BA 213 - Chapter 6 Reading Quiz

(6, LO1) The contribution margin ratio is a. sales divided by contribution margin. b. sales divided by fixed expenses. c. sales divided by variable expenses. d. contribution margin divided by sales.

d. contribution margin divided by sales.

(6, LO1) In a CVP income statement, a selling expense is generally a. completely a variable cost. b. completely a fixed cost. c. neither a variable cost nor a fixed cost. d. partly a variable cost and partly a fixed cost.

d. partly a variable cost and partly a fixed cost.

(6, LO3) What is the key factor in determining sales mix if a company has limited resources? a. Contribution margin per unit of limited resource b. The amount of fixed costs per unit c. Total contribution margin d. The cost of limited resources

a. Contribution margin per unit of limited resource

(6, LO2) In a sales mix situation, at any level of units sold, net income will be higher if a. More higher contribution margin units are sold than lower contribution margin units b. More lower contribution margin units are sold than higher contribution margin units c. More fixed expenses are incurred d. Weighted-average unit contribution margin decreases.

a. More higher contribution margin units are sold than lower contribution margin units

(6, LO2) Sales mix is a. The relative percentage in which a company sells its multiple products b. The trend of sales over recent periods c. The mix of variable and fixed expenses in relation to sales d. A measure of leverage used by the company

a. The relative percentage in which a company sells its multiple products

(6, LO1) Cost-volume-profit analysis is the study of the effects of a. changes in costs and volume on a company's profit. b. cost, volume, and profit on the cash budget. c. cost, volume, and profit on various ratios. d. changes in costs and volume on a company's profitability ratios.

a. changes in costs and volume on a company's profit.

(6, LO4) A company with higher contribution margin ratio is a. more sensitive to changes in sales revenue. b. less sensitive to changes in sales revenue. c. either more or less sensitive to changes in sales revenue, depending on other factors. d. have a lower break-even point.

a. more sensitive to changes in sales revenue.

(6, LO4) A cost structure which relies more heavily on fixed costs makes the company a. more sensitive to changes in sales revenue. b. less senstive to changes in sales revenue. c. either more or less sensitive to changes in sales revenure, depending on other factors. d. have a lower break-even point.

a. more sensitive to changes in sales revenue.

(6, LO1) Margin of safety in dollars is a. expected sales divided by break-even sales. b. expected sales less break-even sales. c. actual sales less expected sales. d. expected sales less actual sales

b. expected sales less break-even sales.

(6, LO4) The margin of safety ratio a. is computed as actual sales divided by break-even sales. b. indicates what percent decline in sales could be sustained before the company would operate at a loss. c. measures the ration of fixed costs to variable costs. d. is used to determine the break-even point.

b. indicates what percent decline in sales could be sustained before the company would operate at a loss.