Questions 1-4

1) If the contribution margin is NOT sufficient to cover fixed expenses: A) total profit equals total expenses. B) a loss occurs. C) variable expenses equal contribution margin. D) contribution margin is negative. 2) Which of the following is true regarding the contribution margin ratio of a company that produces only a single product? A) As fixed expenses decrease, the contribution margin ratio increases. B) The contribution margin ratio will decline as unit sales decline. C) The contribution margin ratio equals the selling price per unit less the variable expense ratio. The contribution margin ratio multiplied by the selling price per unit equals the contribution margin per unit. 3) If a company increases its selling price by $2 per unit due to an increase in its variable labor cost of $2 per unit, the break-even point in units will: A) not change. B) decrease. C) increase. D) change but direction cannot be determined. 4) Accepting a special order will improve overall net operating income if the revenue from the special order exceeds: A) the variable costs associated with the order. B) the sunk costs associated with the order. C) the contribution margin on the order. D) the incremental costs associated with the order.