Deck 3: Analysis of Cost, volume, and Pricing to Increase Profitability

Question 1

Newton Company currently produces and sells 4,000 units of a product that has a contribution margin of $6 per unit.The company sells the product for a sales price of $20 per unit.Fixed costs are $18,000.The company is considering investing in new technology that would decrease the variable cost per unit to $8 per unit and double total fixed costs.The company expects the new technology to increase production and sales to 9,000 units of product.What sales price would have to be charged to earn a $99,000 target profit assuming the investment in technology is made?

A) $22
B) $23
C) $15
D) $13

Answer 1

B

Question 2

During the current year,Winchester Company sold 80,000 units at a selling price of $20 per unit.Variable cost per unit was $15,and Winchester's net income for the year was $40,000.What was the amount of Winchester's fixed costs?

A) $360,000
B) $440,000
C) $1,160,000
D) $400,000

Answer 2

A

Question 3

M and M,Inc.produces a product that has a variable cost of $3.00 per unit.The company's fixed costs are $30,000.The product is sold for $5.00 per unit and the company desires to earn a target profit of $20,000.What is the amount of sales that will be necessary to earn the desired profit?

A) $75,000
B) $50,000
C) $83,333
D) $125,000

Answer 3

D

Question 4

Martin Company currently produces and sells 40,000 units of product at a selling price of $12.The product has variable costs of $6 per unit and fixed costs of $150,000.The company currently earns a total contribution margin of:

A) $280,000
B) $200,000
C) $240,000
D) $90,000

Question 5

Bates Company currently produces and sells 4,000 units of a product that has a contribution margin of $5 per unit.The company sells the product for a sales price of $20 per unit.Fixed costs are $20,000.The company has recently invested in new technology and expects the variable cost per unit to fall to $12 per unit.The investment is expected to increase fixed costs by $15,000.After the new investment is made,how many units must be sold to break even?

A) 2,917 units
B) 4,375 units
C) 7,000 units
D) 4,000 units

Question 6

Zeus,Inc.produces a product that has a variable cost of $9.50 per unit.The company's fixed costs are $40,000.The product sells for $12.00 a unit and the company desires to earn a $20,000 profit.What is the volume of sales in units required to achieve the target profit? (Do not round intermediate calculations.)

A) 24,000 units
B) 16,000 units
C) 17,000 units
D) 4,000 units

Question 7

Harris Company produces a product whose cost is $10.Assuming the company uses a cost-plus pricing system,what selling price would the company set to earn a profit margin of 20% of cost?

A) $2.00
B) $12.50
C) $50.00
D) $12.00

Question 8

Kingston Company sells its product for $200 per unit.The company's accountant provided the following cost information: $$\begin{array} { l l l } \text { Manufacturing costs } & \$ 25,000 + 40 \% \text { of sales } \\\text { Selling costs } & \$ 10,000 + 20 \% \text { of sales } \\\text { Administrative costs } & \$ 15,000 + 10 \% \text { of sales }\end{array}$$ What is Kingston Company's contribution margin ratio?

A) 30%
B) 15%
C) 35%
D) 20%

Question 9

Phan Company has not reported a profit in five years.This year the company would like to narrow its loss to $7,500.Assuming its selling price is $36.50 per unit and its variable costs per unit are $24,how many units must be sold to achieve its target given that total fixed costs are $60,000? (Do not round intermediate calculations.)

A) 2,188
B) 1,439
C) 4,200
D) 1,600

Question 10

At its $60 selling price,Atlantic Company has sales of $15,000,variable manufacturing costs of $4,000,fixed manufacturing costs of $1,000,variable selling and administrative costs of $2,000,and fixed selling and administrative costs of $1,000.What is the company's contribution margin per unit?

A) $26
B) $28
C) $44
D) $36

Question 11

Pierce Company's break-even point is 12,000 units.Its product sells for $25 and has a $10 variable cost per unit.What is the company's total fixed cost amount?

A) $250,000
B) $180,000
C) $120,000
D) Fixed costs cannot be computed with the information provided.

Question 12

Rocky Mountain Bottling Company produces a soft drink that is sold for a dollar.At production and sales of 800,000 units,the company pays $600,000 in production costs,half of which are fixed costs.At that volume,general,selling,and administrative costs amount to $250,000,of which $70,000 are fixed costs.What is the amount of contribution margin per unit?

A) $0.40
B) $0.5375
C) $0.25
D) None of these is correct.

Question 13

The records of Gemini Company show a contribution margin ratio of 40%.The company desires to earn a profit of $35,000 and has fixed costs of $70,000.What sales revenue would have to be generated in order to earn the desired profit?

A) $87,500
B) $262,500
C) $175,000
D) $42,000

Question 14

The pricing strategy that begins with the determination of a price at which a product will sell and then focuses on developing a cost structure for the product that will yield a profit is known as:

A) cost-plus pricing.
B) prestige pricing.
C) developmental pricing.
D) target costing.

Question 15

Camden Company sets the selling price for its product by adding a markup to the product's variable manufacturing costs.This approach to pricing is referred to as:

A) cost-plus pricing
B) target pricing
C) target costing
D) contribution margin-based pricing

Question 16

Mitchell Company sells its product for $100 per unit.The company's accountant provided the following cost information: $$\begin{array} { l l l } \text { Manufacturing costs } & \$ 25,000 + 45 \% \text { of sales } \\\text { Selling costs } & \$ 15,000 + 20 \% \text { of sales } \\\text { Administrative costs } & \$ 25,000 + 10 \% \text { of sales }\end{array}$$
What is the company's break-even point in units?

A) 1,000
B) 750
C) 2,600
D) 4,000

Question 17

Jarvis Company produces a product that has a selling price of $20.00 and a variable cost of $15.00 per unit.The company's fixed costs are $50,000.What is the break-even point measured in sales dollars?

A) $150,000
B) $200,000
C) $62,500
D) $100,000

Question 18

Select the incorrect break-even equation from the following:

A) Total contribution margin = total variable costs
B) Total contribution margin = total fixed costs
C) Total fixed costs ÷ contribution margin ratio = break-even sales in dollars
D) Total revenue = total costs

Question 19

Once sales reach the break-even point,each additional unit sold will:

A) increase fixed cost by a proportionate amount.
B) reduce the margin of safety.
C) increase the company's operating leverage.
D) increase profit by an amount equal to the per unit contribution margin.

Question 20

Cooper Company sells a product at $50 per unit that has unit variable costs of $20.The company's break-even sales point in sales dollars is $150,000.How much profit will the company make if it sells 4,000 units?

A) $210,000
B) $120,000
C) $60,000
D) $30,000

Question 21

Chester Company plans to introduce a new product.A market research specialist claims that 20,000 units can be sold at a $100 selling price.Assuming the company desires a profit margin of 22% of sales,what is the target cost per unit?

A) $128.21
B) $78
C) $80
D) $20

Question 22

The margin of safety ratio can be defined as the:

A) Excess of budgeted sales over break-even sales divided by break-even sales.
B) Excess of budgeted sales over break-even sales divided by budgeted sales.
C) Excess of budgeted sales over fixed costs divided by budgeted sales.
D) Excess of budgeted sales over variable costs divided by budgeted sales.

Question 23

How does the cost-volume-profit model accommodate non-linear costs and revenues?

A) Non-linear costs and revenues are ignored by the model.
B) Inventory levels are segregated into distinct ranges within which a linear relationship is expected to approximate the actual cost or revenue behavior.
C) It is not a problem since non-linear costs and revenues do not exist in practice.
D) None of these is correct.

Question 24

Bruce Company recently reduced its advertising budget.All other costs and revenues were unchanged.Select the response that indicates the impact of the advertising cuts on the company's break-even point and margin of safety. $\begin{array}{llcc}&\text {Break-even Point}&\text {Margin of Safety}\\\end{array}$
A. $\begin{array}{lrr}& \text { Increase } &&&& \text { Increase} \\\end{array}$
B. $\begin{array}{lrr}& \text { Decrease } &&&& \text { Decrease} \\\end{array}$
C. $\begin{array}{lrr}& \text { Increase } & &&&\text { Decrease} \\\end{array}$
D. $\begin{array}{lrr}& \text { Decrease } &&&& \text {Increase} \\\end{array}$

A) A
B) B
C) C
D) D

Question 25

Which of the following is not one of the assumptions underlying cost-volume-profit analysis?

A) Costs are linear.
B) Production equals sales.
C) All costs can be segregated into fixed and variable components.
D) The selling price increases or decreases with changes in sales volume.

Question 26

Columbus Industries makes a product that sells for $25 a unit.The product has a $5 per unit variable cost and total fixed costs of $9,000.At budgeted sales of 2,000 units,the margin of safety ratio is:

A) 22.5%.
B) 10%.
C) 77.5%.
D) None of these answers is correct.

Question 27

Markham Company has a contribution margin ratio of 25%.The company is considering a proposal that will increase sales by $150,000.What increase in profit can be expected assuming total fixed costs increase by $25,000? (Do not round intermediate calculations.)

A) $6,250
B) $31,250
C) $37,500
D) $12,500

Question 28

Consider the following cost-volume-profit graph: What is the approximate amount of fixed costs in this organization?

A) $0
B) $25,000
C) $60,000
D) $30,000

Question 29

Consider the following cost-volume-profit graph: Based on the information in the graph,the break-even point in sales dollars is approximately equal to:

A) $50,000.
B) $30,000.
C) $60,000.
D) $20,000.

Question 30

If a company experiences an increase in rent expense,the total cost line on the cost-volume-profit graph will:

A) shift upward, and the break-even point will shift downward.
B) shift upward, and the break-even point will also shift upward.
C) shift upward and have a steeper slope, and the break-even point will also shift upward.
D) shift upward and have a flatter slope, and the break-even point will be unchanged.

Question 31

During the current year,Fairview Corporation sold 100,000 units of its product for $20 each.The variable cost per unit was $14,and Fairview's margin of safety was 40,000 units.What was the amount of Fairview's total fixed costs?

A) $240,000
B) $560,000
C) $840,000
D) $360,000

Question 32

Billings Company has developed the following budgeted income statement: $\begin{array}{lrr} \text {Sales Revenue \( (2,300 \) units \( \times \$ 14 \) sales price) } &\$32,200\\ \text { Total Variable Expenses (2,300 \( \$ 6 \) per unit)} &\underline{(13,800)}\\ \text { Contribution Margin} &18,400\\ \text {Fixed Expenses } &\underline{(10,000)}\\ \text {Net Income } &\underline{\$8,400}\\\end{array}$

The Company is experimenting with new engineering techniques and believes it can reduce variable cost to $4.50 per unit and significantly improve the product.The innovations would double fixed costs but the company expects to be able to increase sales to 3,500 units.If this strategy is pursued the company's budgeted net income will:

A) decrease by $4,250.
B) increase by $4,850.
C) increase by $13,250.
D) decrease by $4,150.

Question 33

Consider the following cost-volume-profit graph: The line designated by the letter (B)represents which of the following?

A) Variable cost
B) Break-even
C) Total revenue
D) Total cost

Question 34

Acme Company has variable costs equal to 30% of sales.The company is considering a proposal that will increase sales by $10,000 and total fixed costs by $7,000.By what amount will net income increase?

A) $0
B) $3,000
C) $7,000
D) $4,000

Question 35

A pricing strategy that sets the price at a premium under the assumption that people will pay more for the product because of the product's brand name,media attention,or some other reason that has piqued the interest of the public is known as:

A) cost-plus pricing.
B) contribution margin-based pricing.
C) target pricing.
D) prestige pricing.

Question 36

A market research specialist told Peachtree Company that it could expect to sell 500,000 units of its new high-capacity computer disk at a price of $5.Assuming the company desires a profit margin equal to 20% of sales,what target cost per unit is necessary?

A) $1.00
B) $4.00
C) $3.00
D) None of these answers is correct

Question 37

Consider the following cost-volume-profit graph: The line designated by the letter (A)represents which of the following?

A) Total revenue
B) Total cost
C) Total fixed cost
D) None of these is correct.

Question 38

A product has a contribution margin of $2.50 per unit and a selling price of $25 per unit.Fixed costs are $20,000.Assuming new technology increases the unit contribution margin by 50 percent but increases total fixed costs by $13,750,what is the new break-even point in units?

A) 3,667 units
B) 3,333 units
C) 13,500 units
D) 9,000 units

Question 39

Which of the following is not an assumption made when performing cost-volume-profit analysis?

A) Number of units produced is greater than the number of units sold.
B) Worker efficiency is held constant.
C) The company produces within the relevant range of activity.
D) There is a linear relationship between cost and volume for both fixed and variable cost.

Question 40

Consider the following cost-volume-profit graph: The area designated by the letter (C)represents which of the following?

A) Profit area
B) Loss area
C) Break-even area
D) Fixed cost area

Question 41

What happens to the break-even point in sales dollars when the contribution margin ratio increases?

A) Break-even point increases.
B) Break-even point decreases.
C) Break-even point stays the same.
D) Not enough information to answer the question.

Question 42

When drawing a cost-volume-profit graph,how are the axes labeled?

A) The horizontal axis would be labeled with dollars (of cost or revenue), while the vertical axis would be labeled with number of units (volume or activity).
B) The horizontal axis would be labeled with dollars (of total fixed costs), while the vertical axis would be labeled with dollars (of total variable costs).
C) The horizontal axis would be labeled with number of units (volume or activity), while the vertical axis would be labeled with dollars (of cost or revenue).
D) None of these answers is correct.

Question 43

Assume that the company sells two products,X and Y,with contribution margins per unit of $12 and $10,respectively.What happens to the break-even point if the sales mix shifts to favor product X? (In other words,sales of product X will make up a higher percentage of the sales mix.)

A) Break-even point increases.
B) Break-even point decreases.
C) Break-even point stays the same.
D) None of these answers is correct.

Question 44

Crown Company produces and sells two products.The following monthly data are provided: $\begin{array}{lrr}&\text { Slicer }&\text {Chopper }\\\text { Unit selling price } & 10 & \$ 15 \\\text { Variable manufacturing costs } & 6 &9 \\\text { Variable selling and administrative costs } & 1 & 1 \\\text { Estimated unit sales per month } & 280 & 420\end{array}$
The break-even point for the current sales mix is 360 units (144 Slicer models and 216 Chopper models).What would be the impact on profit if 360 units are sold but 145 Slicer models are sold instead of 144?

A) $3 decrease
B) $5 increase
C) $2 decrease
D) $2 increase

Question 45

To get a feel for the impact on profits of various changes in costs and volume levels,management should perform:

A) cost benefit analysis
B) sensitivity analysis
C) cost analysis
D) profitability analysis

Question 46

Zed Company sells two kinds of mainframe computer power supplies.The company projected the following cost information for the two products: $\begin{array}{lrr}&\text { Standard } & \text { Heavy-Duty } \\&\text { Supply } & \text { Supply }\\ \text { Unit selling price} &\$250&\$120\\ \text { Unit variable cost} &\$110&\$50\\ \text { Number of units produced and sold } &7,000&3,000\end{array}$
Assume that total fixed costs are $428,400.How many units of the standard supply unit would be included in the total number of units required to break even with the projected sales mix? (Round your answer to the nearest whole unit)

A) 3,600 units
B) 2,520 units
C) 1,080 units
D) 2,040 units

Question 47

When performing sensitivity analysis,which of the following is an example of a variable that management may consider changing to answer "what if" questions?

A) Variable cost per unit
B) Sales price per unit
C) Fixed cost per unit
D) Both Variable cost per unit and Sales price per unit are correct.

Question 48

What is the formula for calculating contribution margin ratio?

A) Contribution margin ÷ Net income
B) Contribution margin ÷ Fixed costs
C) Contribution margin ÷ Desired profit
D) Contribution margin ÷ Sales

Question 49

What happens to break-even point when the sales price per unit decreases?

A) Break-even point increases.
B) Break-even point decreases.
C) Break-even point stays the same.
D) None of these answers is correct.

Question 50

The Victor Company sells two products.The following information is provided: $$\begin{array} { l r r r r } \text { Unit selline price } & \$ & 100 & \$ & 150 \\\text { Unit variable cost } & \$ & 30 & \$ & 70 \\\text { Number of units produced and sold } & & 20,000 & & 60,000\end{array}$$ What is the weighted average contribution margin per unit?

A) $77.50
B) $80.00
C) $75.00
D) $72.50

Question 51

Company A has break-even sales of 90,000 units and budgeted sales of 99,000 units.What is the margin of safety as expressed as a percentage?

A) 9.00%
B) 10.0%
C) 9.09%
D) None of these answers is correct.

Question 52

If total fixed costs increase while variable costs and sales price are unchanged,what happens to the break-even point?

A) The break-even point increases, and therefore more units must be sold to break even.
B) The break-even point decreases, and therefore fewer units must be sold to break even.
C) The break-even point remains the same.
D) The break-even point decreases and therefore more units must be sold to break even.

Question 53

Burke Company has a break-even of $600,000 in total sales.Assuming the company sells its product for $50 per unit,what is its margin of safety in units if sales total $850,000?

A) 5,000 units
B) 250,000 units
C) 12,000 units
D) 17,000 units

Question 54

Which of the following software applications is most useful for performing cost-volume-profit sensitivity analysis?

A) Database software
B) Spreadsheet software
C) Presentation software
D) Word processing software

Question 55

Broadway Company produces and sells two models of calculators.The following monthly data are provided: $\begin{array}{lcc}&\text{ Standard } &\text{ Premium} \\ \text {Unit selling price}&\$ 100 & \$ 150 \\ \text {Unit variable manufacturing cost}&\$ 60 & \$ 90 \\\text {Unit variable selling and administrative cost}& \$ 15 & \$ 30\\ \text {Number of units produced and sold}& 3,000 & 1,000\end{array}$

Total monthly fixed costs are expected to be $15,000.What is the break-even point in sales dollars at the expected sales mix? (Do not round intermediate calculations.)

A) $19,231
B) $43,478
C) $68,182
D) $64,286

Question 56

Jasper Company has variable costs per unit of $20,fixed costs of $300,000,and a break-even point of 60,000 units.What will be the new break-even point in units if variable costs decrease by $3 per unit and fixed costs increase by $100,000?

A) 93,333 units
B) 33,333 units
C) 50,000 units
D) 200,000 units

Question 57

Company X has variable costs per unit of $20,fixed costs of $300,000,and a break-even point in units of 60,000 units.If the sales price per unit decreases by $2 and the variable cost per unit decreases by $2,what would happen to the break-even point?

A) Break-even point increases.
B) Break-even point in dollars decreases.
C) Break-even point stays the same.
D) Break-even point in dollars decreases and break-even point in units stays the same.

Question 58

The Travel Pro Company sells two kinds of luggage.The company projected the following cost information for the two products: $\begin{array}{lrr}&\text { Rolling Bag }&\text { Carry-on Bag }\\ \text { Unit selling price } &\$250&\$120\\ \text { Unit variable cost } &\$110&\$80\\ \text { Number of units produced and sold}&4,000&6,000\end{array}$
The company's total fixed costs are expected to be $280,000.
Based on this information,what is the combined number of units of the two products that would be required to break even with the projected sales mix? (Round your answer to the nearest whole unit.)

A) 3,500 units
B) 3,111 units
C) 1,556 units
D) None of these is correct.

Question 59

Chesterfield Corporation has been operating well above its break-even point.What will happen to Chesterfield's margin of safety if the variable cost per unit increases?

A) The break-even point would decrease, and the margin of safety would decrease.
B) The break-even point would decrease, and the margin of safety would increase.
C) The break-even point would increase, and the margin of safety would decrease.
D) The break-even point would increase, and the margin of safety would increase.

Question 60

When sales price,fixed cost,variable cost,and production volume are changing simultaneously,the best approach to determining profitability is:

A) contribution margin.
B) contribution ratio.
C) sensitivity analysis.
D) equation.

Question 61

At the break-even point:

A) Sales would be equal to total costs.
B) Contribution margin would be equal to total fixed costs.
C) Sales would be equal to fixed costs.
D) Both sales would be equal to total costs and contribution margin would be equal to total fixed costs are correct.

Question 62

When computing the break-even point in units,a company should round to the next whole unit because partial units ordinarily are not sold.

Question 63

Ng Company sells one product that has a sales price of $20 per unit,variable costs of $12 per unit,and total fixed costs of $300,000.What is the amount of sales volume in dollars necessary to attain a desired profit of $100,000?

A) $250,000
B) $750,000
C) $1,000,000
D) $666,667

Question 64

Which of the following statements about a cost-volume-profit graph is correct?

A) A cost-volume-profit graph is prepared with activity (number of units) on the vertical axis.
B) The intersection of the total sales line and the total cost line represents the break-even point.
C) The area above the break-even point represents the area of loss.
D) The total cost line intersects the vertical axis at the dollar amount of total variable costs.

Question 65

Rose Corporation sells backpacks.Variable costs for this product are $30 per unit,and the sales price per unit is $50 per unit.Total fixed costs amount to $100,000.How many backpacks does Rose need to sell to achieve a desired profit of $60,000?

A) 2,000 units
B) 5,000 units
C) 5,333 units
D) 8,000 units

Question 66

Which of the following statements regarding cost-volume-profit analysis is incorrect?

A) Cost-volume-profit analysis assumes that fixed cost per unit is constant.
B) Cost-volume-profit analysis assumes that the selling price cost per unit is constant.
C) An increase in inventory during a period will affect cost-volume-profit relationships.
D) Although cost-volume-profit analysis is based on assumptions that seldom will be perfectly achieved, the technique is still useful to managers.

Question 67

Select the correct statement regarding the contribution margin ratio.

A) The contribution margin ratio can be calculated using either total amounts or per unit amounts.
B) The contribution margin ratio equals contribution margin per unit divided by variable cost per unit.
C) Total fixed costs divided by the contribution margin ratio equals the break-even point in units.
D) An increase in variable cost per unit will cause the contribution margin ratio to increase.

Question 68

Wayans Company has a contribution margin ratio of 60%.This means that its variable costs are 60% of sales.

Question 69

Jensen Company has a contribution margin ratio of 45%.This means that its variable costs are 55% of sales.

Question 70

Select the incorrect statement regarding cost-volume-profit relationships for multiple products.

A) For a company that sells many different products, the level of the break-even point is affected by the company's sales mix.
B) An increase in sales volume accompanied by a change in sales mix could cause a company's profits to decrease.
C) For a multi-product company, cost-volume-profit analysis can be done using the contribution margin ratio of the most profitable product.
D) None of these answers is correct.

Question 71

For a company using target costing,market price minus profit equals target price.

Question 72

Which of the following statements regarding Company A is incorrect?

A) If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its break-even point in units is 36,000 units.
B) If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its variable expenses must be $20 per unit.
C) If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, once it has covered its fixed costs, net income will increase by $30 for each additional unit sold.
D) Both if Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its break-even point in units is 36,000 units and if Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its variable expenses must be $20 per unit are incorrect.

Question 73

Falls Company has a contribution margin of $32 per unit and fixed costs of $500,000,and it desires to earn a profit of $100,000.What is the sales volume in units required to achieve this desired profit?

A) 3,125 units
B) 18,750 units
C) 15,625 units
D) 12,500 units

Question 74

Sharon Company has variable costs of $80 per unit,total fixed costs of $200,000,and a break-even point of 5,000 units.If the sales price per unit is increased by $10,how many units must Sharon Company sell to break even?

A) 4,000 units
B) 5,000 units
C) 6,000 units
D) 3,000 units

Question 75

Joseph Company has variable costs of $80 per unit,total fixed costs of $200,000,and a break-even point of 5,000 units.If the variable cost per unit decreases by $8,how many units must Joseph Company sell to break even?

A) 2,778 units
B) 2,500 units
C) 6,250 units
D) 4,167 units

Question 76

Contribution margin ratio will remain the same at various levels of sales even if total fixed costs are altered.

Question 77

Select the correct statement regarding break-even point analysis.

A) The break-even point in sales dollars equals total fixed costs divided by contribution margin per unit.
B) An increase in fixed costs causes the break-even point to increase.
C) An increase in contribution margin per unit causes the break-even point in units to increase.
D) A decrease in the variable cost per unit causes the break-even point in units to increase.

Question 78

Bloom Company has variable cost per unit of $20 and a sales price of $35 per unit.Its total fixed costs are $240,000.Which of the following is a correct statement?

A) Company D's break-even point is 12,000 units.
B) If budgeted sales are 25,000 units, D's margin of safety is 10,000 units.
C) If Company D's variable cost per unit increases and nothing else changes, the margin of safety will decrease.
D) If Company D's variable cost per unit decreases and nothing else changes, the break-even point will stay the same.

Question 79

Adams Company sells a product whose contribution margin is $10 and selling price is $25.If the company's break-even point is 100 units,its total fixed costs must be $500.

Question 80

Martinez Company sells one product that has a sales price of $20 per unit,variable costs of $8 per unit,and total fixed costs of $200,000.what is the contribution margin ratio?

A) 40%
B) 60%
C) 50%
D) 66%