Metropolitan Community College, Omaha - ACCT 420

1)Within the relevant range, fixed costs:

 

 

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

Rent for the warehouse. Annual salary of the CEO. Depreciation.

 

3. A 45% contribution margin ratio means that:

 

The company should contribute 45% of its operating income to qualified charities for maximum tax benefits.

55% of the company's revenue is consumed by fixed and variable costs.

The company's revenue has increased by 45% during the current accounting period.

 

4. A company's most profitable products are often those which:

 

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

 

Is included among the monthly operating expenses as a variable cost. Is considered a fixed cost of doing business.

Is treated as a semivariable cost that is partially dependent upon sales volume.

 

6. Variable costs would include:

 Insurance expense. Amortization expense.

 

7. If the unit sales price is $7 and variable costs are $3, how many units have to be sold to earn a profit of $3,600 if fixed costs equal $5,000?

 900 units

1,250 units

1,500 units

 

8. 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? (Round the answer to the nearest unit.)

 5,595 units

7,667 units

 

9. The contribution margin ratio is expressed as:

 

 

10. Unique Corporation manufactures two products; data are shown below:

 

	Contribution Margin Ratio	Relative Sales Mix
Product D	50%	40%
Product F	30%	60%

 

If Unique's monthly fixed costs average $400,000, what is its break-even point expressed in sales dollars? (Round the answer to the nearest dollar.)

 

 

$1,320,462

$1,250,000

$1,400,000

 

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

 

$8,820.

 

12. Operating income can be calculated by:

 

Dividing fixed costs by the contribution margin ratio. Multiplying fixed costs by the contribution margin ratio.

 

13. The margin of safety is calculated by:

 

Dividing fixed costs plus target income by the contribution margin. Subtracting break-even income from current income.

 

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

 

15. A company's relevant range of production is:

The production range from zero to 100% of plant capacity.

 

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

At 50% of full capacity.

At the sales volume resulting in the lowest average unit cost.

At the volume at which total revenue equals total variable costs.

 

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

 

$90,000.

$80,000.

 

18. The Davidson Company's breakeven point in units is 40,000. Assuming that variable costs are 60% and fixed costs are $300,000, what is the company's projected operating income if sales are $1,000,000?

 

$750,000

 

19. 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

$10,000 per month. Management must feel that the additional facilities will increase monthly sales volume (in dollars) by:

 

$4,725.

$8,775.

$13,500.

 

20. 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.

 

 

21. 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?

 

Variable costs, $22 million Fixed costs, $13.5 million

 

 

22. A semivariable cost:

 

Increases and decreases directly and proportionately with changes in volume.

 

23. Product X sells for $35 per unit and has related variable costs of $25 per unit. The fixed costs of producing product X are $65,000 per month. How many units of product X must be sold each month to earn a monthly operating income of

$85,000?

 2,833 units

6,000 units

 

24. 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?

 

 

25. 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?

 

$750,000

$100,000

 

26. Stupper Corporation manufactures two products; data are shown below:

 

	Contribution Margin Ratio	Relative Sales Mix
Product D	50%	60%
Product F	60%	40%

If Stupper's monthly fixed costs average $200,000, what is its break-even point expressed in sales dollars? (Round the answer to the nearest dollar.)

 

 

$320,000

$250,000

 

27. In the area of cost-volume-profit analysis, the contribution margin ratio shows how much each dollar of sales contributes to:

 

 

28. If the unit sales price is $12, variable costs are $6 per unit and fixed costs are $26,000 what is the contribution margin ratio per unit?

 40%

 

29. When volume increases, fixed cost per unit:

 Increases.

 

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

 Contribution margin. Contribution margin ratio.

 

 

 

 

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

 

Maximum capacity with present facilities                                  8,000 units Total fixed cost (per period)                                                       $1,029,200 Variable cost per unit                                                                                   $118.00

Sales price per unit                                                                $180.00

 

 

31. The contribution margin per unit for product no. CK74 is:

$149.00.

$44.00.

$68.00.

 

32. The number of units of CK74 that Ruby must sell to break- even is:

 

 

 

 

 

33. At the current selling price of $90 per unit, the contribution margin ratio is:

 60%

54%

80%

 

34. At the current selling price of $90 per unit, the dollar volume of sales per month necessary for Accents to break-even is:

 

$30,000.

 

35. At the current selling price of $90 per unit, what dollar volume of sales per month is required for Accents to earn a monthly operating income of $12,000?

 

 

$30,000.

$116,667.