Question

1.

If fixed costs increased and everything else the same , the contribution margin would

		increase
		cannot tell
		remain the same
		decrease

2.

Part of the cost is variable and part is fixed

		variable cost
		mixed cost
		fixed cost
		constant cost

3.

What would cause the break-even point to increase?

		variable costs go up
		variable costs go down
		Fixed price go down
		contribution margin goes up

4.

Which would you find on an absorption costing income statement?

		Contribution margin
		fixed costs
		variable costs
		gross profit

5.

Which of these is a variable cost?

		rent
		direct labor
		straight line depreciation
		president's salary

Answer 1

1)c) If fixed cost increase and everything else remains the same the contribution margin would be the same as in order to calculate contirbution margin only variable expenses are considered.

2) b) In mixed cost part of he cost if variable which means it changes with production volume and part of the cost is fixed which means it does not change with production volume.

3) b) Breakeven point is calculated as fixed expenses/contribution per unit . It will increase if fixed expenses increase or contribution margin per unit decrease . Contribution margin per unit will decrease if variable expenses go up as it is SP-VC.

4) d) We find gross profit on absorption costing income statement which is calculated as opening inventory + cost of goods manufactured - cost of goods sold.

5) b) direct labour is a variable costs as it varies with production volume. With increase in production volume direct labour costs increase and vice versa