Question 1 :

Which of the following statements are true?

1.Contribution margin and gross margin mean the same thing.

2.The contribution format income statement is used as an internal planning and decision- making tool. Its emphasis on cost behavior aids cost-volume-profit analysis, management performance appraisals, and budgeting.

3.A contribution format income statement separates costs into fixed and variable categories, first deducting variable expenses from sales to obtain the contribution margin.

1. A) Only statement I is true.

2. B) Both statements II and III are true.

3. C) All of the statements are true.

4. D) None of the statements are true.

Question 2:

Which of the following statements are true? 1.In a contribution format income statement for a merchandising company, the cost of goods sold reports the product costs attached to the merchandise sold during the period.

2.Contribution format income statements are prepared primarily for external reporting purposes.

3.Most companies use the contribution approach in preparing financial statements for external reporting purposes.

1. A) Only statement I is true.

2. B) Both statements I and III are true.

3. C) All of the statements are true.

4. D) None of the statements are true.

Question 3:

31) Morrisroe Corporation has provided the following information: Cost per Unit Direct materials $ 6.65 Cost per Period Direct labor $ 3.30 Variable manufacturing overhead $ 1.70 Fixed manufacturing overhead $ 10,000 Sales commissions $ 1.00 Variable administrative expense $ 0.50 Fixed selling and administrative expense $ 5,000 Required: a. If the selling price is $25.90 per unit, what is the contribution margin per unit sold? b. What incremental manufacturing cost will the company incur if it increases production from 5,000 to 5,001 units