Deck 3: Costvolumeprofit Relationships

Question 1

Variable cost is the ratio of variable rate to sales.

Answer 1

False

Question 2

Lower food cost percents will necessarily lead to increased profits.

Answer 2

False

Question 3

In smaller restaurants, the cost of labor is often treated as a fixed cost.

Answer 3

True

Question 4

A higher average contribution margin per sale requires an increase in the number of sales needed to cover given fixed costs.

Question 5

Dollar volume required to break even can be calculated if one knows fixed costs, selling prices, and average number of sales.

Question 6

If product cost is increased while sales price is held constant, higher average variable rate will result.

Question 7

If the variable cost of an item is $4.00, and the sales price is $6.00, the contribution rate for the item is $2.00.

Question 8

If a restaurant manager succeeds in reducing average variable cost, a higher number of customers will be required for the restaurant to break even, assuming fixed costs remain the same.

Question 9

Variable rate equals sales price divided by variable cost.

Question 10

Variable cost per unit equals sales price minus contribution margin.

Question 11

VR equals:

A) CM divided by CR
B) 1 - CR
C) 1 divided by CR

Question 12

To achieve the greatest possible accuracy when calculating the breakeven point for a given restaurant, one should treat labor as:

A) a fixed cost
B) a variable cost
C) a semi-variable cost

Question 13

Sales price minus variable cost per unit equals:

A) FC
B) CM
C) VR

Question 14

Which of the following formulas is incorrect:

A) S = FC + P
CR
B) VR = 1 - CR
C) CM = VC X CR

Question 15

It is possible to determine the number of sales required for an establishment to break even provided one knows fixed costs and:

A) CM
B) Average sales price
C) CR

Question 16

Given sales of $120,000, variable costs of $48,000, and fixed costs of $60,000, profit is:

A) $12,000
B) $60,000
C) $108,000

Question 17

Given fixed costs of $95,000, a profit target of $25,000, and a variable rate of .4, the dollar sales volume required to achieve the target profit would be:

A) $300,000
B) $200,000
C) neither of these is correct.

Question 18

Given average variable cost of $4.20 and average variable rate of .3, contribution margin is:

A) $14.00
B) $12.60
C) $9.80

Question 19

Given sales price of $8.00 and variable rate of .4, contribution margin is:

A) $2.00
B) $3.20
C) $4.80

Question 20

Sales equals:

A) Variable Rate + Contribution Rate
B) Variable Cost + Fixed Cost + Profit
C) Variable Rate X (Fixed cost + Profit)