# 20 MCQ’s

20 MCQ’s. 1. How many units must BAC Company sell to break even if the selling price per unit is \$8.50, variable costs are \$4.00 per unit, and fixed costs are \$9,000?
A) 1,000
B) 1,059
C) 2,000
D) 2,250

2. Field Legal Services is trying to determine the variable and fixed elements of its service overhead. The following data have been collected from recent activity:

 Total Service Overhead Cases Worked March \$22,900 112 April 20,800 98 May 26,400 138

The formula for total service overhead costs is
A) \$5,600 + \$140 per case.
B) \$5,600 + \$40 per case.
C) \$7,823 + \$134.62 per case.
D) \$7,080 + \$140 per case.

3. Dilly LLC, wants to make a profit of \$30,000. It has variable costs of \$85 per unit and fixed costs of \$20,000. How much must it charge per unit if 5,000 units are sold?
A) \$70
B) \$55
C) \$85
D) \$95
E) \$100

4. Walton’s Warehouse reported sales of \$640,000, a contribution margin of \$8 per unit, fixed costs of \$314,000, and a profit of \$70,000. How many units did Walton’s Warehouse sell?
A) 8,750 units
B) 28,375 units
C) 48,000 units
D) 67,625 units

1. For every unit that a company produces and sells above the breakeven point, its profitability is improved (ignoring taxes) by the unit’s
A) gross margin.
B) selling price minus fixed cost.
C) variable cost.
D) contribution margin.

2. Excerpts from a cost-volume-profit analysis indicate fixed costs of \$50,000, a contribution margin per unit of \$35, a selling price of \$90, and a sales level of 4,000 units. What must be the targeted level of profit?
A) \$80,000
B) \$105,000
C) \$140,000
D) \$90,000

3. Dick Sports, Inc.’s, income statement data for last year is as follows:

 Sales revenue \$200,000 Variable costs 140,000 Fixed costs 30,000 Operating income 18,000

What is Dick’s breakeven point in dollars?
A) \$100,000
B) \$18,000
C) \$142,000
D) \$48,000

4. Excerpts from a cost-volume-profit analysis indicate fixed costs of \$30,000, a variable cost per unit of \$36, a selling price of \$60, and a sales level of \$125,000. The targeted level of profit must be
A) \$20,000.
B) \$50,000.
C) \$95,000.
D) \$75,000.

Use the following to answer questions 1 – 2:
SHARE is trying to determine how many clients must be serviced in order to cover its monthly service overhead. Using the high-low method, it has determined that the variable cost per client is \$800 and that the monthly fixed overhead is \$28,000.
1. Assuming an average fee of \$1,200 per client, the breakeven point per month is
A) 35 clients.
B) 80 clients.
C) 70 clients.
D) 55 clients.

2. Assuming an average fee of \$1,400 per client and a targeted profit of \$26,000, the number of clients to be serviced is
A) 80 clients.
B) 120 clients.
C) 47 clients.
D) 90 clients.

3. If fixed costs are \$80,000, the contribution margin is \$25 per unit, and the targeted profit is \$30,000, then the required unit sales are
A) 4,400 units.
B) 2,000 units.
C) 4,500 units.
D) 2,500 units.

4. Dilly LLC, wants to make a profit of \$30,000. It has variable costs of \$85 per unit and fixed costs of \$20,000. How much must it charge per unit if 5,000 units are sold?
A) \$70
B) \$55
C) \$85
D) \$95
E) \$100

1. Which of the following correctly describes the effect of a decline in interest rates on bond prices?
A. The prices of existing bonds rise.;
B. The prices of existing bonds are not affected.;
C. The prices of the existing bonds fall.;
D. The prices of newly issued bonds are lowered.

2. The major source of risk based by investors who purchase bonds is
B. liquidity risk.;
C. event risk.
D. interest rate risk.;

3. A \$1000 par value bond that was issued two years ago by the Golden Ibis Corporation has a 6% coupon. If the prevailing market rate for interest on comparable bonds is now 7%, then the Golden Ibis bond pays it bondholders an annual interest income of
A. \$70, and the bond would sell for less than its par value.;
B. \$60, and the bond would sell for more than its par value.;
C. \$70, and the bond would sell for more than its par value.
D. \$60, and the bond would sell for less than its par value.;

4. A bond which has a deferred call
A. would not have to be redeemed when it reaches maturity.;
B. could be retired at any time prior to maturity.;
C. could not be retired for a specified period after the date of issue, but after that could be retired at any time.;
D. could be retired at any time during the initial call period, but after that period (usually the first five years after issue).

1. Some securities are called junk bonds because
A. they have a high risk of default and the debt is unsecured.
B. they have secured by equipment-type collateral rather than by cash.;
C. they are issued by foreign companies.
D. the companies that issue them have inadequate amounts of debt in their corporate structures.;

2. The specific type of risk that is measured by bond ratings is
A. interest rate risk.;
B. market risk.;
D. default risk.;

3. The most common yield curve is upward sloping, which means that
A. the nearer the call date, the more volatile the bond price will be.;
B. yields tend to increase with longer maturities.
C. yield spreads tend to increase over time.
D. default risk increases with maturity.

4. According to the expectation hypothesis, investors’ expectations of increasing inflation will result in
A. an upward-sloping yield curve.;
B. a flat yield curve.;
C. a downward-sloping yield curve.;
D. a humped yield curve.

20 MCQ’s

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