Question 1

Contribution margin is

Accepted Answer

A) the amount of revenue remaining after deducting fixed costs. 
B) available to cover fixed costs and contribute to income for the company. 
C) sales less fixed costs. 
D) unit selling price less unit fixed costs.

Question 2

In CVP analysis, the term "cost"

Accepted Answer

A) includes only manufacturing costs. 
B) means cost of goods sold. 
C) includes manufacturing costs plus selling and administrative expenses. 
D) excludes all fixed manufacturing costs.

Question 3

In applying the high-low method, what is the unit variable cost? $\begin{array}{llr}\text { Month}&\text { Miles }&\text {Total Cost }\
\hline \text { January } & \overline{80,000} & \$ 144,000 \
\text { February } & 50,000 & 120,000 \
\text { March } & 70,000 & 141,000 \
\text { April } & 90,000 & 195,000
\end{array}$

Accepted Answer

A) $2.16 
B) $1.88 
C) $2.40 
D) Cannot be determined from the information given.

Question 4

Cunningham, Inc.sells MP3 players for $60 each.Variable costs are $40 per unit, and fixed costs total $90,000.How many MP3 players must Cunningham sell to earn net income of $210,000?

Accepted Answer

A) 15,000. 
B) 5,250. 
C) 3,750. 
D) 4,500.

Question 5

In using the high-low method, the fixed cost

Accepted Answer

A) is determined by subtracting the total cost at the high level of activity from the total cost at the low activity level. 
B) is determined by adding the total variable cost to the total cost at the low activity level. 
C) is determined before the total variable cost. 
D) may be determined by subtracting the total variable cost from either the total cost at the low or high activity level.

Question 6

A cost which remains constant per unit at various levels of activity is a

Accepted Answer

A) variable cost. 
B) fixed cost. 
C) mixed cost. 
D) manufacturing cost.

Question 7

Sales are $500,000 and variable costs are $350,000.What is the contribution margin ratio?

Accepted Answer

A) 43% 
B) 30% 
C) 70% 
D) Cannot be determined because amounts are not expressed per unit.

Question 8

Nelson Manufacturing has the following data: Variable costs are 60% of the unit selling price.
The contribution margin ratio is 40%.
The contribution margin per unit is $500.
The fixed costs are $300,000.
Which of the following does not express the break-even point?

Accepted Answer

A) $300,000 + .60X = X 
B) $300,000 + .40X = X 
C) $300,000 ÷ $500 = X 
D) $300,000 ÷ .40 = X

Question 9

In applying the high-low method, which months are relevant? $\begin{array}{llr}\text { Month}&\text { Miles }&\text {Total Cost }\
\hline \text { January } & \overline{80,000} & \$ 144,000 \
\text { February } & 50,000 & 120,000 \
\text { March } & 70,000 & 141,000 \
\text { April } & 90,000 & 195,000
\end{array}$

Accepted Answer

A) January and February 
B) January and April 
C) February and April 
D) February and March

Question 10

April Industries sells a product with a contribution margin of $12 per unit, fixed costs of $148,800, and sales for the current year of $200,000.How much is April's break-even point?

Accepted Answer

A) 9,200 units 
B) $51,200 
C) 12,400 units 
D) 4,267 units

Question 11

The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

Accepted Answer

A) True 
 B)False

Question 12

Wendy Industries produces only one product.Monthly fixed expenses are $12,000, monthly unit sales are 2,500, and the unit contribution margin is $10.How much is monthly net income?

Accepted Answer

A) $25,000 
B) $37,000 
C) $0 
D) $13,000

Question 13

Cost behavior analysis is a study of how a firm's costs

Accepted Answer

A) relate to competitors' costs. 
B) relate to general price level changes. 
C) respond to changes in the level of business activity. 
D) respond to changes in the gross national product.

Question 14

Vintage Wines has fixed costs of $15,000 per year.Its warehouse sells wine with variable costs of 80% of its unit selling price.How much in sales does Vintage need to break even per year?

Accepted Answer

A) $12,000 
B) $3,000 
C) $18,750 
D) $75,000

Question 15

A company has contribution margin per unit of $90 and a contribution margin ratio of 40%.What is the unit selling price?

Accepted Answer

A) $150 
B) $225 
C) $36 
D) Cannot be determined.

Question 16

The amount by which actual or expected sales exceeds break-even sales is referred to as

Accepted Answer

A) contribution margin. 
B) unanticipated profit. 
C) margin of safety. 
D) target net income.

Question 17

Unit contribution margin is the amount that each unit sold contributes towards the recovery of fixed costs and to income.

Accepted Answer

A) True 
 B)False

Question 18

At the break-even point of 2,000 units, variable costs are $55,000, and fixed costs are $32,000.How much is the selling price per unit?

Accepted Answer

A) $43.50 
B) $11.50 
C) $16.00 
D) $27.50

Question 19

Aero, Inc.requires sales of $2,000,000 to cover its fixed costs of $400,000 and to earn net income of $500,000.What percent are variable costs of sales?

Accepted Answer

A) 25% 
B) 55% 
C) 20% 
D) 45%

Question 20

A fixed cost remains constant in total and on a per unit basis at various levels of activity.

Accepted Answer

A) True 
 B)False

Exam 5: Merchandising Operations and the Multiple-Step Income Statement

Contribution margin is

In CVP analysis, the term "cost"

Cunningham, Inc.sells MP3 players for $60 each.Variable costs are $40 per unit, and fixed costs total $90,000.How many MP3 players must Cunningham sell to earn net income of $210,000?

In using the high-low method, the fixed cost

A cost which remains constant per unit at various levels of activity is a

Sales are $500,000 and variable costs are $350,000.What is the contribution margin ratio?

Nelson Manufacturing has the following data: Variable costs are 60% of the unit selling price. The contribution margin ratio is 40%. The contribution margin per unit is $500. The fixed costs are $300,000. Which of the following does not express the break-even point?

April Industries sells a product with a contribution margin of $12 per unit, fixed costs of $148,800, and sales for the current year of $200,000.How much is April's break-even point?

The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

Wendy Industries produces only one product.Monthly fixed expenses are $12,000, monthly unit sales are 2,500, and the unit contribution margin is $10.How much is monthly net income?

Cost behavior analysis is a study of how a firm's costs

Vintage Wines has fixed costs of $15,000 per year.Its warehouse sells wine with variable costs of 80% of its unit selling price.How much in sales does Vintage need to break even per year?

A company has contribution margin per unit of $90 and a contribution margin ratio of 40%.What is the unit selling price?

The amount by which actual or expected sales exceeds break-even sales is referred to as

Unit contribution margin is the amount that each unit sold contributes towards the recovery of fixed costs and to income.

At the break-even point of 2,000 units, variable costs are $55,000, and fixed costs are $32,000.How much is the selling price per unit?

Aero, Inc.requires sales of $2,000,000 to cover its fixed costs of $400,000 and to earn net income of $500,000.What percent are variable costs of sales?

A fixed cost remains constant in total and on a per unit basis at various levels of activity.