Chapter 7

The contribution margin is...

• Sales revenue minus mixed expenses

• Sales revenue minus fixed expenses

• Sales revenue minus variable expenses

• Sales revenue minus operating expenses

The contribution margin ratio is..

• Fixed expenses divided by variable expenses

• Contribution margin divided by variable expenses

• Contribution margin divided by sales revenue

• Sales revenue divided by contribution margin

The formula to find the break- even point or a target profit volume in terms of number of units that need to be sold is..

• (Fixed expenses + Variable expenses) ÷ Contribution margin per unit

• (Fixed expenses + Operating income) ÷ Contribution margin per unit

• (Fixed expenses + Variable expenses) ÷ Sales revenue

• (Fixed expenses + Operating income) ÷ Sales revenue

Which of the following would be shown in a CVP graph

• Breakeven Point

• Operating income area

• Operating Win area

• All of the above

All else being equal, if a

company’s sale price increases, then the..

• unit contribution margin will decrease.

• volume needed to break even will increase

• total contribution margin will increase.

• sales amount needed to break even will increase.

All else being equal, if a company’s total variable costs decrease, then the..

• unit contribution margin will decrease.

• volume needed to break even will increase

• total contribution margin will decrease.

• sales amount needed to break even will decrease.

Which of the following is true regarding a company that offers more than one product?

• It has one unique breakeven point

• The breakeven point is dependent on sales mix assumptions

• Breakeven should be found using a simple average contribution margin

• Breakeven should be found for each product individually

Which of the following is correct regarding choosing between two cost structures:

• The indifference point is the point at which costs under two options are the same

• The indifference point is the point where total revenues equal total expenses

• The indifference point is the point where one option is better than the other