Discretionary fixed costs:

Answer

A. vary directly and proportionately with the level of activity.

B. have a long-term planning horizon, generally encompassing many years.

C. are made up of plant, equipment, and basic organizational costs.

D. None of these.

Question 18, 19 and 20 use the following information:

The following is Addison Corporation's contribution format income statement for last month:

Sales                                                      $ 1,000,000

Variable expenses                           700,000

Contribution margin                       300,000

Fixed expenses                                 180,000

Net operating income                    $ 120,000

The company has no beginning or ending inventories. A total of 20,000 units were produced and sold last month.

18. What is the company's contribution margin ratio?

Answer

A. 250%

B. 150%

C. 70%

D. 30%

19. What is the company's break-even in units?

Answer

A. 20,000 units

B. 0 units

C. 18,000 units

D. 12,000 units

20. How many units would the company have to sell to attain the target profit of $150,000?

Answer

A. 22,000

B. 37,500

C. 25,000

D. 26,667