Question

Match the definition with the correct term.

-       A.       B.       C.       D.       E.       F.       G.       H.       I.       J.       K.       L.    Organizational unit of a factory responsible for partially manufacturing units.       -       A.       B.       C.       D.       E.       F.       G.       H.       I.       J.       K.       L.    Direct labor + Factory overhead       -       A.       B.       C.       D.       E.       F.       G.       H.       I.       J.       K.       L.    Costing system that requires the use of Equivalent Units of Production to calculate costs per unit.       -       A.       B.       C.       D.       E.       F.       G.       H.       I.       J.       K.       L.    Costing system that tracks costs related to unique production runs.       -       A.       B.       C.       D.       E.       F.       G.       H.       I.       J.       K.       L.    Cost that remains unchanged in total regardless of variations in the volume of production.       -       A.       B.       C.       D.       E.       F.       G.       H.       I.       J.       K.       L.    A cost that has both fixed and variable cost compotents.       -       A.       B.       C.       D.       E.       F.       G.       H.       I.       J.       K.       L.    A company's normal operating levels which excludes extremely high or low volumes of production       -       A.       B.       C.       D.       E.       F.       G.       H.       I.       J.       K.       L.    Future income goals       -       A.       B.       C.       D.       E.       F.       G.       H.       I.       J.       K.       L.    Sales - Variable costs       -       A.       B.       C.       D.       E.       F.       G.       H.       I.       J.       K.       L.    Excess of expected sales over break-even sales       -       A.       B.       C.       D.       E.       F.       G.       H.       I.       J.       K.       L.    Sales level where a company neither earns a profit or loss       -       A.       B.       C.       D.       E.       F.       G.       H.       I.       J.       K.       L.    A cost that changes in proportion to production activity.

A. Target Income B. Relevant range C. Production department D. Process Costing E. Margin of Safety F. Break-even point G. Job Order Costing H. Conversion Costs I. Contribution margin J. Variable cost K. Mixed cost L. Fixed Costs

Companies who sell multiple products:

		use a modified CVP analysis using composite units to calculate its break-even point.
		cannot use a CVP analysis to calculate its break-even point.
		calculates its break-even point by combining each product's individual CVP analysis.
		determine its break-even point based on a CVP analysis for its best selling product.

Cyan Company's contribution margin ratio is 40%. Total fixed costs are $112,750. What is Cyan's break-even point in sales dollars?

		$45,100
		$281,875
		$234,712
		$112,750

Determine the contribution margin ratio using the following information:

Unit sales	55,000 units
Unit selling price	$16.75
Unit variable cost	$9.25
Fixed costs	$214,000

		23.2%
		44.8%
		55.2%
		51.7%

The contribution margin ratio:

		Cannot be used in conjunction with other analytical tools.
		Is the percent of each sales dollar that remains after deducting the total unit variable cost.
		Is the percent of each sales dollar that remains after deducting the total unit fixed cost.
		Is the percent of each sales dollar that remains to cover the variable and fixed costs. During its most recent fiscal year, Donatella Enterprises sold 325,000 electric screwdrivers at a price of $18.90 each. Fixed costs amounted to $1,016,000 and pretax income was $1,369,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question? $3,757,500 $5,126,500 $4,773,500 $2,385,000

Answer 1

Organizational unit of a factory responsible for partially manufacturing units.	C. Production department
Direct labor + Factory overhead	H. Conversion costs
Costing system that requires the use of Equivalent Units of Production to calculate costs per unit.	D. Process costing
Costing system that tracks costs related to unique production runs.	G. Job order costing
Cost that remains unchanged in total regardless of variations in the volume of production.	L. Fixed costs
A cost that has both fixed and variable cost compotents.	K. Mixed costs
A company's normal operating levels which excludes extremely high or low volumes of production	B. Relevant range
Future income goals	A. Target income
Sales - Variable costs	I. Contribution margin
Excess of expected sales over break-even sales	E. Margin of safety
Sales level where a company neither earns a profit or loss	F. Break even point
A cost that changes in proportion to production activity.	J. Variable costs

2. Companies who sell multiple products:

The correct answer is : use a modified CVP analysis using composite units to calculate its break-even point.

Option B is wrong because we can calculate cvp analysis

Option C is wrong because we do not combine individual cvp analysis of products

Option D is wrong because cvp is calculated for all products not just best selling.

3. Cyan company

Contribution margin ratio = 40%

Total Fixed costs = 112,750

Break even point = Total Fixed cost / Contribution margin ratio

112,750 / 40% = 281,875

Option B is correct option $281,875

Option A is wrong because it is wrong calculation

Option C is wrong because it is wrong calculation

Option D is wrong because it is wrong calculation

Contribution margin ratio

Unit Sales 55,000

Unit selling price $16.75

Unit variable cost $9.25

Total fixed costs $214,000

Formula = Contribution / Sales

(16.75 - 9.25) / 16.75 = 44.8%

Option B is correct 44.8%

Option A is wrong because it is wrong calculation

Option C is wrong because it is wrong calculation

Option D is wrong because it is wrong calculation

The contribution margin ratio:

Option B : Is the percent of each sales dollar that remains after deducting the total unit variable cost.

Option A is wrong because it can be used in conjuction with other analytical tools

Option C is wrong because sales dollar that remains after deducting the total unit variable cost not fixed costs

Option D is wrong because it only covers fixed costs not variable costs

Donatella Enterprises.

Fixed cost + Pretax income is contribution

Sales - contribution is variable costs.

Sales	6,142,500
Variable cost	3,757,500
Contribution	2,385,000
Fixed cost	1,016,000
Pretax Income	1,369,000

Option A is correct $3,757,500

Option B is wrong because it is wrong calculation

Option C is wrong because it is wrong calculation

Option D is wrong because it is wrong calculation