1. Select the incorrect statement regarding costs andexpenses.

a. Some costs are initially recorded as expenses while othersare initially recorded as assets.

b. Expenses are incurred when assets are used to generaterevenue.

c. Manufacturing-related costs are initially recorded asexpenses.

d. Non-manufacturing costs should be expensed in the period inwhich they are incurred.

2. What is the effect on the balance sheet of making cash salesof inventory to customers on profit?

a. Assets and equity increase.

b. Assets and equity decrease.

c. Assets decrease and equity increases.

d. Assets increase and equity decreases.

3. At its $60 selling price, Atlantic Company has sales of$15,000, variable manufacturing costs of $4,000, fixedmanufacturing costs of $1,000, variable selling and administrativecosts of $2,000 and fixed selling and administrative costs of$1,000. What is the company's contribution margin per unit?

a. $26

b. $28

c.$44

d.$36

4. Rocky Mountain Bottling Company produces a soft drink that issold for a dollar. At production and sales of 800,000 units, thecompany pays $600,000 in production costs, half of which are fixedcosts. At that volume, general, selling, and administrative costsamount to $250,000 of which $70,000 are fixed costs. What is theamount of contribution margin per unit?

a. $0.400

b. $0.5375

c. $0.250

d. None of these is correct

5. Bates Company currently produces and sells 4,000 units of aproduct that has a contribution margin of $5 per unit. The companysells the product for a sales price of $20 per unit. Fixed costsare $20,000. The company has recently invested in new technologyand expects the variable cost per unit to fall to $12 per unit. Theinvestment is expected to increase fixed costs by $15,000.After the new investment is made, how many unitsmust be sold to break-even?

a. 2,917 units

b. 4,375 units

c. 7,000 units

d. 4,000 units

6. Burke Company has a break-even of $600,000 in total sales.Assuming the company sells its product for $50 per unit, what isits margin of safety in units if sales total $850,000?

a. 5,000 units

b. 250,000, units

c. 12,000 units

d. 17,000 units