ACIS Book 5

Company A has a contribution margin ratio of 35%. For each dollar in sales, contribution margin will increase by Blank______. Multiple choice question. $0.35 $0.65

$0.35

Cost structure refers to the relative portion of product and period costs in an organization. True false question

False

Which of the following items are found above the contribution margin on a contribution margin format income statement? Multiple select question. Sales Fixed expenses Net operating income Variable expenses

Sales Variable expenses

Contribution margin: is not affected by changes in activity. is first used to cover variable expenses. becomes profit after fixed expenses are covered. equals sales minus fixed expenses.

becomes profit after fixed expenses are covered.

When making a decision using incremental analysis consider the ______.

change in sales dollars resulting specifically from the decision change in cost resulting specifically from the decision

Users can easily judge the impact on profits of changes in selling price, cost or volume when using an income statement constructed under the approach. contribution margin traditional gross margin balance sheet

contribution margin

The calculation of contribution margin (CM) ratio is _____. net operating income ÷ total contribution margin contribution margin ÷ sales contribution margin ÷ total expenses variable expenses ÷ contribution margin

contribution margin ÷ sales

The contribution margin income statement allows users to easily judge the impact of a change in ______ on profit. cost volume organizational structure selling price

cost volume selling price

Assuming sales price remains constant, an increase in the variable cost per unit will ______ the contribution margin per unit. have no impact on decrease increase

decrease

Total contribution margin equals ______. variable expenses plus net operating income total sales minus fixed expenses fixed expenses plus net operating income total sales minus net operating income

fixed expenses plus net operating income

Contribution margin is first used to cover____ expenses. Once the break-even point has been reached, contribution margin becomes____ .

fixed, profits

The term "cost structure" refers to the relative proportion of_____ and _____costs in an organization.

fixed, variable

The amount by which sales can drop before losses are incurred is the ____of ___

margin, safety

To prepare a CVP graph, lines must be drawn representing total revenue, Blank______. Multiple choice question. total variable expenses, and total fixed expense break-even point, and profit total expense, and profit total expense, and total fixed expense

total expense, and total fixed expense

The break-even point is reached when the contribution margin is equal to: Multiple choice question. total sales. total fixed expenses. profit. total variable expenses.

total fixed expenses.

At the break-even point ______. the company is experiencing a loss the company is earning a profit total revenue equals total cost net operating income is zero

total revenue equals total cost net operating income is zero

The break-even point is the level of sales at which the profit equals____

zero

A company currently has sales of $700,000 and a contribution margin ratio of 45%. As a result of increasing advertising expense by $8,000, the company expects to increase sales to $735,000. If this is done and these results occur, net operating income will ______. increase by $7,750 decrease by $12,250 increase by $15,750 decrease by $8,000

increase by $7,750

CVP analysis allows companies to easily identify the change in profit due to changes in ______. product mix management selling price location volume

product mix selling price volume

The contribution margin as a percentage of sales is referred to as the contribution margin or CM____

ratio

The variable expense ratio is the ratio of variable expense to _____. fixed expense sales net operating income the contribution margin

sales

CVP analysis focuses on how profits are affected by . selling price total fixed costs sales volume unit variable cost break-even point mix of products sold

selling price total fixed costs sales volume unit variable cost mix of products sold

A company sold 20,000 units of its product for $20 each. Variable cost per unit is $11. Fixed expenses total $150,000. The company's contribution margin is ______. $130,000 $150,000 $30,000 $180,000

$180,000

Daisy's Dolls sold 30,000 dolls this year. Each doll sold for $40 and had a variable cost of $19. Fixed expenses were $250,000. Net operating income for the year is Blank______. Multiple choice question. $380,000 $(249,979) $630,000 $1,520,000

$380,000

Vivian's Violins has sales of $326,000, contribution margin of $184,000 and fixed costs total $85,000. Vivian's Violins net operating income is ______. $241,000 $57,000 $99,000

$99,000 Reason: Net operating income = $184,000 - $85,000 = $99,000

Net operating income equals: (dollar sales - dollar sales to break even) × unit contribution margin. dollar sales - dollar sales to break even. (unit sales - unit sales to break even) × unit contribution margin. unit sales × unit contribution margin.

(unit sales - unit sales to break even) × unit contribution margin.

Given sales of $1,452,000, variable expenses of $958,320 and fixed expenses of $354,000, the contribution margin ratio is 90% 24% 34% 66%

34%

Gifts Galore had sales revenue of $189,000. Total contribution margin was $100,170 and total fixed expenses were $27,500. The contribution margin ratio was ______. 53% 38% 47% 68%

53%

When preparing a CVP graph, the horizontal axis represents: variable costs. sales dollars. total costs. unit volume.

unit volume.

Variable expenses ÷ Sales is the calculation for the____ _____ ratio.

variable, expense or cost