1. The breakeven point is that point where:

a. total sales revenue equals total variable and fixed expenses.

b. total contribution margin equals total fixed expenses.

c. Both a and \(\mathrm{b}\) are correct.

d. Neither a nor b is correct.
2. Garth Company sells a single product that generates a positive contribution margin. If the selling price per unit and the variable cost per unit both increase \(10 \%\) and fixed costs do not change, the:

3. Honeybee Company's contribution margin ratio is \(60 \%\); the company's breakeven point in sales is \(\$ 150,000\). If the company wants to earn net income of \(\$ 60,000\) over the period, its sales would have to be:

a. \(\$ 200,000\).

b. \(\$ 350,000\).

c. \(\$ 250,000\).

d. \(\$ 210,000\).
4. Carlton Company sells its product for \(\$ 40\) per unit. The company's variable costs are \(\$ 22\) per unit; its fixed costs are \(\$ 82,800\) a year. Carlton's breakeven point is:

a. \(\$ 184,000\).

b. 3,764 units.

c. \(\$ 150,545\).

d. 2,070 units.
5. Fixed manufacturing overhead costs are allocated to each unit of product using:

a. the absorption-costing method only.

b. the variable-costing method only.

c. both the absorption- and variable-costing methods.

d. neither the absorption-nor the variable-costing method.
6. Last year Clarence Company sold 3,600 units at a price of \(\$ 50\) per unit. The company's variable cost per unit was \(\$ 15\); its fixed costs for the year were \(\$ 40,530\). If the company wants a profit of \(\$ 40,000\) next year, all other factors remaining constant, it will have to sell:

a. 1,158 units.

b. 1,958 units.

c. 2,300 units.

d. 800 units.
7. When production exceeds sales, absorption-costing net income generally:

a. is less than variable-costing net income.

b. is more than variable-costing net income.

c. equals variable-costing net income.

d. is higher or lower than variable-costing net income because no generalization can be made.
8. Last year, Bone Company produced 10,000 units of product \(\mathrm{X}\) and incurred the following costs:

Under absorption costing, any unsold units of product \(\mathrm{X}\) would be carried in Finished Goods Inventory at a unit cost of:

a. \(\$ 4.50\).

b. \(\$ 4.20\).

c. \(\$ 3.80\).

d. \(\$ 2.90\).
9. Selling and administrative expenses are:

a. a product cost under variable costing.

b. a product cost under absorption costing.

c. part of fixed manufacturing overhead under variable costing.

d. a period expense under both variable and absorption costing.
10. Last year Smith Company had net income of \(\$ 125,000\) using variable costing and \(\$ 105,000\) using absorption costing. The company's variable production costs were \(\$ 20\) per unit; its total fixed overhead was \(\$ 176,000\). The company produced 11,000 units. Production levels and fixed costs have not changed in three years. During the year, Smith's finished goods inventory:

a. increased by 1,000 units.

c. decreased by 1,000 units.

b. increased by 1,250 units.

d. decreased by 1,250 units.

Transcribed Image Text:

Unit Contribution Margin a. increases b. no change c. no change d. increases Contribution Margin increases Ratio no change increases no change Breakeven in Units decreases no change no change decreases