1. An example of a cost that is variable with respect to the number of units produced and sold is:
A. insurance on the headquarters building.
B. power to run production equipment.
C. supervisory salaries.
D. depreciation of factory facilities.
2. Tempcon, Inc. sells and installs furnaces for $3,000 per furnace. The following cost formula relates to last
year's operations at Tempcon:
Y = $125,000 + $1,800X
If Tempcon sold and installed 500 furnaces last year, what was its total contribution margin last year?
3. The cost of goods sold in a retail store totaled $325,000. Fixed selling and administrative expenses totaled
$115,000 and variable selling and administrative expenses were $210,000. If the store's contribution margin
totaled $590,000, then sales must have been:
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 variable expense per unit equals the contribution margin per
C. If sales increase, the dollar increase in net operating income can be computed by multiplying the contribution
margin ratio by the dollar increase in sales.
D. The contribution margin ratio increases as the number of units sold increases.