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Multiple Choice relating to Cost Volume Profit

16. Item A sells for $5. Fixed costs per unit are $1, and variable costs per unit are $3. The contribution margin ratio for item A is 20%.
a. True
b. False

17. Which of the following average costs per unit may be expected to decrease by the greatest percentage with an increase in the volume of units produced?
a. Average fixed cost per unit.
b. Average semivariable cost per unit.
c. Average variable cost per unit.
d. Average total cost per unit.

18. A semivariable cost:
a. Increases and decreases directly and proportionately with changes in volume.
b. Changes in response to a change in volume, but not proportionately.
c. Increases if volume increases, but remains constant if volume decreases.
d. Changes inversely in response to a change in volume.

19. Which of the following is an example of a fixed cost for an airline?
a. Depreciation on the corporate headquarters.
b. Fuel costs.
c. Income taxes expense.
d. Passengers' meals.

20. The break-even point in a cost-volume-profit graph is always found:
a. At 50% of full capacity.
b. At the sales volume resulting in the lowest average unit cost.
c. At the volume at which total revenue equals total variable costs.
d. At the volume at which total revenue equals total fixed costs plus total variable costs.

Solution Preview

16. Contribution Margin is Selling Price less the Variable cost. Here selling price is $5 and variable cost is $3, contribution margin is $2 and as a ratio is 2/5=40%.
Answer b. ...

Solution Summary

The solution explains calculations relating to cost volume profit