Budgeting Concepts Quiz

Which type of budget focuses only on cash inflows and outflows?

• Operating budget

• Master budget

• Cash budget

• Flexible budget

Which of the following budgets is part of the operating budget?

• Production budget

• Capital expenditure budget

• Cash budget

• Budgeted balance sheet

What does the contribution margin represent?

• The difference between total sales and total fixed costs.

• The portion of sales revenue that contributes to covering fixed costs and generating profit.

• The profit earned on each unit sold.

• The ratio of fixed costs to total costs.

Which of the following is an assumption of CVP analysis?

• Costs are linear throughout the relevant range.

• Fixed costs change with production levels.

• Variable costs remain constant per unit but change in total.

• Both a and c.

If the contribution margin per unit is $25 and fixed costs are $50,000, what is the break-even sales volume in units?

• 1,000

• 2,000

• 3,000

• 4,000

What is the formula for the contribution margin ratio?

• (Sales - Fixed Costs) / Sales

• Contribution Margin / Sales

• Contribution Margin / Variable Costs

• Sales / Contribution Margin

Which of the following statements is correct about CVP analysis?

• CVP analysis cannot be used for decision-making.

• CVP analysis only applies to companies with no fixed costs.

• CVP analysis determines how changes in costs and volume affect profits.

• CVP analysis ignores the concept of contribution margin.

What is the break-even point?

• When sales revenue equals total costs.

• When variable costs equal fixed costs.

• When total costs exceed total revenue.

• When total profit equals total fixed costs.

If fixed costs are $10,000, variable costs per unit are $5, and the selling price per unit is $15, what is the break-even volume?

• 500 units

• 1,000 units

• 2,000 units

• 3,000 units

A company lowers its fixed costs. What is the impact on the break-even point?

• Break-even point increases.

• Break-even point decreases.

• Break-even point remains unchanged.

• It depends on variable costs.