Question : 36.How will a company’s contribution margin be affected by an : 1259646

 

 

36.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.

 

 

 

 

37.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.

 

 

 

 

38.The contribution margin ratio is 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.

 

 

 

 

39.A company with monthly revenue of $120,000, variable costs of $50,000, and fixed costs of $40,000 has a contribution margin of:   

A. $90,000.

 

B. $80,000.

 

C. $70,000.

 

D. $30,000.

 

 

 

40.A company with monthly fixed costs of $170,000 expects to earn monthly operating income of $25,000 by selling 6,500 units per month. What is the company’s expected unit contribution margin?   

A. $30 per unit.

 

B. $26 per unit.

 

C. $22 per unit.

 

D. The information given is insufficient to determine unit contribution margin.

 

 

 

41.If the monthly sales volume required to break even is $190,000 and monthly fixed costs are $55,900, the contribution margin ratio is closest to:   

A. 29%.

 

B. 71%.

 

C. 23%.

 

D. 340%.

 

 

 

42.If the unit sales price is $12, variable costs are $6 per unit and fixed costs are $26,000 what is the contribution margin ratio per unit?   

A. 40%.

 

B. 50%.

 

C. 60%.

 

D. 70%.

 

 

 

43.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.

 

 

 

 

44.Millar Company produces a single product which it sells for $89 a unit. If the fixed costs of manufacturing and selling the product are $68,400 a month and the variable costs are $57 a unit, which of the below is correct?   

A. The fixed costs amount to $32 per unit at any level of output within a relevant volume range.

 

B. The company will break even with a sales volume of $68,400 a month.

 

C. An increase in sales volume above $68,400 a month will cause an increase in fixed costs.

 

D. The contribution margin per unit of product is $32.

 

 

 

45.In comparison to selling a product with a low contribution margin ratio, selling a product with a high contribution margin ratio always:   

A. Requires less dollar sales volume to cover a given level of fixed costs.

 

B. Results in a greater margin of safety.

 

C. Results in higher operating income.

 

D. Results in a higher contribution margin per unit sold.