Q. If a company has a margin of safety of $10,000 and its break-even sales are $50,000, what are its actual sales?
-
A.
$40,000
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B.
$60,000
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C.
$50,000
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D.
$70,000
Solution
Actual sales = Break-even sales + Margin of safety = $50,000 + $10,000 = $60,000.
Correct Answer:
B
— $60,000
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Q. If a company sells 1,000 units at a selling price of $25 per unit and variable costs of $15 per unit, what is the total contribution?
-
A.
$10,000
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B.
$5,000
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C.
$15,000
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D.
$25,000
Solution
Total contribution = (Selling Price - Variable Cost) * Number of Units = ($25 - $15) * 1,000 = $10,000.
Correct Answer:
A
— $10,000
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Q. If a company sells 1,000 units at a selling price of $50 each and has variable costs of $30 per unit, what is the total contribution?
-
A.
$20,000
-
B.
$30,000
-
C.
$50,000
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D.
$10,000
Solution
Total contribution = (Selling Price - Variable Cost) * Number of Units = ($50 - $30) * 1,000 = $20,000.
Correct Answer:
A
— $20,000
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Q. If a product sells for $100 and has variable costs of $60, what is the contribution margin?
-
A.
$40
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B.
$60
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C.
$100
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D.
$20
Solution
Contribution margin = Sales ($100) - Variable Costs ($60) = $40.
Correct Answer:
A
— $40
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Q. In a marginal costing system, which of the following is used to assess performance?
-
A.
Net profit
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B.
Gross profit
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C.
Contribution margin
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D.
Total costs
Solution
In marginal costing, performance is often assessed using the contribution margin.
Correct Answer:
C
— Contribution margin
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Q. In CVP analysis, which of the following is considered a fixed cost?
-
A.
Direct materials
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B.
Direct labor
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C.
Rent expense
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D.
Sales commissions
Solution
Rent expense is considered a fixed cost in CVP analysis.
Correct Answer:
C
— Rent expense
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Q. What happens to the contribution margin if variable costs increase while selling price remains constant?
-
A.
Increases
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B.
Decreases
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C.
Remains the same
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D.
Cannot be determined
Solution
If variable costs increase while selling price remains constant, the contribution margin decreases.
Correct Answer:
B
— Decreases
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Q. What is the break-even point in units if fixed costs are $20,000 and contribution margin per unit is $5?
-
A.
4,000 units
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B.
5,000 units
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C.
2,000 units
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D.
10,000 units
Solution
Break-even point (units) = Fixed Costs / Contribution Margin per unit = $20,000 / $5 = 4,000 units.
Correct Answer:
B
— 5,000 units
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Q. What is the formula for calculating the contribution margin ratio?
-
A.
Contribution Margin / Sales
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B.
Sales / Contribution Margin
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C.
Fixed Costs / Variable Costs
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D.
Variable Costs / Sales
Solution
The contribution margin ratio is calculated as Contribution Margin divided by Sales.
Correct Answer:
A
— Contribution Margin / Sales
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