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| 1 | |
Consider the following:
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Which of the following is true about the each of the costs? |
| | A) | Cost A is a fixed cost. |
| | B) | Cost B is a variable cost. |
| | C) | Cost C is a variable cost. |
| | D) | Only A and B are true. |
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| 2 | |
Consider the following schedule:
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What is the most likely cause of the decrease in the per-unit cost of output? |
| | A) | Fixed costs remain constant over the relevant range. |
| | B) | The fixed cost per unit is decreasing proportionately with increases in volume. |
| | C) | The variable cost per unit is remaining relatively constant. |
| | D) | All of the above. |
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| 3 | |
The term economies of scale refers to the savings accruing from which of the following? |
| | A) | Reducing variable costs through large scale purchases |
| | B) | Reducing unit costs through greater utilization of plant during the accounting period |
| | C) | Reducing the volume of output |
| | D) | Increasing contribution margin |
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| 4 | |
At the point at which the total revenue line intersects the total cost line in a graphic presentation of the break-even point, the area beyond this intersection and within the boundaries of the total revenue line and total cost line is which of the following? |
| | A) | Profit area |
| | B) | Net income |
| | C) | Operating income |
| | D) | Variable costs |
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| 5 | |
The selling price of Product A is $15. The variable costs to manufacture and sell the product are $6. What is the contribution margin ratio? |
| | A) | 60% |
| | B) | 40% |
| | C) | 35% |
| | D) | 50% |
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| 6 | |
Target operating income is $450,000 and fixed costs are $60,000. The sales price per unit is $15, with a contribution margin of 40%. What sales unit volume is required to achieve the target operating income? |
| | A) | 100,000 units |
| | B) | 85,000 units |
| | C) | 30,000 units |
| | D) | 34,000 units |
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| 7 | |
Product A sells for $24 and has a contribution margin ratio of 25%. Sales are expected to decline by 10,000 units over the next accounting period. What will be the net change in operating income? |
| | A) | $240,000 |
| | B) | $250,000 |
| | C) | $25,000 |
| | D) | $60,000 |
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| 8 | |
The Salmon Company currently sells its product for $15 a unit. The variable cost per unit is $8. Fixed costs are $59,500. Salmon has initiated a contract with its materials supplier that will reduce direct materials $1 per unit. To the nearest unit, how many fewer units will Salmon have to sell to achieve the break-even point? |
| | A) | 1,000 fewer units |
| | B) | 827 fewer units |
| | C) | 1,062 fewer units |
| | D) | 1,417 fewer units |
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| 9 | |
Rock-a-Way Gravel purchases raw gravel in 20-ton lots from which it manufactures 4 grades of gravel, which consists of its sales mix. The gravel grades are: 5 tons of Decorative Stone, 8 tons of Road Stone, 4 tons of Pea Gravel, and 3 tons of Construction Gravel. The contribution margin ratio on each product is, respectively, 50%, 40%, 60%, and 75%. What is the average contribution margin ratio for every 20 tons of gravel sold? |
| | A) | 56.25% |
| | B) | 51.75% |
| | C) | 75.0% |
| | D) | Greater than 75% |
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| 10 | |
Consider the following, all within the relevant range:
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Use the high-low method of analysis and calculate the variable cost component of total costs. |
| | A) | $0.40 per unit |
| | B) | $0.50 per unit |
| | C) | $0.60 per unit |
| | D) | $0.75 per unit |
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