CVP questions
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Please answer part one and explain in detail for part two.
1. A cost that changes in proportion to changes in volume of activity is a(n):
A. Differential cost.
B. Fixed cost.
C. Incremental cost.
D. Variable cost.
E. Product cost.
2. A target income refers to:
A. Income at the break-even point.
B. Income from the most recent period.
C. Income planned for a future period.
D. Income only in a multiproduct environment.
E. Income at the minimum contribution margin.
3. The excess of expected sales over the sales level at the break-even point is known as the:
A. Sales turnover.
B. Profit margin.
C. Contribution margin.
D. Relevant range.
E. Margin of safety.
4. In cost-volume-profit analysis, the unit contribution margin is:
A. Sales price per unit less cost of goods sold per unit.
B. Sales price per unit less unit fixed cost per unit .
C. Sales price per unit less total variable cost per unit .
D. Sales price per unit less unit total cost per unit.
E. The same as the contribution margin ratio.
The following information describes a product expected to be produced and sold by Hadley Company:
Required:
(a) Calculate the contribution margin ratio.
(b) Calculate the break-even point in dollar sales.
(c) What dollar amount of sales would be necessary to achieve a pretax income of $120,000?
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