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Multiple Choice

1. Burning Company, a producer of salsa, has the following information:

Income tax rate 30%
Selling price per unit $5.00
Variable cost per unit $3.00
Total fixed costs $90,000.00

The break-even point in dollars is:

a)$150,000
b)$180,000
c)$225,000
d)$270,000

2. ________ is all variable costs divided by sales.
a)Gross margin
b)Contribution-margin ratio
c)Variable-cost ratio
d)The sales mix

3. Which of the following is not a cost driver of customer services costs?
a)Hours spent servicing products are not a cost driver of customer services costs.
b)Travel costs are not a cost driver of customer services costs.
c)Number of service calls is not a cost driver of customer services costs.
d)All of these answers are correct.

4. Suppose a Holiday Inn hotel has annual fixed costs applicable to its rooms of $1.2 million for its 300-room hotel, average daily room rents of $50, and average variable costs of $10 for each room rented. It operates 365 days per year. The amount of net income on rooms that will be generated if the hotel is completely full throughout the entire year is:
a)$(1,188,000)
b)$4,275,000
c)$3,180,000
d)$5,475,000

Solution Preview

1. Breakeven dollars = Fixed cost/contribution margin ratio
Contribution margin ratio = (5-3)/5 = 0.4
Breakeven dollars = 90,000/0.4 ...

Solution Summary

The solution explains some multiple choice questions in accounting

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