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Introductory Multiple Choice Quiz
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1
The break even point is 10,000 units, sales are 12,000 units. The margin of safety expressed as a percentage of the break-even point is therefore: (Learning Objective 7 Ch 7)
A)25%
B)80%
C)120%
D)20%
2
The margin of safety for a firm in a very volatile market is 10%. Which of the following is true? (Learning Objective 7 Ch 7)
A)The margin of safety is probably too high
B)The margin of safety is probably too low
C)The margin of safety is adequate
D)We can't tell
3
Contribution per unit is £1. Fixed costs are £5,000. Production and sales are 7,500 units. When sales rise (Learning Objective 1 Ch 7)
A)Contribution margin rises by an amount greater than profit
B)Contribution margin rises by an amount smaller than profit
C)Contribution margin and profit rise by the same amount
D)Contribution margin drops
4
Contribution per unit is £1. Fixed costs are £5,000. Production and sales are 7,500 units. Contribution margin is (Learning Objective 1 Ch 7)
A)£2,500
B)£5,000
C)£7,500
D)nil
5
Contribution per unit is £1. Fixed costs are £5,000. Production and sales are 7,500 units. Profit is (Learning Objective 1 Ch 7)
A)£2,500
B)£5,000
C)£7,500
D)nil
6
Contribution per unit is £1. Fixed costs are £5,000. Production and sales are 7,500 units, Selling price is £2 per unit. Contribution Margin Ratio is (Learning Objective 2 Ch 7)
A)200%
B)75%
C)50%
D)100%
7
Contribution Margin Ratio is 50%. The fixed costs are £30,000. The break even point is (Learning Objective 4 Ch 7)
A)£120,000
B)£60,000
C)£30,000
D)£15,000
8
Variable cost is £4 per unit, Fixed cots are £80,000, Selling price per unit is £9, Sales are 5,000 units. If Selling Price increases by £1, Contribution Margin increases by (Learning Objective 3 Ch 7)
A)£10,000
B)£1
C)£5,000
D)£80,000
9
Variable cost is £4 per unit, Fixed cots are £80,000, Selling price per unit is £9, Sales are 5,000 units. If Variable Cost per unit decreases by £1, Contribution Margin decreases by (Learning Objective 3 Ch 7)
A)£10,000
B)£1
C)£5,000
D)£80,000
10
Variable cost is £4 per unit, Fixed costs are £80,000, Selling price per unit is £9, Sales are 5,000 units. If Fixed Costs increase by £10,000, Contribution Margin (Learning Objective 3 Ch 7)
A)Increases by £10,000
B)Decreases by £10,000
C)Says the same
D)We can't tell
11
Variable cost is £4 per unit, Fixed cots are £80,000, Selling price per unit is £9, Sales are 5,000 units. If sales decrease by 2,000 units, Contribution Margin (Learning Objective 3 Ch 7)
A)Increases by £10,000
B)Decreases by £10,000
C)Says the same
D)We can't tell
12
Variable cost is £4 per unit, Fixed cots are £80,000, Selling price per unit is £9, Sales are 5,000 units. The target profit is £100,000. What must the sales revenue be? (Learning Objective 6 Ch 7)
A)£324,000
B)£200,000
C)£160,000
D)£353,000
13
Contribution margin is £200,000. Net profit is £50,000. Calculate the degree of operating leverage of sales. (Learning Objective 8 Ch 7)
A)0.25
B)3
C)4
D)2
14
Company B sells two products:
Product A:
Contribution Margin Ratio = 20%
Sales = £100,000
Product B
Contribution Margin Ratio = 40%
Sales = £200,000
If actual were sales £200,000 and B were £100,000. The Contribution Margin would:
(Learning Objective 9 Ch 7)
A)increase by £20,000
B)decrease by £20,000
C)increase by £40,000
D)decrease by £40,000
15
Company B sells two products:
Product A:
Contribution Margin Ratio = 20%
Sales = £100,000
Product B
Contribution Margin Ratio = 40%
Sales = £200,000
If actual were sales £200,000 and B were £100,000. Fixed Costs are £50,000. The break even point in Sales Revenue would be
(Learning Objective 9 Ch 7)
A)£175,000
B)£200,000
C)£150,000
D)£187,970
16
One of the following is not an assumption that underlies CVP analysis (Learning Objective 1-9 Ch 7)
A)Fixed costs per unit will remain the same throughout the relevant range
B)Variable cost per unit will increase as sales increase
C)Variable Costs have a linear relationship with sales.
D)Selling price is constant throughout the relevant range





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