Multiple Choice Questions 1. If a company has a $25,000 reduction in sales and an increase of
Question:
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.
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
Step by Step Answer:
Managerial Accounting A Focus on Ethical Decision Making
ISBN: 978-0324663853
5th edition
Authors: Steve Jackson, Roby Sawyers, Greg Jenkins