Question : 31.Based the income statements shown below, which division has the : 1257101

 

 

31.Based on the income statements shown below, which division has the cost structure with the highest operating leverage?     

A. Bottled Water.

 

B. Fruit Juices.

 

C. Soft Drinks.

 

D. The three divisions have identical operating leverage.

 

 

32.The following income statements are provided for two companies operating in the same industry  Assuming sales increase by $1,000, select the correct statement from the following:   

A. Felix’s net income will be more than Jinx’s.

 

B. Both companies will experience an increase in profit.

 

C. Felix’s net income will increase by $250.

 

D. Jinx’s net income will increase by 6%.

 

 

33.The excess of a product’s selling price over its variable costs is referred to as:   

A. gross profit

 

B. gross margin

 

C. contribution margin

 

D. manufacturing margin

 

 

34.Select the incorrect statement regarding the contribution margin income statement.   

A. The contribution margin approach for the income statement is unacceptable for external reporting.

 

B. Contribution margin represents the amount available to cover product costs and thereafter to provide profit.

 

C. The contribution margin approach requires that all costs be classified as fixed or variable.

 

D. Assuming no change in fixed costs, a $1 increase in contribution margin will result in a $1 increase in profit.

 

 

35.Which of the following items would not be found on a contribution format income statement?   

A. Fixed cost

 

B. Variable cost

 

C. Gross margin

 

D. Net income

 

 

36.The following income statement is provided for Ramirez Company in 2013:  What amount was the company’s contribution margin?   

A. $50,000

 

B. $22,000

 

C. $52,000

 

D. $60,000

 

 

37.In order to prepare a contribution format income statement:   

A. costs must be separated into manufacturing and selling, general, and administrative costs.

 

B. costs must be separated into cost of goods sold and operating expenses.

 

C. costs must be separated into variable and fixed costs.

 

D. costs must be separated into mixed, variable and fixed costs.

 

 

38.Select from the following the incorrect statement regarding contribution margin.   

A. Sales – fixed costs = contribution margin

 

B. Net income + total fixed costs = contribution margin

 

C. At the breakeven point (where the company has neither profit nor loss), total fixed costs = total contribution margin

 

D. Total sales revenue times the contribution margin percentage = total contribution margin

 

 

39.The following information is provided for Southall Company:  What is this company’s contribution margin?   

A. $30,000

 

B. $17,500

 

C. $45,000

 

D. $67,500

 

 

40.Which of the following equations can be used to compute a firm’s magnitude of operating leverage?   

A. Net income/sales

 

B. Fixed costs/contribution margin

 

C. Contribution margin/net income

 

D. Net income/contribution margin