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# Business / Managerial Accounting :MCQ

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* Which of the following actions will cause the breakeven point to increase?

a. Decrease variable costs.
b. Decrease selling price.
c. Decrease fixed costs.
d. Decrease safety margin.

* The following monthly data are available for the W.K. Kent Company when it sold 20,000 units of Product A and 5,000 units of

Product B:

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Product A Product B TOTAL
Sales \$220,000 \$80,000 \$300,000
Variable expenses 120,000 64,000 154,000
Contribution margin \$100,000 16,000 116,000
Fixed expenses 36,540
Net operating income \$79,460

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* The breakeven sales for the month for the company are:

a. \$17,125
b. \$59,576
c. \$94,500
d. \$111,650

* A "step cost" is a

a. fixed cost that is constant.
b. cost that is fixed within one range, then increases and is fixed at a higher amount in a higher range.
c. cost that is added to the income statement in steps over a number of different consecutive periods.
d. mixed cost.

* The y-axis on a scatter plot developed for cost estimation typically shows the

a. fixed cost.
b. cost driver.
c. variable cost.
d. total cost.

* The following table presents the correlations among operating costs and three possible cost drivers for Gilbert Company based on

monthly data gathered over the last five years:

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Operating Costs | Costumer Visits Days Open Average Temperature

Operating Costs 1.00
Customer Visits 0.65 1.00
Days Open 0.21 0.52 1.00
Average Temperature -0.73 -0.46 0.11 1.00

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Which of the following statements is true concerning the correlations among these variables?

a. The highest correlation is between customer visits and operating costs.
b. The lowest correlation is between days open and average temperature.
c. Both statements are true: the highest correlation is between customer visits and operating costs and the lowest correlation is between days open and average temperature.
d. None of these answers are true.

#### Solution Preview

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* Which of the following actions will cause the breakeven point to increase?

a. Decrease variable costs.
b. Decrease selling price.
c. Decrease fixed costs.
d. Decrease safety margin.

ANSWER - b Decrease selling price

* The following monthly data are available for the W.K. Kent Company when it sold 20,000 units of Product A and 5,000 ...

#### Solution Summary

Solution contains answers of the multiple choice questions.

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## Business / Managerial Accounting - Please select ONLY: a,b,c, or d.

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At an activity level of 20,000 units produced, fixed costs total \$12,000 and variable costs total \$44,000. What would be the amount of

total costs if 25,000 units are produced, assuming that this activity level is within the relevant range?

a. \$56,000
b. \$59,000
c. \$67,000
d. \$70,000

The contribution margin is calculated as:

a. sales minus fixed costs, divided by sales.
b. sales minus variable costs, divided by sales.
c. sales minus fixed costs.
d. sales minus variable costs.

Last month, Brown Company had total sales revenue of \$75,000. Variable costs totaled \$15,000, and fixed costs totaled \$40,000.

What was the contribution margin?

a. \$60,000
b. \$55,000
c. \$35,000
d. \$20,000

When Delton, Inc. sold 30,000 units of product, total sales revenue was \$210,000, fixed costs totaled \$30,000 and net income was

\$120,000. What was the contribution margin per unit?

a. \$6.00
b. \$5.00
c. \$3.00
d. \$2.00

The breakeven point in units is calculated using

a. fixed costs and the contribution margin ratio.
b. variable costs and the unit contribution margin.
c. variable costs and the contribution margin ratio.
d. fixed costs and the unit contribution margin.

Which of the following is NOT an assumption of CVP analysis?

a. In multiproduct companies, the sales mix is constant over the relevant range
b. Variable cost per unit is constant over the relevant range
c. Fixed cost per unit is constant over the relevant range
d. Total revenue behaves in a linear fashion

Golden Fixtures Company sells a single product for \$52 per unit. If variable expenses are 70% of sales and fixed expenses total

\$16,000, the breakeven point in sales dollars will be

a. \$53,333.
b. \$36,400.
c. \$22,857.
d. \$1,025.

Hortense Flowers Co. sells a single product for \$28 per unit. If unit variable cost is \$16 per unit of sales and fixed expenses total

\$12,000, the breakeven point will be

a. 28,000 units.
b. 21,000 units.
c. 1,000 units.
d. 750 units.

Jazzie Jumpers Company produces one product that is sold for \$32 per unit. Variable costs are \$14 per unit and total fixed costs are

\$72,000. What is dollar amount of sales revenue needed to achieve a target profit of \$90,000?

a. \$370,285
b. \$288,000
c. \$128,000
d. \$ 9,000

The margin of safety is the excess of

a. actual net operating income over expected net operating income.
b. expected or actual sales over break-even sales.
c. expected or actual sales over expected or actual fixed costs.
d. expected or actual sales over expected or actual variable costs.

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