Margin of safety ratio is computed by dividing excess of actual or budgeted sales from break- even sales or it can be determined by * O Dividing contribution margin ratio by variable cost ratio O Dividing profit ratio by contribution margin ratio O Dividing contribution margin ratio by profit ratio O Dividing variable cost ratio by contribution margin ratio

Margin of safety ratio is computed by dividing excess of actual or budgeted sales from break- even sales or it can be determined by * O Dividing contribution margin ratio by variable cost ratio O Dividing profit ratio by contribution margin ratio O Dividing contribution margin ratio by profit ratio O Dividing variable cost ratio by contribution margin ratio

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 6MCQ: The use of fixed costs to extract higher percentage changes in profits as sales activity changes...

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The use of fixed costs to extract higher percentage changes in profits as sales activity changes involves a. margin of safety. b. unit contribution margin. c. degree of operating leverage. d. sensitivity analysis. e. variable cost reduction.
The amount of a units sales price that helps to cover fixed expenses is its ____________________. A. contribution margin B. profit C. variable cost D. stepped cost
Continuous improvement is the governing principle of a lean accounting system. Following are several performance measures. Some of these measures would be associated with a traditional standard-costing accounting system, and some would be associated with a lean accounting system. a. Materials price variances b. Cycle time c. Comparison of actual product costs with target costs d. Materials quantity or efficiency variances e. Comparison of actual product costs over time (trend reports) f. Comparison of actual overhead costs, item by item, with the corresponding budgeted costs g. Comparison of product costs with competitors product costs h. Percentage of on-time deliveries i. First-time through j. Reports of value- and non-value-added costs k. Labor efficiency variances l. Days of inventory m. Downtime n. Manufacturing cycle efficiency (MCE) o. Unused (available) capacity variance p. Labor rate variance q. Using a sister plants best practices as a performance standard Required: 1. Classify each measure as lean or traditional (standard costing). If traditional, discuss the measures limitations for a lean environment. If it is a lean measure, describe how the measure supports the objectives of lean manufacturing. 2. Classify the measures into operational (nonfinancial) and financial categories. Explain why operational measures are better for control at the shop level (production floor) than financial measures. Should any financial measures be used at the operational level? 3. Suggest some additional measures that you would like to see added to the list that would be supportive of lean objectives.
Break-even for a multiple product firm. can be calculated by dividing total fixed costs by the contribution margin of a composite unit can be calculated by multiplying fixed costs by the contribution margin ratio of a composite unit can only be calculated when the proportion of products sold is the same for all products can be calculated by multiplying fixed costs by the contribution margin ratio of the most common product in the sales mix
Product costs under variable costing are typically: A. higher than under absorption costing B. lower than under absorption costing C. the same as with absorption costing D. higher than absorption costing when inventory increases
What can the weighted average contribution margin ratio be used for? To solve for a measure, at any level of sales volume, of the sensitivity of operating profit to changes in volume. Breakeven and profit planning for sales volume expressed in dollars (Y) rather than units (Q). To calculate an average per-unit contribution margin based on an assumed sales mix. To figure out the relative proportion in which a company’s products (or services) are sold. To determine the extent of fixed costs in an organization’s cost structure.
The contribution margin ratio can be calculated in all of the following ways except: a.1 − Variable cost ratio. b.Contribution margin per unit / Price. c.Total contribution margin / Total sales. d.Fixed costs / Contribution margin ratio. e.All of these choices are correct. Total contribution margin divided by total sales is the: a.contribution margin ratio. b.sales ratio. c.target income. d.margin of safety. e.indifference point.
On the cost- volume -profit graph , the area between the total cost line and the sales line before the break -even point represents a. The profit area b. The variable cost amount c . The contribution margin per unit d. The fixed cost amount d. The loss area
The dollar amount of sales needed to achieve a target operating income is computed by dividingbtarget operating income by the contribution margin ratio True False
To calculate the sales dollars necessary to achieved a desired profit level, the sum of fixed costs plus desired prof it is divided by contribution margin weighted average unit contribution margin contribution margin ratio unit sales price minus unit contribution margin
What ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit? A. Margin of safety ratioB. Contribution margin ratioC. Costs and expenses ratioD. Profit ratio
Contribution margin is a.the same as sales revenue b.the excess of sales over variable costs c.another term for volume in the "cost-volume-profit" analysis d.profit