Columbia College - ACCT 281

Ch 20 Practice Quizzes

1)Variable costs would include: Sales commission expense, rise or fall approximate proportion

1. Raymond & Sons generates an average contribution margin ratio of 45% on its sales. Management estimates that by spending $3,500 more per month to rent additional facilities, the business will be able to increase operating income by

2. The following information is available:

What is the operating income?

3. If the monthly sales volume required to break even is $190,000 and monthly fixed costs are $55,900, the contribution margin ratio is closest to:
4. A company with monthly fixed costs of $170,000 expects to earn monthly operating income of $25,000 by selling 6,500 units per month. What is the company's expected unit contribution margin?

5. The contribution margin ratio is computed as:
6. In the area of cost-volume-profit analysis, the contribution margin ratio shows how much each dollar of sales contributes to:
7. Montclair Company earns an average contribution margin ratio of 40% on its sales. The local store manager estimates that he can increase monthly sales volume by $45,000 by spending an additional $7,000 per month for direct mail advertising. Compute the monthly increase in operating income if the manager's estimate about the increased sales volume is accurate.
8. A fixed cost may include all of the following except:
9. Management expects total sales of $40 million, a margin of safety of $10 million, and a contribution margin ratio of 45%. Which of the following estimated amounts

is not consistent with this information?

Chapter 20 Exam:

1. 1. A 45% contribution margin ratio means that:

1. 2. In cost-volume-profit analysis, income tax expense:

1. 3. The contribution margin ratio is expressed as:

1. 4. Operating income can be calculated by:

1. 5. A fixed cost may include all of the following except:

1. 6. A semivariable cost:

1. 7. Management expects total sales of $40 million, a margin of safety of $10 million, and a contribution margin ratio of 45%. Which of the following estimated amounts is not consistent with this information?

1. 8. The Gillett Company's breakeven point in units is 25,000. Assuming that variable costs are 50% and fixed costs are $500,000, what is the company's projected operating income if sales are $1,250,000?

1. 9. A company with monthly revenue of $120,000, variable costs of $50,000, and fixed costs of $40,000 has a contribution margin of:

1. 10. If monthly fixed costs are $21,000 and the contribution margin ratio is 42%, the monthly sales volume required to break even is:

1. 11. If the unit sales price is $14, variable costs are $7 per unit and fixed costs are

$42,000, how many units must be sold to earn an income of

$250,000?

1. 12. Variable costs would include:

1. 13. A product sells for $125, variable costs are $80, and fixed costs are $45,000. If the selling price can be increased by 20% with a similar increase in variable costs, how many fewer units would have to be sold to earn

$300,000?

1. 14. The dollar amount by which sales can decline before an operating loss is incurred is called the:

1. 15. The break-even point in a cost-volume-profit graph is always found:

1. 16. The Parry Company’s breakeven point in units is 20,000. Assuming that variable costs are 30% and fixed costs are $100,000, what is the company’s projected operating income if sales are $750,000?

1. 17. The following information is available:

Sales                                                    $90,000

Contribution margin ratio                               26%

What is the operating income?

1. 18. In comparison to selling a product with a low contribution margin ratio, selling a product with a high contribution margin ratio always:
   19. A company's relevant range of production is:
   20. If the unit sales price is $12, variable costs are $6 per unit, and fixed costs are

$36,000, what sales volume (in dollars) is necessary to break-even?

1. 21. Which of the following is an example of a fixed cost for an airline?

1. 22. When volume increases, fixed cost per unit:
   23. The margin of safety is calculated by:
   24. In the area of cost-volume-profit analysis, the contribution margin ratio shows how much each dollar of sales contributes to:

1. 25. Nanu Corporation manufactures two products; data are shown below:

If Nanu's monthly fixed costs average $425,000, what is its break-even point expressed in sales dollars?

1. 26. Within the relevant range, fixed costs:
   27. Stupper Corporation manufactures two products; data are shown below:

If Stupper's monthly fixed costs average $200,000, what is its break- even point expressed in sales dollars?

1. 28. A company with monthly fixed costs of $170,000 expects to earn monthly operating income of $25,000 by selling 6,500 units per month. What is the company's expected unit contribution margin?

1. 29. The following data are available for product no. CK74, manufactured and sold by Ruby Corporation: