Question

1a. A small diner serves sandwiches and beverages. Which of the following is a variable cost with respect to the number of customers?

a. Rent

b.Soda

c.New dishwasher

d.All of the above

1b. A firm manufactures luxury automobiles. Which of the following is a product cost?

a.CEO salary

b.Sales commissions

c.Advertising

d.Windshields

1c.Within the relevant range, variable costs can be expected to:

a.increase on a per unit basis as the activity level decreases.

a.remain constant in total as the activity level changes.

c.increase on a per unit basis as the activity level increases.

d.vary in total in direct proportion to changes in the activity level.

1d.Which of the following is true at a firm's break-even point?

a.Profit is zero

b.Total revenue equals total cost

c.Total contribution margin equals total fixed cost

d.All of the above

1e.A corporation has provided the following contribution format income statement

Sales (1,000)                                 $50,000
Variable expense       $32,500
Contribution margin              $17,500
Fixed expenses                             12,250
Net Operating Income            $ 5,250

The break-even point in unit sales is closest to:

a.0 units

b.895 units

c.650 units

d.700 units

1f.A company has the following information:

Income tax rate                        25%
Selling price per unit         $8.00
Variable cost per unit       $5.00
Total fixed costs      $100,000

The contribution margin per unit is:

a.$3.00

b.$2.00

c.$5.00

d.$8.00

Answer 1

Question 1 (a)

Answer : b Soda

The cost of soda will change as per no of customers

Question 1 (b)

Answer: d windshield

Windshields are used in the manufacturing of automobile so its a product cost

Question 1 (c)

Answer: d.vary in total in direct proportion to changes in the activity level.

Variable cost is chaged as the acvtivity level changes

Question 1 (d)

Answer: d.All of the above

At break even point there in no profit and loss and it is the point where the fixed is equal to contribution and total cost equal to total revenue

Question 1 (e)

Answer: d. 700 units

BEP ( Units) = FIxed cost / Sales - Variable cost per unit

=12250 / 50-32.50

= 12250/17.50

= 700 units

Question 1 (f)

Answer: a $ 3.00

Conribution margin per unit = Sales - variable cost

= $8 - $ 5

= $ 3