Study_questions_Ch.6

Study_questions_Ch.6 - Study questions Ch.6 Study questions...

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Study questions Ch.6 Study questions Ch.6 Student: ___________________________________________________________________________ 1. Contribution margin can be defined as: A. the amount of sales revenue necessary to cover variable expenses. B. sales revenue minus fixed expenses. C. the amount of sales revenue necessary to cover fixed and variable expenses. D. sales revenue minus variable expenses. 2. Which of the following statements is correct with regard to a CVP graph? A. A CVP graph shows the maximum possible profit. B. A CVP graph shows the break-even point as the intersection of the total sales revenue line and the total expense line. C. A CVP graph assumes that total expense varies in direct proportion to unit sales. D. A CVP graph shows the operating leverage as the gap between total sales revenue and total expense at the actual level of sales. 3. If both the fixed and variable expenses associated with a product decrease, what will be the effect on the contribution margin ratio and the break-even point, respectively? A. Item A B. Item B C. Item C D. Item D 4. Which of the following is true regarding the contribution margin ratio of a single product company? A. As fixed expenses decrease, the contribution margin ratio increases. B. The contribution margin ratio multiplied by the selling price per unit equals the contribution margin per unit. C. The contribution margin ratio will decline as unit sales decline. D. The contribution margin ratio equals the selling price per unit less the variable expense ratio.
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5. If a company is operating at the break-even point: A. its contribution margin will be equal to its variable expenses. B. its margin of safety will be equal to zero. C. its fixed expenses will be equal to its variable expenses. D. its selling price will be equal to its variable expense per unit. 6. At the break-even point: A. sales would be equal to contribution margin. B. contribution margin would be equal to fixed expenses. C. contribution margin would be equal to net operating income. D. sales would be equal to fixed expenses. 7. The break-even point would be increased by: A. a decrease in total fixed expenses. B. a decrease in the ratio of variable expenses to sales. C. an increase in the contribution margin ratio. D. none of these. 8. Which of the following strategies could be used to reduce the break-even point? A. Item A B. Item B C. Item C D. Item D 9. Break-even analysis assumes that: A. Total revenue is constant. B. Unit variable expense is constant. C. Unit fixed expense is constant. D. Selling prices must fall in order to generate more revenue. 10. Target profit analysis is used to answer which of the following questions? A. What sales volume is needed to cover all expenses? B. What sales volume is needed to cover fixed expenses?
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Study_questions_Ch.6 - Study questions Ch.6 Study questions...

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