 480,000.
e. an amount other than those above.
17. Orion recently reported sales revenues of Php 800,000, a total contribution margin of Php
300,000, and fixed costs of Php 180,000. If sales volume amounted to 10,000 units, the
company's variable cost per unit must have been:
a. Php 12.
b. Php 32.
c. Php 50.
d. Php 92.
e. an amount other than those above.
18. Strand has a break-even point of 120,000 units. If the firm's sole product sells for Php 40
and fixed costs total Php 480,000, the variable cost per unit must be:
a. Php 4.
b. Php 36.
c. Php 44.
d. an amount that cannot be derived based on the information presented.
e. an amount other than those in choices "A," "B," and "C" but one that can be derived
based on the information presented.
19. Ribco Co., makes and sells only one product. The unit contribution margin is Php 6 and the
break-even point in unit sales is 24,000. The company's fixed costs are:
a. Php 4,000.
b. Php 14,400.
c. Php 40,000.
d. Php 144,000.
e. an amount other than those above.
20. The contribution-margin ratio is:
a. the difference between the selling price and the variable cost per unit.

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 b. fixed cost per unit divided by variable cost per unit.
c. variable cost per unit divided by the selling price.
d. unit contribution margin divided by the selling price.
e. unit contribution margin divided by fixed cost per unit.
21. At a volume level of 500,000 units, Sullivan reported the following information:

Sales price Php 60

Variable cost per unit 20
Fixed cost per unit 4

The company's contribution-margin ratio is:

a. 0.33.
b. 0.40.
c. 0.60.
d. 0.67.
e. an amount other than those above.
22. Which of the following expressions can be used to calculate the break-even point with the
contribution-margin ratio (CMR)?
a. CMR ÷ fixed costs.
b. CMR x fixed costs.
c. Fixed costs ÷ CMR.
d. (Fixed costs + variable costs) x CMR.
e. (Sales revenue - variable costs) ÷ CMR.

Use the following to answer questions 23-30:

C o s t - V o lu m e - P r o f it G r a p h A
$ 1 0 0 ,0 0 0

H G
8 0 ,0 0 0 B

6 0 ,0 0 0 E

4 0 ,0 0 0 C

D
2 0 ,0 0 0

0 1 ,0 0 0 2 ,0 0 0 3 ,0 0 0 4 ,0 0 0 5 ,0 0 0 U n it s

23. Line A is the:

a. total revenue line.
b. fixed cost line.
c. variable cost line.
d. total cost line.
e. profit line.
24. Line C represents the level of:
a. fixed cost.
b. variable cost.
c. semivariable cost.
d. total cost.
e. mixed cost.
25. The slope of line A is equal to the:
a. fixed cost per unit.
b. selling price per unit.
c. profit per unit.

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 d. semivariable cost per unit.
e. unit contribution margin.
26. The slope of line B is equal to the:
a. fixed cost per unit.
b. selling price per unit.
c. variable cost per unit.
d. profit per unit.
e. unit contribution margin.
27. The vertical distance between the total cost line and the total revenue line represents:
a. fixed cost.
b. variable cost.
c. profit or loss at that volume.
d. semivariable cost.
e. the safety margin.
28. Assume that the firm whose cost structure is depicted in the figure expects to produce a loss
for the upcoming period. The loss would be shown on the graph:
a. by the area immediately above the break-even point.
b. by the area immediately below the total cost line.
c. by the area diagonally to the right of the break-even point.
d. by the area diagonally to the left of the break-even point.
e. in some other area not mentioned above.
29. At a given sales volume, the vertical distance between the fixed cost line and the total cost
line represents:
a. fixed cost.
b. variable cost.
c. profit or loss at that volume.
d. semivariable cost.
e. the safety margin.
30. Assume that the firm whose cost structure is depicted in the figure expects to produce a
profit for the upcoming accounting period. The profit would be shown on the graph by the
letter:
a. D.
b. E.
c. F.
d. G.
e. H.
31. A recent income statement of Oslo Corporation reported the following data:

Units sold 8,000

Sales revenue Php 7,200,000
Variable costs 4,000,000
Fixed costs 1,600,000

If the company desired to earn a target net profit of Php 480,000, it would have to sell:
a. 1,200 units.
b. 2,800 units.
c. 4,000 units.
d. 5,200 units.
e. an amount other than those above.
32. Yellow, Inc., sells a single product for Php 10. Variable costs are Php 4 per unit and fixed
costs total Php 120,000 at a volume level of 10,000 units. What dollar sales level would
Yellow have to achieve to earn a target net profit of Php 240,000?
a. Php 400,000.
b. Php 500,000.
c. Php 600,000.
d. Php 750,000.
e. Php 900,000.

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Use the following to answer questions 35-37:

Archie sells a single product for Php 50. Variable costs are 60% of the selling price, and the company has
fixed costs that amount to Php 400,000. Current sales total 16,000 units.
33. Archie:
a. will break-even by selling 8,000 units.
b. will break-even by selling 13,333 units.
c. will break-even by selling 20,000 units.
d. will break-even by selling 1,000,000 units.
e. cannot break-even because it loses money on every unit sold.
34. Each unit that the company sells will:
a. increase overall profitability by Php 20.
b. increase overall profitability by Php 30.
c. increase overall profitability by Php 50.
d. increase overall profitability by some other amount.
e. decrease overall profitability by Php 5.
35. In order to produce a target profit of Php 22,000, Archie's dollar sales must total:
a. Php 8,440.
b. Php 21,100.
c. Php 1,000,000.
d. Php 1,055,000.
e. an amount other than those above.
36. The difference between budgeted sales revenue and break-even sales revenue is the:
a. contribution margin.
b. contribution-margin ratio.
c. safety margin.
d. target net profit.
e. operating leverage.
37. Maxie's budget for the upcoming year revealed the following figures:

Sales revenue Php 840,000

Contribution margin 504,000
Net income 54,000

If the company's break-even sales total Php 750,000, Maxie's safety margin would be:
a. Php (90,000).
b. Php 90,000.
c. Php 246,000.
d. Php 336,000.
e. Php 696,000.
38. If a company desires to increase its safety margin, it should:
a. increase fixed costs.
b. decrease the contribution margin.
c. decrease selling prices, assuming the price change will have no effect on demand.
d. stimulate sales volume.
e. attempt to raise the break-even point.
39. Dana sells a single product at Php 20 per unit. The firm's most recent income statement
revealed unit sales of 100,000, variable costs of Php 800,000, and fixed costs of Php
400,000. If a Php 4 drop in selling price will boost unit sales volume by 20%, the company
will experience:
a. no change in profit because a 20% drop in sales price is balanced by a 20% increase in
volume.
b. an Php 80,000 drop in profitability.
c. a Php 240,000 drop in profitability.
d. a Php 400,000 drop in profitability.
e. a change in profitability other than those above.
40. Grimes is studying the profitability of a change in operation and has gathered the following
information:

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 Current Anticipated
Operation Operation
Fixed costs Php 38,000 Php 48,000
Selling price Php 16 Php 22
Variable cost Php 10 Php 12
Sales (units) 9,000 6,000
Should Grimes make the change?
a. Yes, the company will be better off by Php 6,000.
b. No, because sales will drop by 3,000 units.
c. No, because the company will be worse off by Php 4,000.
d. No, because the company will be worse off by Php 22,000.
e. It is impossible to judge because additional information is needed.
41. Gleason sells a single product at Php 14 per unit. The firm's most recent income statement
revealed unit sales of 80,000, variable costs of Php 800,000, and fixed costs of Php 560,000.
Management believes that a Php 3 drop in selling price will boost unit sales volume by 20%.
Which of the following correctly depicts how these two changes will affect the company's
break-even point?
Drop in Increase in
Sales Price Sales Volume
A. Increase Increase
B. Increase Decrease
C. Increase No effect
D. Decrease Increase
E. Decrease Decrease
42. All other things being equal, a company that sells multiple products should attempt to
structure its sales mix so the greatest portion of the mix is composed of those products with
the highest:
a. selling price.
b. variable cost.
c. contribution margin.
d. fixed cost.
e. gross margin.
43. O'Dell sells three products: R, S, and T. Budgeted information for the upcoming accounting
period follows.

Product Sales Volume (Units) Selling Price Variable Cost

R 16,000 Php 14 Php 9
S 12,000 10 6
T 52,000 11 8
The company's weighted-average unit contribution margin is:
a. Php 3.00.
b. Php 3.55.
c. Php 4.00.
d. Php 19.35.
e. an amount other than those above.
44. Wells Corporation has the following sales mix for its three products: A, 20%; B, 35%; and C,
45%. Fixed costs total Php 400,000 and the weighted-average contribution margin is Php
100. How many units of product A must be sold to break-even?
a. 800.
b. 4,000.
c. 20,000.
d. An amount other than those above.
e. Cannot be determined based on the information presented.
Use the following to answer questions 47-50:
Lamar & Co., makes and sells two types of shoes, Plain and Fancy. Data concerning these products are
as follows:

Plain Fancy

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 Unit selling price Php Php
20.00 35.00
Variable cost per unit 12.00 24.50

Sixty percent of the unit sales are Plain, and annual fixed expenses are Php 45,000.
45. The weighted-average unit contribution margin is:
a. Php 4.80.
b. Php 9.00.
c. Php 9.25.
d. Php 17.00.
e. an amount other than those above.
46. Assuming that the sales mix remains constant, the total number of units that the company
must sell to break even is:
a. 2,432.
b. 2,647.
c. 4,737.
d. 5,000.
e. an amount other than those above.
47. Assuming that the sales mix remains constant, the number of units of Plain that the
company must sell to break even is:
a. 2,000.
b. 3,000.
c. 3,375.
d. 5,000.
e. 5,625.
48. Assuming that the sales mix remains constant, the number of units of Fancy that the
company must sell to break even is:
a. 2,000.
b. 3,000.
c. 3,375.
d. 5,000.
e. 5,625.
49. Which of the following underlying assumptions form(s) the basis for cost-volume-profit
analysis?
a. Revenues and costs behave in a linear manner.
b. Costs can be categorized as variable, fixed, or semivariable.
c. Worker efficiency and productivity remain constant.
d. In multiproduct organizations, the sales mix remains constant.
e. All of the above are assumptions that underlie cost-volume-profit analysis.
50. Cost-volume-profit analysis is based on certain general assumptions. Which of the following
is not one of these assumptions?
a. Product prices will remain constant as volume varies within the relevant range.
b. Costs can be categorized as fixed, variable, or semivariable.
c. The efficiency and productivity of the production process and workers will change to
reflect manufacturing advances.
d. Total fixed costs remain constant as activity changes.
e. Unit variable cost remains constant as activity changes.

ajmiranda
------END-----
Goodluck and Godbless

Reviewed and Checked by:

Dr. Genoveva Y. Reyes, CPA, FRIAcc

Dean, College of Business Education

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