Multiple Choice Questions 1 If a company has a 25 000
Multiple Choice Questions
1. If a company has a \$25,000 reduction in sales and an increase of \$7,000 in fixed costs with a contribution margin ratio of 34 percent, by how much will net income change?
a. Decrease \$1,500
b. Decrease \$32,000
c. Increase \$1,500
d. Decrease \$15,500

2. Which of the following statements is correct as it relates to a company that sells multiple products?
a. CVP analysis cannot be used.
b. Contribution margin is based on sales mix.
c. CVP analysis is much easier to use.
d. The break-even point remains the same even if sales mix changes.

3. Hoagland Company has the following product information:
Sales price ....... \$6.00 per unit
Variable costs ..... \$2.00 per unit
Fixed costs ...... \$12,000
Units sold ....... 20,000
What is the break-even point in sales dollars?
a. \$12,000
b. \$15,000
c. \$18,000
d. \$21,000

4. Greer Corp. has the following product information:
Sales price ............ \$6.00 per unit
Contribution margin ratio ...... 35%
Fixed costs ............\$42,000
What is the break-even point in units?
a. 7,000
b. 2,471
c. 20,000
d. 18,850

5. Greer Corp. has the following product information:
Sales price ............ \$6.00 per unit
Contribution margin ratio....... 35%
Fixed costs ............. \$42,000
How many units must Greer Corp sell in order to reach a target before-tax profit of \$50,000?
a. 43,810
b. 44,000
c. 44,545
d. 45,105

6. Scuffy Company has the following product information:
Sales price .......... \$7.25 per unit
Variable costs ......... \$2.25 per unit
Fixed costs .......... \$10,000
What is the break-even point in units?
a. 1,380
b. 2,000
c. 4,445
d. 5,000

7. Which of the following is a correct form of the break-even equation when using activity-based costing?
a. Break-even (\$) = (Fixed costs + Batch-level costs) ÷÷ Contribution margin per unit
b. Break-even (units) = (Fixed costs + Facility-level costs) ÷ Contribution margin per unit
c. Break-even (\$) = (Fixed costs + Batch-level costs + Product-level costs) ÷ Contribution margin per unit
d. Break-even (units) = (Fixed costs + Batch-level costs + Product-level costs) ÷ Contribution margin per unit

8. John Abner Enterprises has a contribution margin ratio of 80 percent and fixed costs of \$20,000. What would sales have to be for an after-tax net income of \$60,000? The company is in the 40 percent tax bracket.
a. \$80,000
b. \$100,000
c. \$120,000
d. \$150,000

9. Which of the following is not an assumption of cost-volume-profit analysis?
a. Selling prices change only at the end of the month.
b. Costs can be thought of as fitting a linear function within the relevant range.
c. Sales mix is constant.
d. Inventory levels do not change.

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