study guide 5 chp 18

To calculate a contribution margin per unit, assume that the variable cost per unit is $60, the total fixed cost is $2,000, unit price for sales is $100, and total sales is $8,000. The contribution margin per unit amounts to: A) $20. B) $40. C) $60.

40

Assume the following: (1) Desired target operating income is $20,000, unit price for sales is $500, variable costs per unit is $300, and total fixed cost is $10,000; (2) we have applied the formula to calculate the contribution margin method of determining target operating income and have arrived at a numerator amount of $30,000 (20,000 plus 10,000) and a denominator amount of $200 (500 minus 300); (3) these figures yield an answer of 150 units (30,000 divided by 200). What is the required revenue to achieve the target operating income of $20,000?

75,000

The denominator of the formula to calculate the contribution margin method of determining target operating income consists of the contribution margin per unit. What is the correct numerator in the formula? A) Fixed costs plus target operating income B) Target operating income C) Fixed costs plus variable costs

Fixed costs plus target operating income

The target operating income computation using the contribution margin method determines how many units must be sold in order to yield a particular: A) gross revenue. B) operating income. C) net revenue.

operating income.

The contribution margin is the difference between: A) revenue and total costs. B) revenue and variable costs. C) revenue and fixed costs.

revenue and variable costs.

Multiple levels of forecasted revenue can be illustrated on a chart or graph, with: A) revenue in dollars on the vertical axis and time periods on the horizontal axis. B) time periods on the vertical axis and revenue in dollars on the horizontal axis. C) revenue in dollars on the vertical axis and time expressed as percentages on the horizontal axis.

revenue in dollars on the vertical axis and time periods on the horizontal axis.

The format of a contribution income statement is described as: A) revenue less fixed costs equals contribution margin less variable and fixed costs equals operating income. B) revenue less variable costs less fixed costs equals operating income. C) revenue less variable costs equals contribution margin less fixed costs equals operating income.

revenue less variable costs equals contribution margin less fixed costs equals operating income.

The contribution income statement: A) specifically identifies the contribution margin within the net worth format. B) specifically identifies the contribution margin within the income statement format. C) shows how the remaining difference is available for fixed costs and operating income.

specifically identifies the contribution margin within the income statement format.