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Variable cost / absorption cost/ break even

Can you please help with these true and false review questions?

1. If the variable expense per unit increases and all other factors remain constant, the contribution margin ratio will increase.
TRUE / FALSE

2 An increase in total fixed expenses will not affect the break-even point so long as the contribution margin ratio remains unchanged.
TRUE / FALSE
3 All other things the same, a reduction in the variable expense per unit will cause the break-even point to rise.

TRUE / FALSE
4 The formula for the break-even point is the same as the formula to attain a given target profit for the special case where the target profit is zero.

TRUE / FALSE

5 A shift in the sales mix from products with high contribution margin ratios toward products with low contribution margin ratios will raise the break-even point.
TRUE / FALSE

6. The margin of safety in dollars equals the excess of budgeted (or actual) sales over the break-even volume of sales.
TRUE / FALSE

7. A company with high operating leverage will experience a lower reduction in net operating income in a period of declining sales than will a company with low operating leverage.
TRUE / FALSE

Solution Preview

1. If the variable expense per unit increases and all other factors remain constant, the contribution margin ratio will increase.
FALSE

The contribution margin will decline as variable costs are increasing. The formulae of Contribution margin Ratio = (Sales -Variable cost)/Sales

2 An increase in total fixed expenses will not affect the ...

Solution Summary

Response discusses the Variable cost / absorption cost/ break even

$2.19