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Multiple Choice Quiz
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1
Total contribution margin can be defined as which of the following?
A)Total sales revenue minus total fixed expenses
B)Total sales revenue minus the total of fixed and variable expenses
C)Total sales revenue minus total variable expenses
D)Total sales revenue minus profit
E)Total fixed expenses minus total variable costs
2
If fixed expenses are $54,000, break-even sales units are 15,000, and the contribution margin ratio is .60, what is the unit contribution margin?
A)$2.40
B)$3.60
C)$6.00
D)$5.40
E)$4.50
3
If fixed expenses are $38,000, break-even sales units are 9,500, and the contribution margin ratio is .40, what is the unit selling price?
A)$4.00
B)$6.00
C)$10.00
D)$2.00
E)None of the above
4
Fixed expenses are $75,000. The unit sales price is $25. The contribution margin ratio is .60. What are the break-even sales units?
A)10,000
B)5,000
C)7,500
D)125,000
E)None of the above
5
Consider the following:
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/9352606310/856414/ch7_5.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (9.0K)</a>
In constructing a cost-volume-profit (CVP) graph, at what level on the vertical axis will the total expenses line begin?
A)$120,000
B)$80,000
C)$240,000
D)$40,000
E)$200,000
6
Consider the following:
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/9352606310/856414/ch7_6.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (9.0K)</a>
At what sales volume was the above data derived?
A)12,500 units
B)7,500 units
C)15,000 units
D)10,000 units
E)5,000 units
7
An increase in a company's variable cost per unit will:
A)decrease the number of units which must be sold to break even.
B)decrease the fixed costs on a per unit basis.
C)increase the number of units that must be sold to cover variable and fixed costs.
D)increase net income
E)make it impossible for the company to break-even.
8
Consider the following:
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/9352606310/856414/ch7_8.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (7.0K)</a>
How many sales units are required to earn the target profit?
A)15,000 units
B)12,000 units
C)6,400 units
D)12,800 units
E)10,000 units
9
Consider the following:
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/9352606310/856414/ch7_9.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (7.0K)</a>
Use the equation method and compute the units of sales required to earn a target profit of $12,000.
A)3,220
B)4,440
C)3,840
D)4,267
E)4,560
10
Consider the following:
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/9352606310/856414/ch7_10.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (14.0K)</a>
What is the weighted-average unit contribution margin for the sales mix?
A)$12.00
B)$17.33
C)$26.00
D)$16.00
E)$15.00
11
Consider the following:
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/9352606310/856414/ch7_11.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (12.0K)</a>
Fixed expenses are $32,000. What is the number of units of Product A sold at the break-even point?
A)6,000
B)4,000
C)1,500
D)1,000
E)2,500
12
Consider the following:
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/9352606310/856414/ch7_12.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (16.0K)</a>
Sales revenues were $300,000. There was no beginning or ending inventory. Which of the following statements is false?
A)Income in a traditional income statement is $75,000.
B)Income in a contribution income statement is $80,000.
C)The contribution margin is $190,000.
D)A contribution income statement is an internal document (report).
E)A traditional income statement would include gross margin.
13
Consider the following:
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/9352606310/856414/ch7_13.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (36.0K)</a>
Which of the following statements about the companies is false?
A)The operating leverage for Company A is 6.
B)The operating leverage for Company B is more than that of Company C.
C)The break-even point in sales dollars for Company C is $360,000.
D)The operating leverage for Company B is 5.
E)The operating leverage for Company B is 7.
14
Consider the following:
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/9352606310/856414/ch7_14.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (25.0K)</a>
Management is considering installing a new, automated manufacturing process that will increase fixed costs by $50,000, and reduce variable manufacturing costs by $3 per unit. Assume that management desires to achieve a target profit of $70,000 with or without the acquisition of the automated machine. If the automated machine is installed, what will be the change in the number of units required to achieve the target profit?
A)6,667 unit increase
B)5,667 unit decrease
C)3,000 unit decrease
D)2,000 unit increase
E)3,333 unit decrease
15
Consider the following:
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/9352606310/856414/ch7_15.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (22.0K)</a>
What will be (1) the increase or decrease in break-even units, and (2) the increase or decrease in units necessary to achieve a target income of $45,000 when changing from current conditions to advanced technology in machinery and JIT implementation?
A)No change in break-even point; increase in sales volume to achieve target income
B)Increase in break-even point; increase in sales volume to achieve target income
C)No change in break-even point; decrease in sales volume to achieve target income
D)Decrease in break-event point; decrease in sales volume to achieve target income
E)None of the above





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