Ch.19 Quiz

Instructions
Read the questions carefully.

This assessment is worth 100 points.

  1. Variable costs which increase in total amount in direct proportion to increase in output represent a constant amount per unit of output.   (5 points)

      
      

  2. Variable costs are usually transformed into fixed costs when a business operates at less than full capacity.   (5 points)

      
      

  3. The contribution margin is the difference between total revenue and fixed costs.   (5 points)

      
      

  4. Contribution margin is total revenue less fixed costs.   (5 points)

      
      

  5. Margin of safety is the dollar amount by which actual sales volume exceeds the break-even sales volume.   (5 points)

      
      

  6. A company's relevant range of production is:   (5 points)

    a.  
    b.  
    c.  
    d.  

  7. 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?   (5 points)

    a.  
    b.  
    c.  
    d.  

  8. The levels of production and of manufacturing overhead for the first five months of 2001 for Weber Products are shown below:


    Refer to the above information. Using the high-low method, compute the variable element of manufacturing overhead per unit of production.   (5 points)

    a.  
    b.  
    c.  
    d.  

  9. The levels of production and of manufacturing overhead for the first five months of 2001 for Weber Products are shown below:


    Refer to the above information. Using the high-low method, compute the fixed element of Weber's monthly overhead cost.   (5 points)

    a.  
    b.  
    c.  
    d.  

  10. A company with an operating income of $75,000 and a contribution margin ratio of 60% has a margin of safety of:   (5 points)

    a.  
    b.  
    c.  
    d.  

  11. The following information is available:



    What is the operating income?   (5 points)

    a.  
    b.  
    c.  
    d.  

  12. A company with monthly revenue of $100,000, variable costs of $40,000, and fixed costs of $25,000 has a contribution margin of:   (5 points)

    a.  
    b.  
    c.  
    d.  

  13. A company with monthly fixed costs of $125,000 expects to earn monthly operating income of $5,000 by selling 5,000 units per month. What is the company's expected unit contribution margin?   (5 points)

    a.  
    b.  
    c.  
    d.  

  14. The following data are available for product no. HP27, manufactured and sold by Montgomery Corporation:


    Refer to the above information. The number of units of HP27 that Montgomery must sell to break even is (rounded, if necessary):   (5 points)

    a.  
    b.  
    c.  
    d.  

  15. The following data are available for product no. HP27, manufactured and sold by Montgomery Corporation:


    Refer to the above information. The dollar sales volume to produce operating income of $185,000 is:   (5 points)

    a.  
    b.  
    c.  
    d.  

  16. Double Time Associates sells only one product, with a current selling price of $80 per unit. Variable costs are 40% of this selling price, and fixed costs are $10,000 per month. Management has decided to reduce the selling price to $75 per unit in an effort to increase sales. Assume that the cost of the product and fixed operating expenses are not changed by this reduction in selling price.

    Refer to the above information. At the current selling price of $80 per unit, what dollar volume of sales per month is required for Double Time to earn a monthly operating income of $14,000?   (5 points)

    a.  
    b.  
    c.  
    d.  

  17. Delaten Company produces a single product. The selling price is $40 per unit, and variable costs amount to $10 per unit. Delaten's fixed costs per month total $60,000.

    Refer to the above information. How many units must be sold each month to earn a monthly operating income of $15,000?   (5 points)

    a.  
    b.  
    c.  
    d.  

  18. Expert Corporation manufactures a single product. The selling price is $50 per unit, and variable costs amount to $28 per unit. The fixed costs are $11,000 per month.

    Refer to the above information. What will be the monthly margin of safety (in dollars) if 1,500 units are sold each month?   (5 points)

    a.  
    b.  
    c.  
    d.  

  19. Expert Corporation manufactures a single product. The selling price is $50 per unit, and variable costs amount to $28 per unit. The fixed costs are $11,000 per month.

    Refer to the above information. What will be Expert's monthly operating income if 1,500 units are sold each month?   (5 points)

    a.  
    b.  
    c.  
    d.  

  20. Fuller Enterprises manufactures springs and shock absorbers. Springs account for 60% of the company's total sales revenue, whereas shocks account for only about 40%. The contribution margin ratios for springs and shocks are 50% and 25%, respectively. Fixed costs average $250,000 per month.

    Refer to the above information. Fuller's monthly break-even point expressed in sales dollars is:   (5 points)

    a.  
    b.  
    c.  
    d.  



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