AC202 Quiz7

# AC202 Quiz7 - E. The same as the contribution margin ratio....

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AC 202 Principles of Accounting Name____Jered Havens _________________ Park University Quiz 7A-Chapter 22 Multiple Choice Questions ( 10 points Each ) Select the ONE, BEST Answer 1. A cost that changes in proportion to changes in volume of activity is a(n): A. Differential cost. B. Fixed cost. C. Incremental cost. D. Variable cost. E. Product cost. 1

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2. A target income refers to: A. Income at the break-even point. B. Income from the most recent period. C. Income planned for a future period. D. Income only in a multiproduct environment. E. Income at the minimum contribution margin. 3. The excess of expected sales over the sales level at the break-even point is known as the: A. Sales turnover. B. Profit margin. C. Contribution margin. D. Relevant range. E. Margin of safety.
4. In cost-volume-profit analysis, the unit contribution margin is: A. Sales price per unit less cost of goods sold per unit. B. Sales price per unit less unit fixed cost per unit . C. Sales price per unit less total variable cost per unit . D. Sales price per unit less unit total cost per unit.

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Unformatted text preview: E. The same as the contribution margin ratio. Problem ( 60 points ) 3 The following information describes a product expected to be produced and sold by Hadley Company: Required: (a) Calculate the contribution margin ratio. (b) Calculate the break-even point in dollar sales. (c) What dollar amount of sales would be necessary to achieve a pretax income of \$120,000? (a) Contribution Margin Ratio = Contribution margin per unit / Sales price per unit Contribution margin per unit = Sales price per unit - Total variable cost per unit = \$80-\$32 = \$48 Contribution Margin Ratio = \$48 / \$80 = \$.60 or 48/80 = 60% (b) Break-even point in Dollars = Fixed Costs / Contribution margin ratio = \$630,000 / .60 = \$1,050,000 (c) Dollar amount of sales necessary to achieve a pretax income of \$120,000 = (Fixed cost + desired profit) / Contribution Margin Ratio = (\$630,000 + \$120,000) / .60 = \$1,250,000...
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## This note was uploaded on 11/11/2011 for the course AC 202 taught by Professor Nancyeverett during the Spring '09 term at Park.

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AC202 Quiz7 - E. The same as the contribution margin ratio....

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