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Multiple Choice Questions

Cost-volume profit analysis

A level and AS level


A business depreciates its motor vehicles over four years using the straight-line method. A full
years depreciation is charged in the year of purchase, but none in the year of sale.

A vehicle purchased on 1 July 2011 for $18 000 had an estimated residual value of $4000. The vehicle was sold for $5000 on 31 December 2014.

Which entry appeared in the income statement for the year ended 31 December 2014?

A $1000 loss
B $2500 loss
C $2500 profit
D $5000 profit

Answer: B


Which business would use a job costing system of accounting?

A a beauty parlour
B achocolate factory
C a dairy milk farmer
D an oil refinery


A baker receives one order for 350 loaves of bread.

Which costing method will the baker use?

A absorption costing
B batch costing
C job costing
D unit costing



Last month a company made and sold 10000 units and earned a contribution of $20 per unit.

Its final profit, after deducting total fixed costs, was $120 000.

This month its sales volume has increased by 20%, its contribution per unit has increased by 5% and its total fixed costs have increased by 15%.

What is its profit this month?

A $118000
B $148000
C $160000
D $172000



Which statements about cost—volume-—profit analysis are correct?

1 Fixed costs remain constant over a range of activity.
2 Profits are calculated on an absorption costing basis.
3. Sales revenue increases in direct proportion to output.
4 There is only one product or constant sales mix.

A 1 and 2 only
B 1,2,3and4
C 1,3and4 only
D 2,3 and


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