CH 20 ACC Test Review Flashcards - Quizlet

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CH 20 ACC test review

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Key concepts:
contribution margin... contribution margin ratio variable cost per unit
Terms in this set (87)
1) Which of the following c. direct material cost

is a variable cost?
A) property taxes
B) salary of plant
https://quizlet.com/272625860/ch-20-acc-test-review-flash-cards/ 1/41
manager
C) direct materials cost
D) straight-line
depreciation expense
2) A 15% increase in D) 15% increase in total variable costs

production volume will
result in a ________.
A) 15% increase in the
variable cost per unit
B) 15% increase in total
mixed costs
C) 15% increase in total
administration costs
D) 15% increase in total
variable costs
3) Variable cost per unit, C) remain the same as production levels

within the relevant range, change
will ________.
A) increase as
production decreases
B) decrease as
C) remain the same as
production levels
change
D) decrease as
production increases
4) Which of the following C) They will decrease as production

statements is true of the decreases.
behavior of total variable
costs, within the relevant
range?
A) They will decrease as
production increases.
B) They will remain the
same as production
levels change.
C) They will decrease as
production decreases.
D) They will increase as
5) Which of the following A) They will remain the same as

statements is true of the production levels change.
behavior of total fixed
costs, within the relevant
range?
A) They will remain the
same as production
levels change.
B) They will increase as
C) They will decrease as
D) They will decrease as
production increases.
6) The fixed costs per A) increase as production decreases

unit will ________.
A) increase as
B) decrease as
C) remain the same as
production levels
change
D) increase as
production increases
7) A cellphone service C) 450 minutes

provider charges $5.00
per month and $0.10 per Current bill 50.00
minute per call. If a Less monthly charges -5.00
customer's current bill is Call charges (A) 45.00
$50.00, how many calling Charge per minute per call (B) 0.10
minutes did the customer Number of minutes used (A) ÷ (B)
use? 45/0.10=450.00
A) 500 minutes
B) 550 minutes
C) 450 minutes
D) 400 minutes
8) Ron Moss, a manager D) $7.00

of Waterworks Inc., was
reviewing the water bills Change in total cost ÷ Change in volume
of a dog daycare and of activity = Variable cost per unit
spa. He determined that (3800-2400)/(400-200)=7
its highest and lowest
bills of $3,800 and
$2,400 were incurred in
the months of May and
November, respectively.
If 400 dogs were
washed in May and 200
dogs were washed in
November, what was the
variable cost per dog
associated with the
company's water bill?

A) $6.00
B) $12.00
C) $9.50
D) $7.00
9) Ron Moss, a manager C) $1,000

of Waterworks Inc., was
reviewing the water bills IDK
of a dog daycare and
spa. He determined that
its highest and lowest
bills of $3,800 and
$2,400 were incurred in
the months of May and
November, respectively.
If 400 dogs were
washed in May and 200
dogs were washed in
November, what was the
fixed cost per dog
associated with the
company's water bill?
A) $2,400
B) $3,800
C) $1,000
D) $1,400
10) Which of the A) fixed cost

following costs does not
change in total despite
changes in volume?
A) fixed cost
B) variable cost
C) mixed cost
D) total production cost
11) Costs that have both C) mixed cost

variable and fixed
components are called
________.
A) fixed cost
B) variable cost
C) mixed cost
D) contribution cost
12) Which of the B) variable cost

following costs changes
in total in direct
proportion to a change
in volume?
A) fixed cost
B) variable cost
C) mixed cost
D) period cost
13) Jupiter Inc. incurred D) $3

fixed costs of $300,000.
Total costs, both fixed TC-FC=VC
and variable, are 450000-30000=150000 VC
$450,000 when 50,000 VC/#OF UNITS=VC PER UNIT
units are produced. It 150000/50000=$3VC PER UNIT
sold 35,000 units during
the year. Calculate the
variable cost per unit.
A) $9
B) $12
C) $6
D) $3
Venus Inc. has fixed C) $600,000

costs of $300,000. Total
costs, both fixed and TC-FC=VC
variable, are $450,000 450,000-30,000=150,000 VC
when 30,000 units are VC/#OF UNITS=VC PER UNIT
produced. Calculate the 150000/30000=$5VC PER UNIT
total costs if the volume
increases to 60,000 units. 5*60,000UNITS=300,000 VC
A) $750,000
B) $1,200,000 VC+FC=600,000
C) $600,000
D) $450,000
15) The highest value of C) $10,000

total cost was $75,000 in
June for Mantilla (75000-50000)/(13000-8000)=5 PER UNIT
Beverages Inc. Its lowest 13000UNITS * $5 = 65000VC
value of total cost was
$50,000 in December. 75000 TC - 65000 VC = 10000 FC
The company makes a
single product. The
production volume in
June and December
were 13,000 and 8,000
units, respectively. What
is the fixed cost per
month?
A) $50,000
B) $20,000
C) $10,000
D) $8,000
16) The highest value of C) $5.00 per unit

total cost was $75,000 in
June for Mantilla (75000-50000)/(13000-8000)=5$ PER
Beverages Inc. Its lowest UNIT
value of total cost was
$50,000 in December.
The company makes a
single product. The
production volume in
June and December
were 13,000 and 8,000
units, respectively. What
is the variable cost per
month?
A) $9.38 per unit
B) $6.25 per unit
C) $5.00 per unit
D) $5.77 per unit
17) The relevant range of D) both the fixed costs and the variable
Orleans Trailers Inc. is cost per unit may change
between 100,000 units
and 180,000 units per
month. If the company
produces beyond
180,000 units per month,
________.
A) the fixed costs will
remain the same, but the
variable cost per unit
may change
B) the fixed costs may
change, but the variable
cost per unit will remain
the same
C) the fixed costs and
the variable cost per unit

will not change
D) both the fixed costs
and the variable cost per
unit may change
18) The phone bill for a C) $2,425

company consists of
both fixed and variable Change in total cost /Change in minutes=
costs. Refer to the 4- VC per minute
month data below and ($3,000 - $2,625)/(460 - 160)=$1.25 VC per
apply the high-low minute
method to answer the
question. (Round your TMC FOR JAN*VCPER UNIT
intermediate calculations 460*$1.25=$575 TVC
to two decimal places) TMC - TVC=TFC
$3,000 - $575 = $2,425
JAN 460 MIN $3,000
FEB 200 MIN $2,675
MAR 160 MIN $2,625
APR 300 MIN $2,800
What is the fixed portion

of the total cost?
A) $1,850
B) $2,225
C) $2,425
D) $2,625
19) The phone bill for a A) $1.25

company consists of
both fixed and variable Change in total cost /Change in minutes=
costs. Refer to the 4- VC per minute
month data below and ($3,000 - $2,625)/(460 - 160)=$1.25 VC per
apply the high-low minute
question.
JAN 460 MIN $3,000

FEB 200 MIN $2,675
MAR 160 MIN $2,625
APR 300 MIN $2,800
What is the variable cost

per minute?
A) $1.25
B) $0.67
C) $1.08
D) $0.58
20) The phone bill for a C) $2,900

corporation consists of
both fixed and variable VC+FC=TC
costs. Refer to the 4- (380 minutes × 1.25VC) + $2,425FC
month data below and = $2,900 TC FOR MAY
apply the high-low
question.
JAN 460 MIN $3,000

FEB 200 MIN $2,675
MAR 160 MIN $2,625
APR 300 MIN $2,800
If the company uses 380

minutes in May, how
much will the total bill
be?
A) $2,425
B) $2,478
C) $2,900
D) $3767
21) Porterhouse B) remain the same

Company incurs both
fixed and variable
production costs.
Assuming the production
is within the relevant
range, if volume goes up
by 20%, then the total
fixed costs would ________.
A) increase by 20%
B) remain the same
C) increase by an
amount less than 20%
D) decrease by 20%
22) The high-low method B) separate mixed costs into their variable
is used to ________. and fixed components
A) determine the highest
price that can be
charged for a product
B) separate mixed costs
into their variable and
fixed components
C) identify the relevant
and irrelevant
relevant costs of a
business
D) determine the sales
level at highest capacity
23) Porterhouse C) increase by an amount less than 20%
Company incurs both

fixed and variable
production costs.
Assuming the production
is within the relevant
range, if volume goes up
by 20%, then the total
costs would ________.
A) increase by 20%
B) remain the same
C) increase by an
amount less than 20%
D) decrease by 20%
24) First Buy Television D) $76,800

Antenna Company
provided the following EQUIP DEP 24,000
manufacturing costs for FACTORY INSURANCE 19,000
the month of June. FACTORY MAN. SAL. 12,800
JANITORS SAL. 5,000
DL COST $136,000 PROPERTY TAX 16,000
DM COST $80,000 =Total fixed costs $76,800
EQUIP DEP 24,000
FACTORY INSURANCE
19,000
FACTORY MAN. SAL.
12,800
JANITORS SAL. 5,000
PACKAGING COSTS
18,800
PROPERTY TAX 16,000
From the above

information, calculate
First Buy's total fixed
costs.
A) $311,600
B) $52,800
C) $71,600
D) $76,800
25) First Buy Television C) $234,800

Antennas Company
provided the following DL COST $136,000
manufacturing costs for DM COST $80,000
the month of June. PACKAGING COSTS 18,800
=total VC $234,800
DL COST $136,000
DM COST $80,000
EQUIP DEP 24,000
FACTORY INSURANCE
19,000
FACTORY MAN. SAL.
12,800
JANITORS SAL. 5,000
PACKAGING COSTS
18,800
PROPERTY TAX 16,000
From the above

information, calculate
First Buy's total variable
costs.
A) $311,600
B) $62,300
C) $234,800
D) $38,400
26) Winslow Inc., a tennis A) $17,500

equipment manufacturer,
has variable costs of TC-(VC per unit * units)= TFC
$0.60 per unit of (31900-(.60*24000)=17500
product. In August, the
volume of production
was 24,000 units and
units sold were 20,000.
The total production
costs incurred were
$31,900. What are the
fixed costs per month?
A) $17,500
B) $19,900
C) $9,600
D) $14,400
27) Which of the D) total fixed costs

following costs remains
the same irrespective of AACSB: Concept
the changes in AICPA Functional: Measurement
production?
A) total mixed costs
B) total operating costs
C) total variable costs
D) total fixed costs
41) From the graph given C) AD

below, identify the fixed
costs line.
A) OB
B) AC
C) AD
D) AE
28) From the graph given A) OB

below, identify the sales
revenue line. starts at 0 and goes up
A) OB
B) AC
C) AD
D) AE
Identify the breakeven

point in the graph given
below.
31) When the total D) total fixed costs

variable costs are
deducted from total
mixed costs, we obtain
________.
A) mixed cost per unit
B) variable cost per unit
C) total high-low costs
32) Which of the C) Total mixed cost = (Variable cost per

following is the right unit × Number of units) + Total fixed cost
formula for calculating
total mixed cost?
A) Total mixed cost =
(Variable cost per unit ÷
Number of units) + Total
fixed cost
B) Total mixed cost =
(Variable cost per unit ×
Number of units) - Total
fixed cost
C) Total mixed cost =
(Variable cost per unit ×
Number of units) + Total

fixed cost
D) Total mixed cost =
(Variable cost per unit ÷
Number of units) - Total
fixed cost
Answer: C
33) Arturo Company Answer: FALSE

sells two generators— Explanation: Model A Model B
Model A and Model B— Selling price $456 $390
for $456 and $390, Less: variable cost -404 -320
respectively. The variable Contribution margin$ 52 $ 70
cost of Model A is $404
and of Model B is $320. The contribution margin of Model B ($70)
If Arturo Company's is more than that of Model A ($52). The
sales incentives reward sales team will be motivated to push sales
sales of the goods with of Model B more aggressively than Model
the highest contribution A.
margin, the sales force
will be motivated to
push sales of Model A
more aggressively than
Model B.
34) Arturo Company's Answer: TRUE

Model A generator sells Explanation: Model A Model B
for $456 and Model B Selling price $456 $390
sells for $390. The Less: variable cost -404 -320
variable cost of Model A Contribution margin $ 52 $ 70
is $404 and of Model B

is $320. The company
will generate lower
revenues but a higher
net income if it sells
more of Model B than
Model A.
35) The dollar amount C) contribution margin

that provides for
covering fixed costs and
then provides for
operating income is
called ________.
A) variable cost
B) total cost
C) contribution margin
D) margin of safety
36) Contribution margin A) net sales revenue

ratio is the ratio of
contribution margin to
________.
A) net sales revenue
B) cost of goods sold
C) total variable costs
37) Which of the D) administrative cost

following is a period
cost?
A) manufacturing
overhead
B) direct labor cost
C) direct materials cost
D) administrative cost
38) A ________ groups cost B) contribution margin income statement

by behavior; costs are
classified as either
variable costs or fixed
costs.
A) balance sheet
B) contribution margin
income statement
C) traditional income
statement
D) absorption costing
income statement
39) Contribution margin D) contribution margin divided by net

ratio is equal to ________. sales revenue
A) fixed costs divided by
contribution margin per
unit
B) net sales revenue per
unit minus variable costs
per unit
C) net sales revenue
minus variable costs
D) contribution margin
divided by net sales
revenue
40) Which of the C) Operating income

following appears as a
line item in a
contribution margin
income statement?
A) Gross profit
B) Cost of goods sold
C) Operating income
D) Selling and
administrative expenses
41) Young Company has A) $28

provided the following
information: Unit contribution margin = Net sales
revenue per unit - Variable costs per unit
Price per unit $40 40-12=28
VC per unit 12
FC per month 10,000
Calculate the
unit.
A) $28
B) $40
C) $52
D) $16
42) Young Company has D) 70%

information: 28/40=70%
Contribution margin ratio = Contribution
Price per unit $40 margin ÷ Net sales revenue
VC per unit 12
FC per month 10,000
What is the contribution

margin ratio?
A) 12%
B) 60%
C) 40%
D) 70%
Garcia's, a company that A) 75%

sells fishing nets
provides the following (6-1.5)/6=.75
information about its Unit contribution margin = Net sales
product: revenue per unit - Variable costs per unit
Contribution margin ratio = Contribution
Targeted operating margin ÷ Net sales revenue
income 50,000
selling price per unit
6.00
VC per unit 1.50
total fixed cost 125,000
What is the contribution

margin ratio?
A) 75%
B) 100%
C) 125%
D) 25%
44) The Perfect Fit A) $32 per shirt

Company sells hand
sewn shirts at $40 per sale price*CM=FC
shirt. It incurs monthly 40*.20=8
fixed costs of $5,000. Sale price - FC = VC
The contribution margin 40-8=$32 VC
ratio is calculated to be
20%. What is the variable
cost per shirt?
A) $32 per shirt
B) $48 per shirt

C) $40 per shirt
D) $38 per shirt
45) Pluto Hand blenders B) $30,000

Company sold 2,000
units in October at a Unit contribution margin = Net sales
price of $35 per unit. The revenue per unit - Variable costs per unit
variable cost is $20 per (352000)-(202000)
unit. Calculate the total 70000-40000=30000
contribution margin.
A) $70,000 OR
B) $30,000
C) $40,000 35-20=15
D) $20,000 15*2000=30000
46) Pluto Hand blenders C) $20,000

Company sold 2,000
units in October at a $70000-40000=30000
price of $35 per unit. The 30000-10000=20000
variable cost is $20 per
unit. The monthly fixed
costs are $10,000. What
is the operating income
earned in October?
A) $30,000
B) $70,000
C) $20,000
D) $40,000
47) Which of the B) Contribution margin ratio = Contribution

following formulae is the margin ÷ Net sales revenue
right formula for
calculating contribution
margin ratio?
A) Contribution margin
ratio = Contribution
margin + Net sales
revenue
B) Contribution margin
margin ÷ Net sales
revenue
C) Contribution margin
margin × Net sales
revenue
D) Contribution margin
margin - Net sales
revenue
48) Pluto Hand blenders Pluto Company

Company sells a product Contribution Margin Income Statement
for $80 per unit. Variable Month ended October 31, 2014
costs are $25 per unit
and fixed costs are Net sales revenue $160,000
$4,000 per month. Pluto Variable costs -50,000
sold 2,000 units in Contribution margin 110,000
October, 2014. Prepare Fixed costs -4,000
an income statement for Operating income $106,000
October using the
contribution margin
format.
49) One of the C) inventory levels

assumptions of cost-
volume-profit (CVP)
analysis is that there are
no changes in the ________.
A) accounts payable
B) cash balance
C) inventory levels
D) accounts receivables
50) Maywood Company B) 3 scarves

sells hand-knit scarves..
Each scarf sells for $25. Required sales in units = (FC + TaP) ÷ CM
The company pays $30 per unit
to rent vending space Unit CM = Net sales revenue per unit - VC
for one day. The variable per unit
costs are $15 per scarf. Unit CM = $25 - $15 = $10 per scarf
How many scarves
should the company sell Required sales in units = ($30 + 0) ÷ $10 = 3
each day in order to scarves
break even?
A) 4 scarves
B) 3 scarves
C) 5 scarves
D) 2 scarves
51) Maywood Company B) $75

sells hand-knit scarves..
Each scarf sells for $25. req in $ = (FC+TP)/(CM/Net sales)
The company pays $30
to rent a vending space (30+0)/(10/25)=75$
for one day. The variable
costs are $15 per scarf.
What total revenue
amount does the
company need to earn
to break even?
A) $85
B) $75
C) $50
D) $100
52) Young Guns D) 450 units

Company, which sells
tents, has provided the Required sales in units = (Fixed costs +
following information: Target profit) ÷ Contribution margin per
unit
price per unit $40 Unit contribution margin = Net sales
VC per unit 12 revenue per unit - Variable costs per unit
FC per unit 12600
Selling price $40
What are the required Less: variable cost -12
sales in units for Young Contribution margin $28
to break even?
A) 252 units Required sales in units = ($12,600 + 0) ÷ $28
B) 1,050 units = 450 units
C) 315 units
D) 450 units
53) Young Company has B) $18,000

information: Explanation: B) Required sales in dollars =
(Fixed costs + Target profit) ÷ Contribution
price per unit $40 margin ratio
VC per unit 12 Contribution margin ratio = Contribution
FC per unit 12600 margin ÷ Net sales revenue
What is the amount of Selling price $40

sales in dollars required Less: variable cost -12
for Young to break Contribution margin $28
even?
A) $1,050 Contribution margin ratio = ($28 ÷ $40) ×
B) $18,000 100 = 70%

C) $5,400
D) $12,600 Required sales in dollars = ($12,600 + 0) ÷
70% = $18,000
54) Roberts Tobacco B) $25,000

Company has fixed costs
of $10,000. Their Required sales in dollars = (Fixed costs +
contribution margin ratio Target profit) ÷ Contribution margin ratio
is 40% and ratio of Required sales in dollars = ($10,000 + 0) ÷
selling expenses to sales 40% = $25,000
is 20%. What is the
breakeven point in sales
dollars?
A) $50,000
B) $25,000
C) $4,000
D) $2,000
55) Jenna Manufacturers A) 250 units

produces flooring
material. The monthly Required sales in units = (Fixed costs +
fixed costs are $10,000 Target profit) ÷ Contribution margin per
per month. The unit unit
selling price is $75 and Unit contribution margin = Net sales
variable cost per unit is revenue per unit - Variable costs per unit
$35. If Jenna's managers
create a CVP graph from Selling price $75
volume levels of zero to Less: variable cost -35
500 units, at what sales Contribution margin 40
level (in units) will the Fixed costs 10,000
revenue and total cost Required sales in units ($10,000 ÷ $40)
lines intersect? $250
A) 250 units
B) 190 units
C) 240 units
D) 275 units
56) Jupiter Company C) ($625)

sells glass vases at a
wholesale price of $3 Net sales revenue $16,500
per unit. The variable Variable costs -9,625
cost of manufacture is Contribution margin 6,875
$1.75 per unit. The fixed Fixed costs -7,500
costs are $7,500 per Operating loss ($625)
month. It sold 5,500 units
during this month.
Calculate Jupiter's
operating income (loss)
for this month.
A) $9,000
B) $625
C) ($625)
D) ($7,500)
57) Colin was a D) 9 guitars

professional classical
guitarist until a Required sales in units = (Fixed costs +
motorcycle accident left Target profit) ÷ Contribution margin per
him disabled. After long unit
months of therapy, he
hired an experienced Contribution margin per unit = $700 × 0.60
luthier and started a = $420
small shop to make and
sell Spanish guitars. The Total fixed costs = $800 + $2,500 + $480 =
guitars sell for $700 and $3,780
the fixed monthly
operating costs are as Required sales in units = ($3,780 + 0) ÷
follows: $420 = 9 guitars
Rent and utilities $ 800

Wages and benefits to
luthier 2,500
Other expenses 480
Colin's accountant told

him about contribution
margin ratios and he
understood clearly that
for every dollar of sales,
$0.60 went to cover his
fixed costs, and that
anything past that point
was pure profit.
How many guitars does

Colin have to sell each
month to break even?
A) 6 guitars
B) 14 guitars
C) 7 guitars
D) 9 guitars
58) Colin was a B) $6,635

professional classical
guitarist until a Required sales in dollars = (Fixed costs +
motorcycle accident left Target profit) ÷ Contribution margin ratio
him disabled. After long Contribution margin ratio = 60%
months of therapy, he Total fixed costs = $1,000 + $2,500 + $481 =
hired an experienced $3,981
luthier and started a Required sales in dollars = ($3,981 + 0) ÷
small shop to make and 60% = $6,635
sell Spanish guitars. The
guitars sell for $700 and
the fixed monthly
operating costs are as
follows:
Rent and utilities $1,000

Wages and benefits to

luthier 2,500
Other expenses 481
Colin's accountant told

him about contribution
margin ratios and he
understood clearly that
for every dollar of sales,
$0.60 went to cover his
fixed costs, and that
anything past that point
was pure profit.
What is the amount of

revenue Colin should
earn each month to
break even?
A) $9,952
B) $6,635
C) $4,968
D) $5,833
59) Jenna Manufacturers Required sales in units = (Fixed costs +

produces flooring Target profit) ÷ Contribution margin per
material. The monthly unit
fixed costs are $10,000
per month. The unit Unit contribution margin = Net sales
selling price is $75 and revenue per unit - Variable costs per unit
variable cost per unit is
$35. How many units Selling price $75
should Jenna sell in Less: variable cost -35
order to earn $10,000 as Contribution margin 40
operating income? Fixed costs 10,000
Target profit 10,000
Required sales in units ($20,000 ÷ $40) 500
units
60) Jenna Manufacturers Answer: Required sales in dollars = (Fixed

produces flooring costs + Target profit) ÷ Contribution margin
material. The monthly ratio
fixed costs are $10,000 Unit contribution margin = Net sales
per month. The unit revenue per unit - Variable costs per unit
selling price is $75 and
variable cost per unit is Selling price $75.00
$35. Jenna wishes to Less: variable cost -35.00
earn an operating Contribution margin 40.00
income of $25,000. Contribution margin ratio (A) 0.53333
Using the contribution Target profit + Fixed costs (B) 35,000
martin ratio, calculate Required sales in dollars (B ÷ A) $65,625
the total revenue.
(Round intermediate
calculations to five
decimal places.)
61) When the total fixed D) remains the same

costs increases, the
unit ________.
A) increases
B) decreases
C) increases
proportionately
D) remains the same
62) When the total fixed A) increases

costs increases, the
breakeven point ________.
A) increases
B) decreases
C) decreases
proportionately
D) remains the same
63) When the total fixed C) remains the same
costs decreases, the
unit ________.
A) increases
B) decreases
C) remains the same
D) decreases
proportionately
64) When the total fixed B) decreases

costs decreases, the
breakeven point ________.
A) increases
B) decreases
C) remains the same
D) increases
proportionately
65) When the selling A) increases

price per unit decreases,
the breakeven point
________
A) increases
B) decreases
C) remains the same
D) decreases
proportionately
66) When the selling D) decreases

price per unit decreases,
the contribution margin
per unit ________.
A) increases
proportionately
B) increases
C) remains the same
D) decreases
67) Which of the D) The breakeven point increases.

following statements is
true if the variable cost
per unit increases while
the sale price per unit
and total fixed costs
remain constant?
A) The breakeven point
decreases.
B) The contribution
margin increases.
C) The breakeven point
remains the same.
D) The breakeven point
increases.
68) Which of the D) The breakeven point decreases.

following statements is
true if total fixed costs
decreases while the
sales price per unit and
variable costs per unit
remain constant?
A) The contribution
margin increases.
B) The breakeven point
increases.
C) The contribution
margin decreases.
D) The breakeven point
decreases.
69) Which of the D) an increase in the sales price per unit

following will lower the
breakeven point?
A) a decrease in the
sales price per unit
B) an increase in total
fixed costs
C) an increase in the
variable costs per unit
D) an increase in the
sales price per unit
70) A small business C) It will go down by $2,500.

produces a single
product and reports the Contribution margin (before reduction in
following data: selling price) = $8.00 - $5.00 = $3.00
Operating income (before reduction in
Price $8.00 per unit selling price) = (10,000 × $3.00) - $21,000 =
Variable cost $5.00 per $9,000
unit
Fixed cost $21,000 per Contribution margin (after reduction in
month selling price) = $7.50 - $5.00 = $2.50
Volume 10,000 per Operating income (after reduction in
month selling price) = (11,000 × $2.50) - $21,000 =
$6,500
The company believes
that the volume will go Decrease in operating income due to
up to 11,000 units if the reduction in selling price = $9,000 -
company reduces its $6,500 = $2,500
price to $7.50.How
would this change affect
operating income?
A) It will go up by
$2,500.
B) It will go up by
$9,000.
C) It will go down by
$2,500.
D) It will go down by
$9,000.
71) Grantham Company Answer: FALSE

sells two products, X and Total contribution per unit of the X and Y =
Y. For the coming year, ($5 × 1) + ($3 × 2) = $11.00
Grantham predicts the Weighted-average contribution margin
sale of 5,000 units of X per unit = $11 per unit ÷ 3 units = $3.67
and 10,000 units of Y. The
contribution margins of
the two products are $5
and $3, respectively. The
weighted-average
contribution margin
would be $5.50.
72) For the next year, Answer: TRUE

Hall & Co. predicts the Explanation: Total contribution = ($6 ×
sale of 15,000 units of a 15,000) + ($9 × 30,000) = $90,000 +
product with a $270,000 = $360,000
contribution margin of Weighted-average contribution margin
$6 per unit and 30,000 per unit = $360,000 ÷ 45,000 = $8
units of another product
with a contribution
margin of $9 per unit.
The weighted-average
unit is $8.
73) A company that sells Answer: FALSE

multiple products will
always set selling prices
such that all products

have the same
contribution margin.
74) The Purely Pizza Answer: TRUE

Company sells pizzas in Explanation: Total contribution = $12 + $18
two different sizes— = $30
medium and large. The Weighted-average contribution margin
two products sell in per unit = $30 ÷ 2 = $15
equal numbers. The
contribution margin of a
medium pizza is $12 and
the contribution margin
of a large pizza is $18.
The weighted average
contribution margin is
$15.
75) The Purely Pizza Contribution margin of medium pizza =

Company sells pizzas in $10 × 2 = $20
two different sizes— Contribution margin of large pizza = $16 × 1
medium and large. The = $16
number of medium Total contribution = $20 + $16 = $36
pizzas sold is twice the Weighted-average contribution margin
number of large pizzas per unit = ($20 + $16) ÷ 3 = $12
sold. The contribution
margin of a medium
pizza is $10 and the
contribution margin of a
large pizza is $16. The
weighted average
contribution margin is
$15.
76) Operating leverage D) sales volume changes
predicts the effects fixed

costs have on changes in
operating income when
________.
A) production is
discontinued
B) there are no sales
returns
C) variable costs change
D) sales volume changes
77) The degree of A) dividing the contribution margin by

operating leverage can operating income
be measured by ________.
A) dividing the
contribution margin by
operating income
B) dividing the fixed
costs by the sales price
per unit
C) multiplying the
contribution margin to
sales revenue
D) dividing the fixed
costs by contribution
margin
78) A company's D) cost structure

proportion of fixed costs
to variable costs is
called its ________.
A) target profit
B) relevant range
C) mixed cost
D) cost structure
79) Gould Enterprises B) $1,950

sells computer disks for
$1.50 per disk. Unit Margin of safety = (4,300 - 3,000) × $1.50 =
variable expenses total $1,950
$0.90. The breakeven
point in units is 3,000
and expected sales in
units are 4,300. What is
the margin of safety in
dollars?
A) $4,500
B) $1,950
C) $3,870
D) $6,450
80) Divine Foods B) 1,000 units

produces a gourmet
condiment which sells (5000FC+0TP)/10CM=500u to BE
for $16 per unit. Variable
costs are $6 per unit, 1500Exp.Sales-500uBE=1000units
and fixed costs are
$5,000 per month. If
Divine expects to sell
1,500 units, compute the
margin of safety in units.
A) 500 units
B) 1,000 units
C) 1,500 units
D) 8,000 units
81) Divine Foods A) $16,000

produces a gourmet
condiment which sells (5000FC+0TP)/10CM=500u to BE
for $16.00 per unit.
Variable costs are $6 per 1500Exp.Sales-500uBE=1000units
unit, and fixed costs are

$5,000 per month. If 1000units*16$=$16,000
Divine expects to sell
1,500 units, compute the
margin of safety in
dollars.
A) $16,000
B) $15,000
C) $10,000
D) $6,000
82) Antique Works is A) 8 units

owned and operated by
a craftsman who makes Sales price per unit $720
replicas of historic Less variable cost per unit -470
firearms for museums, Contribution margin per unit $250
sportsmen, and
collectors. The cost data Required sales in units = (Fixed costs +
are as follows: Target profit) ÷ Contribution margin per
unit
Price per unit $720 Required sales in units = ($8,000 + 0) ÷
Variable costs per unit $250 = 32 units
470
Fixed costs per month Expected sales - Breakeven sales = Margin
8,000 of safety in units
40 units - 32 units = 8 units
If Antique expects to sell
40 units per month, what
is his margin of safety
expressed in units per
month?
A) 8 units
B) 6 units
C) 4 units
D) 2 units
83) Antique Works is C) $5,760

owned and operated by
a craftsman who makes Explanation: C) Sales price per unit $720
replicas of historic Less variable cost per unit -470
firearms for museums, Contribution margin per unit $250
sportsmen, and
collectors. He is Required sales in units = (Fixed costs +
currently producing 40 Target profit) ÷ Contribution margin per
flintlock muskets per unit
month. Cost data are as Required sales in units = ($8,000 + 0) ÷
follows: $250 = 32 units
Price per unit $720 Expected sales - Breakeven sales = Margin

Variable costs per unit of safety in units
470 40 units - 32 units = 8 units
Fixed costs per month
8,000 Margin of safety in units × Sales price per
unit = Margin of safety in dollars
If Antique expects to sell 8 units × $720 per unit = $5,760
40 units per month, how
much is his margin of
safety expressed in sales
revenue?
A) $2,000
B) $3,760
C) $5,760
D) $2,760
84) Mist Beverages A) $3.99 per product

Company sells two
products, A and B. Mist Weighted contribution = ($3.50 × 2,500
predicts that it will sell units) + ($4.80 × 1,500 units) = $8,750 +
2,500 units of A and $7,200 = $15,950
1,500 units of B during
the next period. The unit Weighted-average contribution margin
contribution margins are
$3.50 and $4.80, per unit = $15,950 ÷ 4,000 units = $3.99 per
respectively. What is the unit
weighted-average unit
contribution margin?
A) $3.99 per product
B) $5.18 per product
C) $2.18 per product
D) $3.11 per product
85) McDaniel Company D) $4.36 per product

sells two products—J and
B. McDaniel predicts that (72002.85)+
it will sell 7,200 units of J (56006.3)=55800/(7200+5600)=4.36
and 5,600 units of B in
the next period. The unit
contribution margins are
$2.85 and $6.30,
respectively. What is the
weighted-average unit
A) $9.96 per product
B) $4.58 per product
C) $7.75 per product
D) $4.36 per product
86) Becky's Bakery sells D) $1.90 per muffin

three large muffins for
every two small ones. A 3-2=1 5-2.5=2.5
small muffin sells for (1cm2)+(2.5cm3)=9.5/5=1.90
$3.00, with a variable
cost of $2.00. A large
muffin sells for $5.00
with a variable cost of
$2.50. What is the
weighted-average
(Round your
intermediate calculations
to one decimal place.)
A) $1.93 per muffin
B) $1.75 per muffin
C) $1.25 per muffin
D) $1.90 per muffin
87) Popeye's, a local C) $0.77 per drink.

convenience store, sells
soft drinks. It sells two
large drinks for every
small drink. A large drink
sells for $1.50 with a
variable cost of $0.60. A
small drink sells for $1.00
with a variable cost of
$0.50. The weighted
average contribution
margin is: (Round your
intermediate calculations
and final answer to two
decimal places.)
A) $1.15 per drink.
B) $2.30 per drink.
C) $0.77 per drink.
D) $0.60 per drink.
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CH 20 ACC test review

contribution margin... contribution margin ratio variable cost per unit

Terms in this set (87)

1) Which of the following c. direct material cost

2) A 15% increase in D) 15% increase in total variable costs

3) Variable cost per unit, C) remain the same as production levels

4) Which of the following C) They will decrease as production

5) Which of the following A) They will remain the same as

6) The fixed costs per A) increase as production decreases

7) A cellphone service C) 450 minutes

8) Ron Moss, a manager D) $7.00

company's water bill?

9) Ron Moss, a manager C) $1,000

10) Which of the A) fixed cost

11) Costs that have both C) mixed cost

12) Which of the B) variable cost

13) Jupiter Inc. incurred D) $3

Venus Inc. has fixed C) $600,000

15) The highest value of C) $10,000

16) The highest value of C) $5.00 per unit

the variable cost per unit

18) The phone bill for a C) $2,425

What is the fixed portion

19) The phone bill for a A) $1.25

JAN 460 MIN $3,000

What is the variable cost

20) The phone bill for a C) $2,900

JAN 460 MIN $3,000

If the company uses 380

21) Porterhouse B) remain the same

23) Porterhouse C) increase by an amount less than 20%

Company incurs both

24) First Buy Television D) $76,800

From the above

25) First Buy Television C) $234,800

From the above

26) Winslow Inc., a tennis A) $17,500

27) Which of the D) total fixed costs

41) From the graph given C) AD

28) From the graph given A) OB

Identify the breakeven

31) When the total D) total fixed costs

32) Which of the C) Total mixed cost = (Variable cost per

Number of units) + Total

33) Arturo Company Answer: FALSE

34) Arturo Company's Answer: TRUE

is $404 and of Model B

35) The dollar amount C) contribution margin

36) Contribution margin A) net sales revenue

37) Which of the D) administrative cost

38) A ________ groups cost B) contribution margin income statement

39) Contribution margin D) contribution margin divided by net

40) Which of the C) Operating income

41) Young Company has A) $28

42) Young Company has D) 70%

What is the contribution

Garcia's, a company that A) 75%

What is the contribution

44) The Perfect Fit A) $32 per shirt

B) $48 per shirt

45) Pluto Hand blenders B) $30,000

46) Pluto Hand blenders C) $20,000