Q. If a company has a contribution margin of $15 per unit and sells 2,000 units, what is the total contribution?
-
A.
$30,000
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B.
$15,000
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C.
$45,000
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D.
$60,000
Solution
Total contribution = Contribution Margin * Quantity = $15 * 2,000 = $30,000.
Correct Answer:
A
— $30,000
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Q. If a company has a sales price of $50, variable costs of $30, and fixed costs of $100,000, what is the contribution margin ratio?
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A.
40%
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B.
20%
-
C.
30%
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D.
50%
Solution
Contribution Margin = Sales Price - Variable Costs = $50 - $30 = $20. Contribution Margin Ratio = Contribution Margin / Sales Price = $20 / $50 = 40%.
Correct Answer:
A
— 40%
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Q. If a company has fixed costs of $60,000 and a contribution margin ratio of 40%, what is the sales required to break even?
-
A.
$150,000
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B.
$100,000
-
C.
$75,000
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D.
$200,000
Solution
Break-even sales = Fixed Costs / Contribution Margin Ratio = $60,000 / 0.40 = $150,000.
Correct Answer:
A
— $150,000
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Q. If a company sells 1,000 units at $50 each and has variable costs of $30 per unit, what is the total contribution?
-
A.
$20,000
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B.
$30,000
-
C.
$50,000
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D.
$10,000
Solution
Total contribution = (Selling Price - Variable Cost) * Quantity = ($50 - $30) * 1000 = $20,000.
Correct Answer:
A
— $20,000
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Q. If a product has a selling price of $100, variable costs of $60, and fixed costs of $10, what is the break-even point in sales dollars?
-
A.
$1000
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B.
$2000
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C.
$5000
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D.
$3000
Solution
Break-even point in sales dollars = Fixed Costs / Contribution Margin Ratio. Contribution Margin = Selling Price - Variable Costs = $100 - $60 = $40. Contribution Margin Ratio = $40 / $100 = 0.4. Break-even Sales = $10 / 0.4 = $25. Therefore, Break-even point in sales dollars = $25 * $100 = $3000.
Correct Answer:
D
— $3000
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Q. In a CVP analysis, which of the following factors is NOT considered?
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A.
Selling price per unit
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B.
Variable cost per unit
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C.
Total fixed costs
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D.
Market demand
Solution
CVP analysis focuses on costs and revenues, not on market demand.
Correct Answer:
D
— Market demand
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Q. In a flexible budget, what remains constant?
-
A.
Variable costs per unit
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B.
Total fixed costs
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C.
Total variable costs
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D.
Sales price per unit
Solution
In a flexible budget, total fixed costs remain constant regardless of the level of activity.
Correct Answer:
B
— Total fixed costs
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Q. In marginal costing, fixed costs are treated as:
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A.
Product costs
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B.
Period costs
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C.
Variable costs
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D.
Direct costs
Solution
In marginal costing, fixed costs are treated as period costs and are charged in full to the profit and loss account.
Correct Answer:
B
— Period costs
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Q. What is the break-even point in units if fixed costs are $40,000, selling price per unit is $80, and variable cost per unit is $50?
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A.
800 units
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B.
1,000 units
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C.
1,200 units
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D.
600 units
Solution
Break-even point (units) = Fixed Costs / (Selling Price - Variable Cost) = $40,000 / ($80 - $50) = 1,000 units.
Correct Answer:
B
— 1,000 units
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Q. What is the contribution margin in marginal costing?
-
A.
Sales Revenue - Variable Costs
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B.
Sales Revenue - Fixed Costs
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C.
Total Costs - Profit
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D.
Sales Revenue - Total Costs
Solution
The contribution margin is calculated as Sales Revenue minus Variable Costs.
Correct Answer:
A
— Sales Revenue - Variable Costs
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Q. What is the formula for calculating the margin of safety?
-
A.
Actual Sales - Break-even Sales
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B.
Break-even Sales - Actual Sales
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C.
Total Sales - Variable Costs
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D.
Fixed Costs / Contribution Margin
Solution
Margin of safety is calculated as Actual Sales minus Break-even Sales.
Correct Answer:
A
— Actual Sales - Break-even Sales
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Q. What is the margin of safety if the break-even sales are $100,000 and actual sales are $150,000?
-
A.
$50,000
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B.
$100,000
-
C.
$150,000
-
D.
$200,000
Solution
Margin of safety = Actual Sales - Break-even Sales = $150,000 - $100,000 = $50,000.
Correct Answer:
A
— $50,000
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Q. What is the primary purpose of cost control?
-
A.
To increase sales
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B.
To reduce fixed costs
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C.
To ensure that actual costs do not exceed budgeted costs
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D.
To maximize profit
Solution
The primary purpose of cost control is to ensure that actual costs do not exceed budgeted costs.
Correct Answer:
C
— To ensure that actual costs do not exceed budgeted costs
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Q. Which costing method is primarily used for internal decision-making?
-
A.
Absorption costing
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B.
Marginal costing
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C.
Standard costing
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D.
Job costing
Solution
Marginal costing is primarily used for internal decision-making as it focuses on variable costs.
Correct Answer:
B
— Marginal costing
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Q. Which of the following is a key benefit of using marginal costing?
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A.
It provides a detailed analysis of fixed costs.
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B.
It simplifies the decision-making process.
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C.
It is required by GAAP.
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D.
It allocates fixed costs to products.
Solution
Marginal costing simplifies the decision-making process by focusing on variable costs and contribution.
Correct Answer:
B
— It simplifies the decision-making process.
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Q. Which of the following is NOT a characteristic of marginal costing?
-
A.
Focus on variable costs
-
B.
Contribution margin analysis
-
C.
Absorption of fixed costs into product costs
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D.
Useful for decision making
Solution
Marginal costing does not absorb fixed costs into product costs; it treats them as period costs.
Correct Answer:
C
— Absorption of fixed costs into product costs
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