Cost Test 3
Which of the following represents the excess of the selling price per unit of a product over the variable cost of obtaining and selling each unit?
Unit contribution margin
Contribution Margin formula
SP - VC
Total costs for Locke & Company at 120,000 units are $289,000, while total fixed costs are $145,000. The total variable costs at a level of 250,000 units would be
$300,000.
Sales revenue in order to breakeven
(FC+OI)/Contribution Margin ratio
Martin Enterprises has a predicted operating income of $140,000. Its total variable expenses are $50,000 and its total fixed expenses have doubled from $20,000 to $40,000. The unit contribution margin for the company's sole product is $10. The number of units that Martin Enterprises needs to sell to achieve the predicted operating income would be
18000
The Settler's Chuck Wagon sells tickets for dinner and a show for $50 each. The cost of providing dinner is $23 per ticket and the fixed cost of operating the theater is $115,000 per month. The company can accommodate 13,500 patrons each month. What is the projected monthly income if 5,500 patrons visit the theater each month?
33500
Del Company has fixed costs of $100,000 and breakeven sales of $800,000. What is its projected profit at $1,200,000 sales?
50000
Mom and Pop's Ice Cream Shoppe sells ice cream cones for $5.00 per customer. Variable costs are $2.25 per cone. Fixed costs are $3,000 per month. What is the company's contribution margin ratio?
55%
Assume the following amounts :Total fixed costs $24,000 Selling price per unit $20 Variable costs per unit$15 If sales revenue per unit increases to $22 and 12,000 units are sold, what is the operating income?
60000
Wallace Industrial sells two products, large forklifts and small forklifts. A large forklift sells for $50,000 per unit with variable costs of $26,000 per unit. Small forklifts sell for $30,000 per unit with variable costs of $12,000 per unit. Total fixed costs for the company are $1,600,000. Wallace Industrial typically sells one large forklifts for every two smalls. What is the breakeven point in total units?
80 units
Which of the following is not an acceptable method of accounting for by-products?
All of the above methods are acceptable approaches to accounting for by-products.
Contribution Margin Ratio
Contribution Margin / Sales
The most likely strategy to reduce the breakeven point would be to
Decrease the fixed costs and increase the contribution margin
T/F A contribution margin income statement classifies costs by function, but a traditional income statement classifies costs by cost behavior (variable or fixed).
False
T/F Contribution margin is the amount of revenue left over to cover selling and administrative costs after manufacturing costs have been deducted.
False
T/F The margin of safety is the difference between actual profit and target net income.
False
First step in constant gross margin percentage, Net realizable value (NRV) method is to allocate joint, to compute
Gross margin %
Assuming no other changes in the cost-volume-profit relationship, which of the following will decrease the breakeven point in units?
Increase in selling per unit
contribution margin per unit
Selling price - variable cost per unit
breakeven point
TFC/CM
If the variable cost per unit decreases while the sales price per unit and total fixed costs remain constant, which of the following statements is true?
The contribution margin increases and the breakeven point decreases.
Which of the following is a true statement regarding joint costs?
The primary reason for allocating joint costs is for inventory valuation for financial report-ing.
With respect to variable costs per unit, which of the following statements is true?
They will remain the same as production levels change within the relevant range.
T/F A company's break-even point can be decreased by increasing the contribution margin ratio.
True
T/F At the break-even point, total contribution margin is equal to total fixed costs.
True
The secondary product recovered in the course of manufacturing a primary product during a joint process is:
a by-product
The joint cost allocation method that yields the same gross margin percentage for each prod-uct is the:
constant growth method
Margin of safety
difference between your actual or expected profitability and the break even point
Which of the following is a characteristic of a contribution income statement?
fixed expenses are listed separately from variable expenses
Fixed costs
increase per unit as total production decreases
In a joint process of production, two or more products that yield high volume of sales as compared to total sales of other products are classified as
joint product
When an organization is operating above the breakeven point, the degree or amount that revenues may
margin of safety
Which of the following costs of a joint process would be allocated to the joint products?
mats, labor, overhead
Difference between final sales value and separable costs is equal to
net realizable value
The joint cost allocation method that assigns joint production costs based on the proportionate share of eventual revenues less further processing costs is the:
net realizable value method.
Operating Income
revenues - variable costs= cont. margin- FC= OI
A joint cost allocation method is based on relative value of total sales, at point of split off is classified as
sales value at split off
Cost Volume Profit analysis assumes that over the relevant range
selling prices are unchanged
Cost Volume Profit analysis assumes over the relevant range that
total costs are linear
A(n) ________ cost is a cost whose total amount changes in direct proportion to a change in volume.
variable
In order to decrease a company's break-even point, which of the following should be decreased?
variable cost per unit
