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Introduction to Managerial Accounting

Jeannie M. Folk
Ray H. Garrison
Eric Noreen

Cost-Volume-Profit Relationships

Multiple Choice Quiz

Carrington Company produces a product that sells for $60. Variable manufacturing costs are $30 per unit. Fixed manufacturing costs are $10 per unit based on the current level of activity, and fixed selling and administrative costs are $8 per unit. A selling commission of 10% of the selling price is paid on each unit sold. The contribution margin per unit is:

$24.

$30.

$36.

$54.

A company has provided the following data:

Sales	6,000 units
Sales price	$100 per unit
Variable cost	$50 per unit
Fixed cost	$150,000

If the dollar contribution margin per unit is increased by 10%, total fixed cost is decreased by 20%, and all other factors remain the same, net income will:

decrease by $30,000.

increase by $30,000.

increase by $60,000.

increase by $210,000.

Capulet Company sells a single product. The product has a selling price of $50 per unit and variable expenses of 80% of sales. If the company's fixed expenses total $75,000 per year, then it will have a break-even of:

$1,875.

$7,500.

$93,750.

$375,000.

The following is Montague Corporation's contribution format income statement for last month:

Sales	$2,000,000
Less variable expenses	1,400,000
Contribution margin	600,000
Less fixed expenses	360,000
Net income	$ 240,000

The company has no beginning or ending inventories. A total of 40,000 units were produced and sold last month. What is the company's contribution margin ratio?

30%

70%

150%

250%

The following is Montague Corporation's contribution format income statement for last month:

Sales	$2,000,000
Less variable expenses	1,400,000
Contribution margin	600,000
Less fixed expenses	360,000
Net income	$ 240,000

The company has no beginning or ending inventories. A total of 40,000 units were produced and sold last month. (Note that this is the same data as provided in the previous question.) What is the company's break-even in units?

0 units

24,000 units

36,000 units

40,000 units

The following is Montague Corporation's contribution format income statement for last month:

Sales	$2,000,000
Less variable expenses	1,400,000
Contribution margin	600,000
Less fixed expenses	360,000
Net income	$ 240,000

$800

$3,000

$5,000

$9,600

The following is Montague Corporation's contribution format income statement for last month:

Sales	$2,000,000
Less variable expenses	1,400,000
Contribution margin	600,000
Less fixed expenses	360,000
Net income	$ 240,000

44,000

50,000

53,334

75,000

The following is Montague Corporation's contribution format income statement for last month:

Sales	$2,000,000
Less variable expenses	1,400,000
Contribution margin	600,000
Less fixed expenses	360,000
Net income	$ 240,000

$240,000

$800,000

$1,200,000

$1,760,000

The following is Montague Corporation's contribution format income statement for last month:

Sales	$2,000,000
Less variable expenses	1,400,000
Contribution margin	600,000
Less fixed expenses	360,000
Net income	$ 240,000

0.12

0.4

2.5

3.3

Penway Company sells three products: A, B and C. Product A's unit contribution margin is higher than Product B's which is higher than Products C's. Which one of the following events is most likely to increase the company's overall break-even point?

The installation of new automated equipment and subsequent lay-off of factory workers.

A decrease in Product C's selling price.

An increase in the overall market demand for Product B.

A change in the relative market demand for the products, with the increase favoring Product A relative to Product B and Product C.

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