1. Which one of the following is the format of a CVP ...

1. Which one of the following is the format of a CVP income statement? A. Sales ? Variable costs = Fixed costs + Net income. B. Sales ? Fixed costs ? Variable costs ? Operating expenses = Net income. C. Sales ? Cost of goods sold ? Operating expenses =Net income. D. Sales ? Variable costs ? Fixed costs = Net income.

2. Croc Catcher calculates its contribution margin to be less than zero. Which statement is true? A. Its fixed costs are less than the variable cost per unit. B. Its profits are greater than its total costs. C. The company should sell more units. D. Its selling price is less than its variable costs.

3. Which one of the following describes the break-even point? A. It is the point where total sales equals total variable plus total fixed costs. B. It is the point where the contribution margin equals zero. C. It is the point where total variable costs equal total fixed costs. D. It is the point where total sales equals total fixed costs.

4. The following information is available for Chap Company.

Sales

$350,000

Cost of good sold $120,000

Total fixed expenses

$60,000

Total variable expenses $100,000

Which amount would you find on Chap's CVP income statement?

A. Contribution margin of $250,000.

B. Contribution margin of $190,000.

C. Gross profit of $230,000.

D. Gross profit of $190,000.

5. Gabriel Corporation has fixed costs of $180,000 and variable costs of $8.50 per unit. It has a target income $268,000. How many units must it sell at $12 per unit to achieve its target net income? A. 51,429 units.

B. 128,000 units.

C. 76,571 units.

D. 21,176 units.

6. Sales mix is: A. important to sales managers but not to accountants. B. easier to analyze on absorption costing income statements. C. a measure of the relative percentage of a company's variable costs to its fixed costs. D. a measure of the relative percentage in which a company's products are sold.

7. Net income will be:

A.

greater margin

if more units.

higher-contribution

margin

units

are

sold

than

lower-contribution

B.

greater margin

if more units.

lower-contribution

margin

units

are

sold

than

higher-contribution

C. equal as long as total sales remain equal, regardless of which products are sold.

D. unaffected by changes in the mix of products sold.

8. If the contribution per unit is $15 and it takes 3.0 machine hours to produce the unit, the contribution margin per unit of limited resource is: A. $25.

B. $5.

C. $4.

D. No correct answer is given.

9. The degree of operating leverage: A. can be computed by dividing total contribution margin by net income. B. provides a measure of the company's earnings volatility. C. affects a company's break-even point. D. All of the above.

10. A high degree of operating leverage:

A.

indicates that fixed costs.

a

company

has

a

larger

percentage

of

variable

costs

relative

to

its

B. is computed by dividing fixed costs by contribution margin.

C. exposes a company to greater earnings volatility risk.

D. exposes a company to less earnings volatility risk.

11. Fixed manufacturing overhead costs are recognized as: A. period costs under absorption costing. B. product costs under absorption costing. C. product costs under variable costing. D. part of ending inventory costs under both absorption and variable costing.

12. Net income computed under absorption costing will be:

A. higher than net income under variable costing in all cases.

B. equal to net income under variable costing in all cases.

C.

higher than units sold.

net

income

under

variable

costing

when

units

produced

are

greater

than

D.

higher than units sold.

net

income

under

variable

costing

when

units

produced

are

less

than

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1. Which one of the following is the format of a CVP income statement? A. Sales ? Variable costs = Fixed costs + Net income. B. Sales ? Fixed costs ? Variable costs ? Operating expenses = Net income. C. Sales ? Cost of goods sold ? Operating expenses =Net income. D. Sales ? Variable costs ? Fixed costs = Net income.

2. Croc Catcher calculates its contribution margin to be less than zero. Which statement is true? A. Its fixed costs are less than the variable cost per unit. B. Its profits are greater than its total costs. C. The company should sell more units. D. Its selling price is less than its variable costs.

3. Which one of the following describes the break-even point? A. It is the point where total sales equals total variable plus total fixed costs. B. It is the point where the contribution margin equals zero. C. It is the point where total variable costs equal total fixed costs. D. It is the point where total sales equals total fixed costs.

4. The following information is available for Chap Company.

Sales

$350,000

Cost of good sold $120,000

Total fixed expenses

$60,000

Total variable expenses $100,000

Which amount would you find on Chap's CVP income statement?

A. Contribution margin of $250,000.

B. Contribution margin of $190,000.

C. Gross profit of $230,000.

D. Gross profit of $190,000.

5. Gabriel Corporation has fixed costs of $180,000 and variable costs of $8.50 per unit. It has a target income $268,000. How many units must it sell at $12 per unit to achieve its target net income? A. 51,429 units.

B. 128,000 units.

C. 76,571 units.

D. 21,176 units.

6. Sales mix is: A. important to sales managers but not to accountants. B. easier to analyze on absorption costing income statements. C. a measure of the relative percentage of a company's variable costs to its fixed costs. D. a measure of the relative percentage in which a company's products are sold.

7. Net income will be: A. greater if more higher-contribution margin units are sold than lower-contribution margin units.

B. greater if more lower-contribution margin units are sold than highercontribution margin units.

C. equal as long as total sales remain equal, regardless of which products are sold.

D. unaffected by changes in the mix of products sold.

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