Accounting 202 - Chapter 7

30 Questions | By Jc173 | Updated: Mar 21, 2022 | Attempts: 373

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The changes in cost and volume of the output have an effect on the company’s operating and net income. The study of this change is what we covered in the previous class on chapter seven. The quiz below is designed to test your understanding of this topic so far. Give it a try!

Questions and Answers

1.

The unit contribution margin is computed by:
- A.
  
  Dividing the variable cost per unit by the sales revenue.
- B.
  
  Subtracting the sales price per unit from the variable cost per unit
- C.
  
  Subtracting the variable cost per unit from the sales price per unit
- D.
  
  Dividing the sales revenue by variable cost per unit
2.

Contribution margin ratio is computed by dividing:
- A.
  
  Contribution margin by sales revenue.
- B.
  
  contribution margin by operating income.
- C.
  
  Sales revenue by contribution margin.
- D.
  
  Operating income by contribution margin.
3.

The contribution margin ratio explains the percentage of each sales dollar that contributes towards:
- A.
  
  Variable costs
- B.
  
  Sales revenue
- C.
  
  Fixed costs and generating a profit
- D.
  
  Period expenses
4.

To compute the unit contribution margin, __________ should be subtracted from the sales price per unit.
- A.
  
  A. only variable period costs
- B.
  
  only variable inventoriable product costs
- C.
  
  All variable costs
- D.
  
  All fixed costs
5.

Managers can quickly forecast the operating income by multiplying _________ and then subtracting fixed costs.
- A.
  
  Projected sales revenue by the contribution margin ratio
- B.
  
  Projected sales units by the contribution margin ratio
- C.
  
  Projected sales revenue by the unit contribution margin
- D.
  
  Projected sales units by the variable cost ratio
6.

Managers can quickly forecast the total contribution margin by dividing the projected:
- A.
  
  Sales revenue by the contribution margin ratio.
- B.
  
  Sales units by the contribution margin ratio.
- C.
  
  Sales revenue by the unit contribution margin.
- D.
  
  Sales units by the variable cost ratio.
7.

Which of the following represents the excess of the selling price per unit of a product over the variable cost of obtaining and selling each unit?
- A.
  
  Gross margin
- B.
  
  Unit contribution margin
- C.
  
  Net income
- D.
  
  Operating income
8.

Contribution margin ratio is computed by dividing:
- A.
  
  Contribution margin by sales revenue.
- B.
  
  Contribution margin by operating income.
- C.
  
  Sales revenue by contribution margin.
- D.
  
  Operating income by contribution margin.
9.

On a contribution margin income statement, to what is contribution margin equal?
- A.
  
  Fixed expenses plus variable expenses
- B.
  
  Sales revenues minus variable expenses
- C.
  
  Fixed expenses minus variable expenses
- D.
  
  Sales revenues minus fixed expenses
10.

Akron Laser Wash sells deluxe car washes for $15 per customer. Variable costs are $9 per wash. Fixed costs are $40,000 per month. What is Akron Laser Wash’s contribution margin per car wash?
- A.
  
  $0.40
- B.
  
  $9.00
- C.
  
  $6.00
- D.
  
  $2.50
11.

Akron Laser Wash sells deluxe car washes for $15 per customer. Variable costs are $9 per wash. Fixed costs are $40,000 per month. What is Akron Laser Wash’s contribution margin ratio?
- A.
  
  40%
- B.
  
  250%
- C.
  
  6%
- D.
  
  60%
12.

Akron Laser Wash sells deluxe car washes for $15 per customer. Variable costs are $9 per wash. Fixed costs are $40,000 per month. What is the projected monthly income if 12,000 patrons visit the car wash each month?
- A.
  
  $180,000
- B.
  
  $108,000
- C.
  
  $72,000
- D.
  
  None of the above
13.

The formula used to find the number of units that need to be sold in order to breakeven or generate a target profit is:
- A.
  
  (fixed expenses + operating income) / contribution margin ratio.
- B.
  
  (fixed expenses + operating income) / contribution margin per unit.
- C.
  
  (fixed expenses - operating income) / contribution margin ratio.
- D.
  
  (fixed expenses - operating income) / contribution margin per unit.
14.

The formula used to find the sales revenue (sales in dollars) needed in order to breakeven or generate a target profit is:
- A.
  
  (fixed expenses + operating income) / contribution margin ratio.
- B.
  
  (fixed expenses + operating income) /contribution margin per unit.
- C.
  
  (fixed expenses - operating income) / contribution margin ratio.
- D.
  
  (fixed expenses - operating income) / contribution margin per unit.
15.

Sales below the breakeven point indicate a ______, whereas sales above the breakeven point indicate a ____.
- A.
  
  Loss; loss
- B.
  
  Loss; profit
- C.
  
  Profit; profit
- D.
  
  Profit; loss
16.

The Sweet Factory produces and sells specialty fudge. The selling price per pound is $20, variable costs are $12 per pound, and total fixed costs are $6,000. How many pounds of fudge must The Sweet Factory sell to breakeven?
- A.
  
  15,000
- B.
  
  300
- C.
  
  750
- D.
  
  188
17.

Which of the following statements is TRUE if the sales price per unit increases while the variable cost per unit and total fixed costs remain constant?
- A.
  
  The contribution margin increases and the breakeven point decreases.
- B.
  
  The contribution margin decreases and the breakeven point decreases.
- C.
  
  The contribution margin increases and the breakeven point increases .
- D.
  
  The contribution margin decreases and the breakeven point increases.
18.

Which of the following statements is TRUE if the variable cost per unit decreases while the sales price per unit and total fixed costs remain constant?
- A.
  
  The contribution margin increases and the breakeven point decreases.
- B.
  
  The contribution margin decreases and the breakeven point decreases.
- C.
  
  The contribution margin increases and the breakeven point increases.
- D.
  
  The contribution margin decreases and the breakeven point increases.
19.

Which of the following statements is TRUE if the fixed costs increase while the sales price per unit and variable costs per unit remain constant?
- A.
  
  The contribution margin increases and the breakeven point decreases.
- B.
  
  The contribution margin decreases and the breakeven point increases.
- C.
  
  The contribution margin stays the same and the breakeven point decreases.
- D.
  
  The contribution margin stays the same and the breakeven point increases.
20.

If the sale price per unit decreases and variable costs remain the same, what will be the effect on the contribution margin ratio?
- A.
  
  It will increase.
- B.
  
  It will decrease.
- C.
  
  It will remain the same.
- D.
  
  It is impossible to determine with the given information.
21.

Which of the following statements is TRUE if the variable cost per unit increases while the sale price per unit and total fixed costs remain constant?
- A.
  
  Breakeven point in units increases.
- B.
  
  Breakeven point in units decreases.
- C.
  
  Breakeven point in units remains the same.
- D.
  
  Contribution margin ratio increases.
22.

Which of the following statements is TRUE if total fixed costs decrease while the sale price per unit and variable costs per unit remain constant?
- A.
  
  Contribution margin increases.
- B.
  
  Contribution margin decreases.
- C.
  
  Breakeven point in units decreases.
- D.
  
  Breakeven point in units increases.
23.

Which of the following statements is TRUE if both fixed expenses and the sale price per unit increase while variable costs per unit are unchanged?
- A.
  
  Breakeven point in units could increase, decrease, or remain the same.
- B.
  
  Breakeven point in units increases.
- C.
  
  Breakeven point in units decreases.
- D.
  
  Breakeven point in units remains unchanged.
24.

Fixed costs divided by weighted-average contribution margin per unit equals:
- A.
  
  Contribution margin ratio.
- B.
  
  Margin of safety ratio.
- C.
  
  Break-even sales in dollars.
- D.
  
  Break-even sales in units.
25.

Contribution margin less fixed costs yields:
- A.
  
  Operating income.
- B.
  
  Sales.
- C.
  
  Variable costs.
- D.
  
  None of the above.