Ch 20

Which of the following describes variable costs?

• 1. Costs that vary on a per-unit basis as the level of activity changes

• Costs that vary in total in direct proportion to changes in the level of activity

• 1. Costs that remain the same in total dollar amount as the level of activity changes

• 1. Costs that vary on a per-unit basis, but remain the same in total as the level of activity changes

Answer explanation

What would be Ford Motor Companies' Variable costs?

If sales are $500,000, variable costs are $200,000, and fixed costs are $240,000, what is the contribution margin ratio?

• 1. 40%

  
  

• 1. 48%

  
  

• 1. 52%

  
  

• 1. 60%

  
  

Answer explanation

Contribution margin is the excess of sales over variable costs

If the unit selling price is $16, the unit variable cost is $12, and fixed costs are $160,000, what is the break-even sales (units)?

• 1. 5,714 units

• 1. 10,000 units

• 1. 13,333 units

• 1. 40,000 units

Answer explanation

If the unit selling price is $16, the unit variable cost is $12, and fixed costs are $160,000, what is the break-even sales (units)?

2. 
   Based on the data presented in Question 3, how many units of sales would be required to realize operating income of $20,000?

• 1. 11,250 units

• 1. 5,000 units

• 1. 40,000 units

• 1. 45,000 units

Based on the following operating data, what is the operating leverage?

• 1. 0.8

• 1.2

• 1.8

• 4.0

qWhich of the following costs remain the same regardless of activity level within the relevant range?

●

• a.Total variable cost and unit variable cost

• b.Total fixed cost and unit variable cost

• c.Total variable cost and unit fixed cost

• d.Total fixed cost and unit fixed cost

What does Contribution Margin tell us?

• the amount of money we have available to pay our fixed costs after we've paid off our variable costs

• the amount of money we have available to pay our variable costs after we've paid off our fixed costs

• the amount of money we have available to pay our variable costs after we've paid off our break even costs

• Our profit

What is the formula for Contribution Margin?

• CM = Sales – Variable Costs 

• CM = COGS – Variable Costs 

• CM = Sales – Revenue

• CM = Sales – Fixed Costs