Question :
37. In the area of cost-volume-profit analysis, the contribution margin ratio : 1229578
37. In the area of cost-volume-profit analysis, the contribution margin ratio shows how much each dollar of sales contributes to:
A. Covering the fixed costs of the business and providing operating income.
B. Fixed expenses and variable expenses.
C. Variable expenses and interest charges.
D. Variable expenses when production is at normal capacity.
38. The margin of safety is calculated by:
A. Dividing fixed costs plus target income by the contribution margin.
B. Subtracting break-even income from current income.
C. Subtracting break-even sales from current sales.
D. Subtracting fixed costs from current contribution margin.
39. How will a company’s contribution margin be affected by an investment in equipment that increases fixed costs in order to achieve a reduction in direct labor cost?
A. Contribution margin will increase.
B. Contribution margin will fall.
C. Contribution margin will either increase or decrease depending on the relative magnitudes of the changes in fixed and variable costs.
D. Contribution margin will remain the same.
40. All other things held constant, how will an increase in selling price affect the break-even point measured in units?
A. The break-even point will decrease.
B. The break-even point will increase.
C. The break-even point will remain constant.
D. The effect on the break-even point can’t be predicted with certainty.
41. A 45% contribution margin ratio means that:
A. The company should contribute 45% of its operating income to qualified charities for maximum tax benefits.
B. 55% of the company’s revenue is consumed by fixed and variable costs.
C. The company’s revenue has increased by 45% during the current accounting period.
D. 45% of the company’s revenue is available to cover fixed costs and to contribute toward operating income.
42. A company’s most profitable products are often those which:
A. Have the highest contribution margin ratios and the highest sales volumes.
B. Have the highest contribution margin ratios and the lowest sales volumes.
C. Have the lowest contribution margin ratios and the highest sales volumes.
D. Have the lowest contribution margin ratios and the lowest sales volumes.
43. A fixed cost may include all of the following except:
A. Rent for the warehouse.
B. Annual salary of the CEO.
C. Depreciation.
D. Sales commission expense.
44. The contribution margin ratio may be expressed as:
A. A percentage of revenue.
B. A total dollar amount for the period.
C. A contribution margin per unit.
D. Total contribution margin amount.
45. The dollar amount by which sales can decline before an operating loss is incurred is called the:
A. Contribution margin.
B. Contribution margin ratio.
C. Margin of safety.
D. Relevant range.
46. If a product sells for $8, variable costs are $6 and fixed costs are $150,000, what would total sales have to be in order to break-even?
A. $390,000.
B. $399,999.
C. $600,000.
D. $699,999.
