17) Pacific Company sells only one product for $11 per unit, variable production costs are $3 per unit, and selling and administrative costs are $1.50 per unit. Fixed costs for 10,000 units are $5,000. The operating income is ________. A) $6.50 per unit B) $6.00 per unit C) $5.50 per unit D) $5.00 per unit Answer: B
Explanation: B) Operating income = $11 ? $3 ? $1.50 - ($5,000 / 10,000) = $6.00
Diff: 2
Objective: 1
AACSB: Application of knowledge
18) The contribution income statement highlights ________. A) gross margin
B) the segregation of costs into period costs and inventoriable costs C) different product lines D) variable and fixed costs Answer: D
Diff: 1
Objective: 1
AACSB: Analytical thinking
19) Fixed costs equal $15,000, unit contribution margin equals $25, and the number of units sold equal 1,150. Operating income is ________. A) $28,750 B) $13,750 C) $15,000 D) $14,750 Answer: B
Explanation: B) (1,150 × $25) ? $15,000 = $13,750
Diff: 2
Objective: 1
AACSB: Application of knowledge
5
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Answer the following questions using the information below:
Northern Star sells several products. Information of average revenue and costs is as follows: Selling price per unit $20.00 Variable costs per unit: Direct material $4.00 Direct manufacturing labor $1.60 Manufacturing overhead $0.40 Selling costs $2.00 Annual fixed costs $96,000 The company sells 12,000 units at the end of the year.
20) The contribution margin per unit is ________. A) $11.00 B) $12.00 C) $4.00 D) $14.00 Answer: B
Explanation: B) Contribution margin per unit = ($20 ? $4 ? $1.60 ? $0.40 ? $2) = $12
Diff: 2
Objective: 1
AACSB: Application of knowledge
21) If direct labor and direct material costs increase by $1 each, contribution margin ________. A) increases by $20,000 B) increases by $14,000 C) decreases by $24,000 D) decreases by $14,000 Answer: C
Explanation: C) Contribution margin = ($20 ? $5 ? $2.60 ? $0.40 ? $2) × 12,000 = $120,000.
Diff: 3
Objective: 1
AACSB: Application of knowledge
6
Copyright ? 2015 Pearson Education, Inc.
Answer the following questions using the information below:
Bell Company sells several products. Information of average revenue and costs is as follows: Selling price per unit $28.50 Variable costs per unit: Direct material $5.25 Direct manufacturing labor $1.15 Manufacturing overhead $0.25 Selling costs $1.85 Annual fixed costs $110,000 The company sells 10,000 units.
22) The contribution margin per unit is ________. A) $15 B) $20 C) $22 D) $125
Answer: B
Explanation: B) Contribution margin per unit = $28.50 ? $5.25 ? $1.15 ?$0.25 ? $1.85 = $20.00
Diff: 2
Objective: 1
AACSB: Application of knowledge
23) What is the proportion of variable costs to total costs? A) 45.00% B) 48.56% C) 53.56% D) 43.56% Answer: D
Explanation: D) Total variable costs = $5.25 + $1.15 + $0.25 + $1.85 = $8.50 × 10,000 = $85,000 Total costs = $85,000 + $110,000 = $195,000.
Variable cost proportion = $85,000 / $195,000 = 43.56%
Diff: 2
Objective: 1
AACSB: Application of knowledge
7
Copyright ? 2015 Pearson Education, Inc.
Answer the following questions using the information below:
Alex Furniture sells a table for $850. His fixed costs are $25,000, while his variable costs are $500 per table. He currently plans to sell 175 tables this month.
24) What is the budgeted revenue for the month assuming that Alex sells 175 tables? A) $145,750 B) $148,750 C) $150,000 D) $142,250 Answer: B
Explanation: B) Budgeted revenue = 175 × $850 = $148,750
Diff: 2
Objective: 1
AACSB: Application of knowledge
25) What is the budgeted operating income for the month assuming that Alex sells 175 tables? A) $45,250 B) $37,000 C) $36,250 D) $36,750 Answer: C
Explanation: C) Budgeted operating income = $148,750 ? *(175 × $500) + $25,000+ = $148,750 ? $112,500 = $36,250
Diff: 2
Objective: 1
AACSB: Application of knowledge
26) Winnz sells 8,000 units resulting in $100,000 of sales revenue, $35,000 of variable costs, and $45,000 of fixed costs. The contribution margin percentage is ________. A) 66.67% B) 65.0% C) 37.5% D) 75.0% Answer: B
Explanation: B) ($100,000 ? $35,000) / $100,000 = 65%
Diff: 2
Objective: 1
AACSB: Application of knowledge
27) Which of the following is the mathematical expression of contribution margin ratio? A) Contribution margin ratio = Contribution margin percentage × Revenues (in dollars) B) Contribution margin ratio = Contribution margin percentage × Fixed costs (in dollars) C) Contribution margin ratio = Contribution margin percentage × Variable costs (in dollars) D) Contribution margin ratio = Contribution margin percentage × Operating leverage Answer: A
Diff: 1
Objective: 1
AACSB: Analytical thinking
8
Copyright ? 2015 Pearson Education, Inc.