 Principles of Accounting, Volume 2: Managerial Accounting

# Multiple Choice

1.

LO 3.1The amount of a unit’s sales price that helps to cover fixed expenses is its ________.

1. contribution margin
2. profit
3. variable cost
4. stepped cost
2.

LO 3.1A company’s product sells for $150 and has variable costs of$60 associated with the product. What is its contribution margin per unit?

1. $40 2.$60
3. $90 4.$150
3.

LO 3.1A company’s product sells for $150 and has variable costs of$60 associated with the product. What is its contribution margin ratio?

1. 10%
2. 40%
3. 60%
4. 90%
4.

LO 3.1A company’s contribution margin per unit is $25. If the company increases its activity level from 200 units to 350 units, how much will its total contribution margin increase? 1.$1,250
2. $3,750 3.$5,000
4. $8,750 5. LO 3.2A company sells its products for$80 per unit and has per-unit variable costs of $30. What is the contribution margin per unit? 1.$30
2. $50 3.$80
4. $110 6. LO 3.2If a company has fixed costs of$6,000 per month and their product that sells for $200 has a contribution margin ratio of 30%, how many units must they sell in order to break even? 1. 100 2. 180 3. 200 4. 2,000 7. LO 3.2Company A wants to earn$5,000 profit in the month of January. If their fixed costs are $10,000 and their product has a per-unit contribution margin of$250, how many units must they sell to reach their target income?

1. 20
2. 40
3. 60
4. 120
8.

LO 3.2A company wants to earn an income of $60,000 after-taxes. If the tax rate is 32%, what must be the company’s pre-tax income in order to have$60,000 after-taxes?

1. $88,235 2.$19,200
3. $79,200 4.$143,000
9.

LO 3.2A company has pre-tax or operating income of $120,000. If the tax rate is 40%, what is the company’s after-tax income? 1.$300,000
2. $240,000 3.$48,000
4. $72,000 10. LO 3.3When sales price increases and all other variables are held constant, the break-even point will ________. 1. remain unchanged 2. increase 3. decrease 4. produce a lower contribution margin 11. LO 3.3When sales price decreases and all other variables are held constant, the break-even point will ________. 1. remain unchanged 2. increase 3. decrease 4. produce a higher contribution margin 12. LO 3.3When variable costs increase and all other variables remain unchanged, the break-even point will ________. 1. remain unchanged 2. increase 3. decrease 4. produce a lower contribution margin 13. LO 3.3When fixed costs decrease and all other variables remain unchanged, the break-even point will ________. 1. remain unchanged 2. increase 3. decrease 4. produce a lower contribution margin 14. LO 3.3When fixed costs increase and all other variables remain unchanged, the contribution margin will ________. 1. remain unchanged 2. increase 3. decrease 4. increase variable costs per unit 15. LO 3.4If the sales mix in a multi-product environment shifts to a higher volume in low contribution margin products, the break-even point will ________. 1. remain unchanged because all products are included in the calculation of break-even 2. increase because the low contribution margin products have little effect on break-even 3. increase because the per composite unit contribution margin will decrease 4. decrease because the per composite unit contribution margin will increase 16. LO 3.4Break-even for a multiple product firm ________. 1. can be calculated by dividing total fixed costs by the contribution margin of a composite unit 2. can be calculated by multiplying fixed costs by the contribution margin ratio of a composite unit 3. can only be calculated when the proportion of products sold is the same for all products 4. can be calculated by multiplying fixed costs by the contribution margin ratio of the most common product in the sales mix 17. LO 3.4Waskowski Company sells three products (A, B, and C) with a sales mix of 3:2:1. Unit sales price are shown. What is the sales price per composite unit? 1.$17.00
2. $25.00 3.$35.00
4. $20.00 18. LO 3.4Beaucheau Farms sells three products (E, F, and G) with a sale mix ratio of 3:1:2. Unit sales price are shown. What is the sales price per composite unit? 1.$28.00
2. $20.00 3.$59.00
4. $41.00 19. LO 3.4A company sells two products, Model 101 and Model 202. For every one unit of Model 101, they sell they sell two units of Model 202. Sales and cost information for the two products is shown. What is the contribution margin for a composite unit based on the sales mix? 1.$14
2. $21 3.$35
4. $56 20. LO 3.5Wallace Industries has total contribution margin of$58,560 and net income of $24,400 for the month of April. Wallace expects sales volume to increase by 5% in May. What are the degree of operating leverage and the expected percent change in income for Wallace Industries? 1. 0.42 and 2.2% 2. 0.42 and 5% 3. 2.4 and 12% 4. 2.5 and 13% 21. LO 3.5Macom Manufacturing has total contribution margin of$61,250 and net income of $24,500 for the month of June. Marcus expects sales volume to increase by 10% in July. What are the degree of operating leverage and the expected percent change in income for Macom Manufacturing? 1. 0.4 and 10% 2. 2.5 and 10% 3. 2.5 and 25% 4. 5.0 and 50% 22. LO 3.5If a firm has a contribution margin of$59,690 and a net income of $12,700 for the current month, what is their degree of operating leverage? 1. 0.18 2. 1.18 3. 2.4 4. 4.7 23. LO 3.5If a firm has a contribution margin of$78,090 and a net income of \$13,700 for the current month, what is their degree of operating leverage?

1. 0.21
2. 1.21
3. 2.4
4. 5.7
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