1 Which of the following is not a fixed cost?
A) Property taxes
B) Salary of plant manager
C) Indirect materials
D) Straight-line depreciation
2 Which of the following statements is correct with respect to variable cost per unit, within the relevant range?
A) They will increase as production decreases.
B) They will decrease as production decreases.
C) They will remain the same as production levels change.
D) They will decrease as production increases.
3 Which of the following statements is correct with respect to total fixed costs, within the relevant range?
A) They will remain the same as production levels change.
B) They will increase as production decreases.
C) They will decrease as production decreases.
D) They will decrease as production increases.
4 Which of the following statements is correct with respect to fixed costs per unit?
A) They will increase as production decreases.
B) They will decrease as production decreases.
C) They will remain the same as production levels change.
D) They will increase as production increases.
5 Which of the following is a characteristic of a variable cost?
A) Variable costs are variable per unit, and fixed in total.
B) Variable costs vary in total with production and sales.
C) Variable costs do not change in total over the relevant range.
D) All of the above are characteristics of variable costs.
6 An electric bill for corporate headquarters is an example of what type of cost?
A) Variable cost
B) Conversion cost
C) Fixed cost
D) Mixed cost
7 Dakota Company provides the following information about its single product:
Targeted operating income $40,000
Selling price per unit $3.50
Variable cost per unit $1.05
Total fixed costs $90,000
What is the contribution margin ratio? A) 0.70
B) 0.44
C) 0.56
D) 0.30
8 Marino Company’s average manufacturing cost was $5.40 when 50,000 units were manufactured and was
$5.25 when 80,000 units were manufactured. How much was Marino’s variable cost per unit?
A) $5.25
B) $5.00
C) $5.40
D) $5.32
9 Fixed costs divided by the contribution margin per unit equals the breakeven point in unit sales.
True or False10 Fixed costs divided by the contribution margin ratio equals the breakeven point in sales dollars.
True or False
11 Pennell Company gathered the following information for the year ended December 31, 2009:
Fixed costs:
Manufacturing $165,000
Marketing $52,000
Administrative $24,000
Variable costs:
Manufacturing $113,000
Marketing $39,000
Administrative $48,000
During the year, Pennell produced and sold 75,000 units of product at a sale price of $6.50 per unit. What is the contribution margin? A) $209,500
B) $287,500
C) $122,500
D) $246,500
12 Canine Company produces and sells dog treats for discriminating pet owners. The unit selling price is $10, unit variable costs are $7, and total fixed costs are $3,300. How many dog treats must Canine Company sell to breakeven?
A) 330
B) 471
C) 1,100
D) 194
13 Canine Company produces and sells dog treats for discriminating pet owners. The unit selling price is $10, unit variable costs are $7, and total fixed costs are $3,300. What is the breakeven point in sales dollars?
A) $11,000
B) $4,714
C) $3,300
D) $7,700
14 If the sales price per unit is $7, the unit contribution margin is $3, and total fixed expenses are $19,500, what is the breakeven point in units?
A) 2,786
B) 6,500
C) 5,850
D) 4,875
15 Assuming 10,000 units are sold, what is the contribution margin?
Total fixed costs $15,000
Sale price per unit $23
Variable costs per unit $15
A) $230,000
B) $65,000
C) $150,000
D) $80,000
16 If the sales price per unit decreases and variable costs remain the same, what will be the effect on the contribution margin ratio?
A) It is impossible to determine with the given information.
B) It will decrease.
C) It will remain the same.
D) It will increase.
17 Which of the following would explain why the margin of safety in dollars increased even though total
sales dollars did not change?
A) The breakeven point increased
B) Fixed costs increased
C) The variable cost per unit increased
D) The sales price per unit increased
18 The breakeven point on a CVP graph is the point where the sales revenue line intersects the total cost line.
True or False
19 On a CVP graph, the intersection of the sales line and the total cost line is known as the: A) total cost point.
B) breakeven point.
C) unit contribution margin.
D) margin of safety point.
20 Sensitivity analysis is a “what if” technique that asks what a result will be if a predicted amount is not achieved or if an underlying assumption changes.
True or False