Exam

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

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

2) Given breakeven sales in units of 22,000 and a unit contribution margin of $2.40, how many units must be sold
to reach a target operating income of $4,524?
A) 1,885 B) 4,863 C) 23,885 D) 11,671

3) Belton Company currently sells its products for $25 per unit. Management is contemplating a 20% increase in
the sales price for next year. Variable costs are currently 30% of sales revenue and are not expected to change

m
next year. Fixed expenses are $150,000. What is the breakeven point in units at the current sales price?

er as
A) 8,572 units B) 10,650 units C) 20,000 units D) 6,667 units

co
eH w
4) The Pearson Company has a contribution margin ratio of 25%. Pearson's operating income was $100,000 when

o.
sales totaled $1,000,000. What were Pearson's fixed expenses?
A) $150,000 rs e B) $225,000 C) $350,000 D) $250,000
ou urc
5) Jenny was reviewing the water bill for her doggy day spa and determined that her highest bill, $3,000, occurred
in July when she washed 2,000 dogs and her lowest bill, $2,000, occurred in November when she washed 1,000
o

dogs. What was the variable cost per dog wash associated with Jenny's water bill?
aC s

A) $1.00 B) $2.00 C) $.67 D) $0.50

vi y re

6) The Prentice Company has provided the following information pertaining to its most recent operations:

Sales $250,000
ed d

Contribution margin ratio $40%

ar stu

Operating income $50,000

What is the breakeven point in sales dollars?

A) $500,000 B) $125,000 C) $100,000 D) $200,000
sh is
Th

7) Which of the following will result in an increase in the breakeven point, a decrease in the margin of safety, and a
decrease in the contribution margin per unit?
A) A decrease in fixed costs.
B) An increase in the unit cost of direct materials.
C) A decrease in the hourly wage paid to direct laborers.
D) An increase in the selling price per unit.

8) If the sales price per unit is $8.50, the variable expenses per unit is $6.75, and the breakeven point in sales
dollars is $331,500, what are total fixed costs?
A) $22,286 B) $39,000 C) $26,325 D) $68,250

1
https://www.coursehero.com/file/32959247/Test-1-V3pdf/
 9) Which of the following statements is NOT correct?
A) The breakeven point increases and the margin of safety decreases when the contribution margin ratio
decreases.
B) The breakeven point increases and the margin of safety decreases when fixed costs increase.
C) The breakeven point decreases and the margin of safety increases when fixed costs decrease.
D) The breakeven point decreases and the margin of safety increases when the variable cost per unit
increases.

10) The Red Wing Company reported sales of $750,000, a contribution margin ratio of 25%, a variable cost of $150
per unit, and fixed costs totaling $125,000. What was the margin of safety in units?
A) 3,750 B) 2,500 C) 1,000 D) 1,250

11) Which of the following would explain why the margin of safety in dollars increased even though total sales
dollars did not change?
A) The sales price per unit increased B) The breakeven point increased
C) Fixed costs increased D) The variable cost per unit increased

m
er as
12) Which of the following statements describes variable costs?

co
A) They vary on a per unit basis but do not vary in total as production changes.

eH w
B) They are fixed in total throughout the relevant range of activity.

o.
C) They are constant on a per unit basis but vary in total as production changes.
rs e
D) They decrease on a per unit basis as production volume increases.
ou urc
13) Lightfoot Company sells its product for $55 and has variable costs of $30 per unit. Total fixed costs are $25,000.
What will be the effect on the breakeven point if variable costs increase by 10% due to an increase in the cost of
o

direct materials?
aC s

A) It will decrease by 242 units. B) It will decrease by 136 units.

vi y re

C) It will increase by 242 units. D) It will increase by 136 units.

14) Belton Company currently sells its products for $25 per unit. Management is contemplating a 20% increase in
the sales price for next year. Variable costs are currently 30% of sales revenue and are not expected to change
ed d

next year. Fixed expenses are $150,000. If fixed costs were to decrease 10% during the current year, contribution
ar stu

margin would do what?

A) Remain the same B) Impossible to determine with the given data
C) Increase 10% D) Decrease 10%
sh is

15) If total fixed costs are $95,000, contribution margin per unit is $8.00, and targeted operating income is $30,000,
Th

how many units must be sold to breakeven?

A) 5,625 B) 3,750 C) 11,875 D) 8,125

2
https://www.coursehero.com/file/32959247/Test-1-V3pdf/
 Answer Key
Testname: MINITEST 1 -ISB

1) B
2) C
3) A
4) A
5) A
6) B
7) B
8) D
9) D
10) D
11) A
12) C
13) D
14) A

m
15) C

er as
co
eH w
o.
rs e
ou urc
o
aC s
vi y re
ed d
ar stu
sh is
Th

3
https://www.coursehero.com/file/32959247/Test-1-V3pdf/

Powered by TCPDF (www.tcpdf.org)