True/False

Please write T if the statement is true or F if the statement is false:

____1. The contribution format income statement can be expressed in the following equation: Profit = (Sales Variable expenses) Fixed expenses.

____2. The CM ratio can also be calculated by dividing the contribution margin per unit by the selling price per unit.

_____3. Margin of safety in dollars = Total sales - Break-even sales

_____4. The margin of safety cannot be expressed in terms of the number of units sold .

_____5. If variable expenses are 70% of sales, CM ratio is half of it or 35%.

_____6. A budget is a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period.

_____7. One advantage of budgeting is that it can uncover potential bottlenecks.

_____8. A self-imposed budget or participative budget is a budget that is prepared with the full cooperation and participation of managers at the top level.

_____9. Motivation is generally higher when individuals participate in setting their own goals than when the goals are imposed from above.

____10. The production budget must be adequate to meet budgeted sales and to provide for

the desired ending inventory.

____11. Performance evaluation is difficult when actual activity differs from the planned level of activity.

____12. Flexible budget cannot show costs that should have been incurred at the actual level of activity.

___13. Flexible budgets improve performance evaluation.

___14. Favorable variance occurs when actual revenue is greater than budgeted revenue.

___15. The differences between the master budget amounts and the flexible budget amounts are called master budget variances.