Question 1

$$\begin{array} { l r r } 
\text { Selling price per unit } & \$  100 \
\text { Variable expenses per unit } & \$  40 \
\text { Fixed expenses per month } & \$ 60,000
\end{array}$$ The breakeven point in terms of volume of units per month is:

Accepted Answer

The breakeven point in units is calculated by dividing the total fixed expenses by the contribution margin per unit. The contribution margin per unit is the selling price per unit minus the variable expenses per unit, which is $100 - $40 = $60. Therefore, the breakeven point is $60,000 / $60 = 1,000 units.

Question 2

Production labor wages are an example of a ________ cost behavior pattern.

Accepted Answer

Production labor wages are a variable cost because they vary with the level of production.

Question 3

If a firm's fixed costs were increased by $12,000 and the contribution margin ratio remained at 40 percent, then sales must increase by $________ in order to cover the additional fixed expenses:

Accepted Answer

The answer of If a firm's fixed costs were increased...

Question 4

ABC Company's sales are $100,000, fixed costs are $50,000, and variable costs are $30,000.ABC Company's contribution margin and operating income are ________ and ________ respectively.

Accepted Answer

The answer of ABC Company's sales are $100,000, fixed costs...

Question 5

$$\begin{array} { ll } 
\text { Selling price per unit } & \$  100 \
\text { Variable expenses per unit } & \$  40 \
\text { Fixed expenses per month } & \$ 60,000
\end{array}$$ If the selling price per unit were to drop $2, from $100 to $98, the sales volume were to increase 500 units to 4,500 units per month, and advertising expense were to increase by $1,000:

Accepted Answer

The answer of \[\begin{array} { ll } 
\text { Selling...

Question 6

Each of a company's two product lines has a different contribution margin ratio.If the company's total sales remain the same but the sales mix shifts toward selling more of the product with the lower contribution ratio, which of the following is true?

Accepted Answer

When the sales mix shifts towards the product with the lower contribution margin ratio, the overall contribution margin ratio decreases, leading to a decrease in operating income and an increase in the breakeven point. Therefore, all the statements are true.

Question 7

$$\begin{array} { l l } 
\text { Selling price per unit } & \$  100 \
\text { Variable expenses per unit } & \$  40 \
\text { Fixed expenses per month } & \$ 60,000
\end{array}$$ The breakeven point in terms of total revenues per month is:

Accepted Answer

The breakeven point in units is calculated as Fixed Expenses / (Selling Price - Variable Expenses) = $60,000 / ($100 - $40) = 1,000 units. The total revenue at breakeven is 1,000 units * $100 = $100,000.

Question 8

A management decision that would have a long term influence on the operating leverage of a firm would be:

Accepted Answer

Substituting robots for hourly paid production workers increases fixed costs and reduces variable costs, thus affecting the firm's operating leverage in the long term.

Question 9

A 10% change in a firm's revenues is likely to result in a change of more than 10% in the firm's operating income because:

Accepted Answer

Operating income is more sensitive to changes in revenue because not all costs are variable; fixed costs remain constant, leading to a greater percentage change in operating income.

Question 10

Each of a company's several product lines has a different contribution margin ratio.Total sales in 2020 were 20% higher than total sales in 2019.Total contribution margin for 2020 will be:

Accepted Answer

If the sales mix changes to include more high contribution margin ratio products, the total contribution margin will increase by more than 20% compared to 2019.

Question 11

ABU Co.has several products, each with a different contribution margin ratio.If the same number of units were sold in July as in June, but the sales mix changed:

Accepted Answer

A change in sales mix affects the overall contribution margin, as different products have different contribution margin ratios.

Question 12

$$\begin{array} { ll } 
\text { Selling price per unit } & \$  100 \
\text { Variable expenses per unit } & \$  40 \
\text { Fixed expenses per month } & \$ 60,000
\end{array}$$ If sales volume were to decrease 15%, from 4,000 units per month to 3,400 units per month, operating income would:

Accepted Answer

Operating income decreases by $36,000 because the contribution margin per unit is $60 ($100 - $40), and a decrease of 600 units (15% of 4,000) results in a $36,000 decrease in contribution margin (600 units x $60).

Question 13

$$\begin{array} { l l } 
\text { Selling price per unit } & \$  100 \
\text { Variable expenses per unit } & \$  40 \
\text { Fixed expenses per month } & \$ 60,000
\end{array}$$ Operating income at a volume of 4,000 units per month is:

Accepted Answer

The answer of \[\begin{array} { l l } 
\text {...

Question 14

Which activity of the management planning and control process occurs in each phase of the cycle?

Accepted Answer

Decision making occurs in each phase of the management planning and control process, as it is essential for setting objectives, implementing plans, and evaluating outcomes.

Question 15

A firm has revenues of $150,000, a contribution margin ratio of 35%, and fixed expenses that total $60,000.If revenues increase by $30,000, then:

Accepted Answer

The contribution margin ratio is 35%, so an increase in revenue of $30,000 will increase the contribution margin by 35% of $30,000, which is $10,500. This increase in contribution margin directly increases operating income by $10,500, as fixed expenses remain unchanged.

Question 16

The contribution margin ratio always decreases when the:

Accepted Answer

The contribution margin ratio decreases when variable costs increase while the selling price remains constant, as the contribution margin per unit decreases.

Question 17

$$\begin{array} { l l } 
\text { Selling price per unit } & \$  100 \
\text { Variable expenses per unit } & \$  40 \
\text { Fixed expenses per month } & \$ 60,000
\end{array}$$ The contribution margin ratio is:

Accepted Answer

The answer of \[\begin{array} { l l } 
\text {...

Question 18

The contribution margin format income statement is organized by:

Accepted Answer

The contribution margin format income statement is organized by cost behavior classifications, separating variable costs from fixed costs to highlight the contribution margin.

Question 19

A firm's products have an average contribution margin ratio of 40%, which will be maintained for the next month even though fixed expenses are expected to rise by $20,000.In order to keep operating income for the month from being affected, revenues will have to increase by:

Accepted Answer

To offset the $20,000 increase in fixed expenses without affecting operating income, the firm needs to generate additional contribution margin of $20,000. With a contribution margin ratio of 40%, the required increase in revenue is $20,000 / 0.40 = $50,000.

Question 20

ABC Company's sales are $100,000, fixed costs are $50,000, and variable costs are $30,000.ABC Company's contribution margin ratio is:

Accepted Answer

The contribution margin is calculated as Sales minus Variable Costs, which is $100,000 - $30,000 = $70,000. The contribution margin ratio is the contribution margin divided by sales, so $70,000 / $100,000 = 70%.

Quiz 12: Managerial Accounting and Cost-Volume-Profit Relationships

$\begin{array} { l r r } \text { Selling price per unit } & \$ 100 \\\text { Variable expenses per unit } & \$ 40 \\\text { Fixed expenses per month } & \$ 60,000\end{array}$ The breakeven point in terms of volume of units per month is: