ACC 202 Exam 2 Chp 7

The formula to find the break-even point or a target profit volume in terms of number of units that need to be sold is...

(Fixed expenses + operating income) / contribution margin per unit

On a CVP graph, the breakeven point is...

The intersection of the total revenue line and the total expense line

Which of the following is false regarding choosing between two cost structures... a. The indifference point is the point where total revenues equal total expenses b. The indifferent point is the point at which costs under two options are the same c. Choose the higher operating leverage option when sales volume is expected to be higher than the indifference point d. Choose the lower operating leverage option when sales volume is expected to be lower than the indifference point

A. The indifference point is the point where total revenues equal total expenses

All else being equal, a decrease in a company's fixed expenses will... a. Increase the sales needed to break even b. Increase the contribution margin c. Decrease the sales needed to break even d. Decrease the contribution margin

C. Decrease the sales needed to break even

For a given level of sales, a company's operating leverage is defined as...

Contribution margin / operating income

The contribution margin ratio is...

Contribution margin divided by sales revenue

A company with a low operating leverage... a. Has relatively more risk than a company with high operating leverage b. Has relatively more variable costs than fixed costs c. Has relatively more fixed costs than variable costs d. Has an equal proportion of a fixed and variable costs

D. Has an equal proportion of a fixed and variable costs

All else being equal, if a company's variable expenses increases... a. Its breakeven point will decrease b. There will be no effect on the breakeven point c. Its contribution margin ratio will increase d. Its contribution margin ratio will decrease

D. Its contribution margin ratio will decrease

Which of the following is true regarding a company that offers more than one product? a. Breakeven should be found using a simple average contribution margin b. Breakeven should be found for each product individually c. It has one unique breakeven point d. The breakeven point is dependent on sales mix assumptions

D. The breakeven point is dependent on sales mix assumptions

The contribution margin is...

Sales revenue minus variable expenses