Variable Cost and Contribution Margin

1389 WordsJan 12, 20156 Pages
CHAPTER 1 – COST VOLUME PROFIT- MULTIPLE CHOICE QUESTIONS 1. CVP analysis can be used to study the effect of: A. changes in selling prices on a company 's profitability. B. changes in variable costs on a company 's profitability. C. changes in fixed costs on a company 's profitability. D. changes in product sales mix on a company 's profitability. E. All of these. 2. The break-even point is that level of activity where: A. total revenue equals total cost. B. variable cost equals fixed cost. C. total contribution margin equals the sum of variable cost plus fixed cost. D. sales revenue equals total variable cost. E. profit is greater than zero. 3. The unit contribution margin is calculated as the difference between: A. selling price…show more content…
D. $10,000,000. E. an amount other than those above. 15. Lawton, Inc., sells a single product for $12. Variable costs are $8 per unit and fixed costs total $360,000 at a volume level of 60,000 units. Assuming that fixed costs do not change, Lawton 's break-even point would be: A. 30,000 units. B. 45,000 units. C. 90,000 units. D. negative because the company loses $2 on every unit sold. E. a positive amount other than those given above. 16. Green, Inc., sells a single product for $20. Variable costs are $8 per unit and fixed costs total $120,000 at a volume level of 5,000 units. Assuming that fixed costs do not change, Green 's break-even sales would be: A. $160,000. B. $200,000. C. $300,000. D. $480,000. E. an amount other than those above. 17. Orion recently reported sales revenues of $800,000, a total contribution margin of $300,000, and fixed costs of $180,000. If sales volume amounted to 10,000 units, the company 's variable cost per unit must have been: A. $12. B. $32. C. $50. D. $92. E. an amount other than those above. 18. Strand has a break-even point of 120,000 units. If the firm 's sole product sells for $40 and fixed costs total $480,000, the variable cost per unit must be: A. $4. B. $36. C. $44. D. an amount that cannot be derived based on the information presented. E. an amount other than those in choices "A," "B," and "C" but one that can be derived based on the information presented. 19. The contribution-margin ratio is: A. the difference

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