Question 1

The following selected data relates to Ivory Corporation:

If sales revenue per unit increases to $27 and 8,500 units are sold,what is the contribution margin?

Accepted Answer

D)
Sales $27
Less Variable costs 15
= Contribution Margin 12 × 8,500 = $102,000

Question 2

Fave Motion Pictures sells movie tickets for $10 per movie patron.Variable costs are $7.50 per movie patron and fixed costs are $50,000 per month.The company's relevant range extends to 35,000 movie patrons per month.What is Fave Motion Pictures' projected operating income if 25,000 movie patrons see movies during a month?

Accepted Answer

B)
Sales $10
Less Variable costs 7.50
= Contribution Margin 2.50 × 25,000 = $62,500
Less Fixed 50,000
Operating Income $12,500

Question 3

Bernard Corporation gathered the following information for the year just ended:

During the year,Bernard produced and sold 50,000 units of product at a selling price of $9.00 per unit.There was no beginning inventory of product at the start of the year.
What is the operating income (loss)for the year?

Accepted Answer

C)
Variable costs: Manufacturing $80,000
Marketing 22,000
Administrative 38,000
Total $140,000
Sales $9 × 50,000 = $450,000
Less Variable costs 140,000
Contribution Margin $310,000
Less Fixed $184,000
Operating Income $126,000

Question 4

LaComedia Dinner Theater sells tickets for dinner and a show for $40 each.The cost of providing dinner is $26 per ticket and the fixed cost of operating the theater is $100,000 per month.The company can accommodate 12,000 patrons each month.What is the contribution margin per patron?

Accepted Answer

B)
Sales $40
Less Variable costs 26
= Contribution Margin 14

Question 5

LaComedia Dinner Theater sells tickets for dinner and a show for $40 each.The cost of providing dinner is $26 per ticket and the fixed cost of operating the theater is $100,000 per month.The company can accommodate 12,000 patrons each month.What is the projected monthly income if 10,000 patrons visit the theater each month?

Accepted Answer

D)
Sales $40
Less Variable costs 26
= Contribution Margin 14 × 10,000 = $140,000
Less fixed = 100,000
Operating Income $40,000

Question 6

Bernard Corporation gathered the following information for the year just ended:

During the year,Bernard produced and sold 50,000 units of product at a selling price of $9.00 per unit.There was no beginning inventory of product at the start of the year.
What is the contribution margin for the year?

Accepted Answer

B)
Variable costs: Manufacturing $80,000
Marketing 22,000
Administrative 38,000
Total $140,000
Sales $9 × 50,000 = $450,000
Less Variable costs 140,000
Contribution Margin $310,000

Question 7

The Settler's Chuck Wagon sells tickets for dinner and a show for $50 each.The cost of providing dinner is $23 per ticket and the fixed cost of operating the theater is $115,000 per month.The company can accommodate 13,500 patrons each month.What is the contribution margin per patron?

Accepted Answer

C)
Sales $50
Less Variable costs 23
= Contribution Margin 27

Question 8

LaComedia Dinner Theater sells tickets for dinner and a show for $40 each.The cost of providing dinner is $26 per ticket and the fixed cost of operating the theater is $100,000 per month.The company can accommodate 12,000 patrons each month.What is the contribution margin ratio?

Accepted Answer

B)
Sales $40
Less Variable costs 26
= Contribution Margin 14 Divided by $40 = 35%

Question 9

Dairy Days Ice Cream sells ice cream cones for $4 per customer.Variable costs are $3 per cone.Fixed costs are $2,500 per month.What is Dairy Days' contribution margin ratio?

Accepted Answer

B)
Sales $4
Less Variable costs 3
= Contribution Margin 1 divided by $4 sales = 25%

Question 10

Electric Jet Skis operates a jet ski rental business.Assume the jet skis rent for $55 per 6 hours.The variable costs are $33 per 6 hours rental,and its fixed costs are $80,000 each month.What is the contribution margin ratio?

Accepted Answer

A)
Sales $55
Less Variable costs 33
= Contribution Margin 22 divided by $55 sales = 40%

Question 11

Mom and Pop's Ice Cream Shoppe sells ice cream cones for $5.00 per customer.Variable costs are $2.25 per cone.Fixed costs are $3,000 per month.What is the company's contribution margin per ice cream cone?

Accepted Answer

B)
Sales $5.00
Less Variable costs 2.25
= Contribution Margin 2.75

Question 12

The following selected data relates to Ivory Corporation:

Assuming 8,500 units are sold,what is the contribution margin?

Accepted Answer

C)
Sales $22
Less Variable costs 15
= Contribution Margin 7 × 8,500 = $59,500

Question 13

Electric Jet Skis operates a jet ski rental business.Assume the jet skis rent for $55 for 6 hours.The variable costs are $33 per 6 hour rental,and its fixed costs are $80,000 each month.What is the contribution margin per 6 hour jet ski rental?

Accepted Answer

C)
Sales $55
Less Variable costs 33
= Contribution Margin 22

Question 14

The Halpert Group produces a single product selling for $70 per unit.Variable costs are $7 per unit and total fixed costs are $5,000.What is the contribution margin ratio?

Accepted Answer

C)
Sales $70
Less Variable costs 7
= Contribution Margin 63 Divided by $70 = 90%

Question 15

Mom and Pop's Ice Cream Shoppe sells ice cream cones for $5.00 per customer.Variable costs are $2.25 per cone.Fixed costs are $3,000 per month.What is the company's contribution margin ratio?

Accepted Answer

D)
Sales $5.00
Less Variable costs 2.25
= Contribution Margin 2.75 divided by $5.00 sales = 55%

Question 16

The Settler's Chuck Wagon sells tickets for dinner and a show for $50 each.The cost of providing dinner is $23 per ticket and the fixed cost of operating the theater is $115,000 per month.The company can accommodate 13,500 patrons each month.What is the projected monthly income if 5,500 patrons visit the theater each month?

Accepted Answer

D)
Sales $50
Less Variable costs 23
= Contribution Margin 27 × 5,500 = $148,500
Less fixed = 115,000
Operating Income $33,500

Question 17

Dairy Days Ice Cream sells ice cream cones for $4 per customer.Variable costs are $3 per cone.Fixed costs are $2,500 per month.What is Dairy Days' contribution margin per ice cream cone?

Accepted Answer

A)
Sales $4
Less Variable costs 3
= Contribution Margin 1

Question 18

Hickory Point Amusement Park sells admission tickets for $50 per person for one visit.Variable costs are $15 per visitor and fixed costs are $60,000,000 per month.The company's relevant range extends to 2,000,000 visitors per month.What is Hickory Point's projected operating income if 1,750,000 visitors come to the park during the month?

Accepted Answer

A)
Sales $50
Less Variable costs 15
= Contribution Margin 35 × 1,750,000 = 61,250,000
Less Fixed 60,000,000
Operating Income $1,250,000

Question 19

What is contribution margin equal to on a contribution margin income statement?

Accepted Answer

Contribution margin is the amount of money available to cover fixed expenses and profits after variable expenses have been subtracted from sales revenues. Therefore, contribution margin is equal to sales revenues minus variable expenses.

Question 20

The Settler's Chuck Wagon sells tickets for dinner and a show for $50 each.The cost of providing dinner is $23 per ticket and the fixed cost of operating the theater is $115,000 per month.The company can accommodate 13,500 patrons each month.What is the contribution margin ratio?

Accepted Answer

D)
Sales $50
Less Variable costs 23
= Contribution Margin 27 Divided by $50 = 54%

Quiz 7: Cost-Volume-Profit Analysis

The following selected data relates to Ivory Corporation: If sales revenue per unit increases to $27 and 8,500 units are sold,what is the contribution margin?