Accounting Derivatives

Topics: Variable cost, Contribution margin, Costs Pages: 12 (2067 words) Published: May 8, 2013
This set of 28 questions, taken from prior examinations, covers topics in Chapters 6, 7, and 9.

The purpose of sample multiple choice questions is to acquaint you with the style and substance of typical exam questions on this material.

Please be aware that:

1. multiple choice format questions are only one of many resources available to prepare for testing events – reading textbook chapters and working through chapter examples, studying the end-of-chapter review problem and accompanying solution, and reviewing assigned homework items and the published solutions may be more powerful methods to increase your understanding of the topics covered in the course.

2. the exam questions used this quarter will be similar but different from these example questions – understanding the main concepts in each chapter is critical to success on the testing events; remembering a sample question may be of some help but the format of questions on the same topic often differs rendering memory a distant second choice to understanding.

The Questions:

Part 1
Use the following to answer questions 1-2:

Donnelly Corporation manufactures and sells T-shirts imprinted with college names and slogans. Last year, the shirts sold for $7.50 each, and the variable expense was $2.25 per unit.

The company needed to sell 20,000 shirts to break even. The net operating income last year was $8,400. Donnelly's expectations for the coming year include the following:

* The selling price of the T-shirts will be $9.00.
* Variable expenses will increase by one third.
* Fixed expenses will increase by 10 percent.

1.The number of T-shirts Donnelly Corporation must sell to break even in the coming year is:

A)17,500. B) 20,000. C) 22,000. D) 19,250.

2.If Donnelly Corporation wishes to earn $22,500 in net operating income for the coming year, the company's sales volume in dollars must be:

A)$229,500. B) $213,750. C) $257,625. D) $207,000.

7.Assume a company sells a single product. If Q equals the level of output, P is the selling price per unit, V is the variable expense per unit, and F is the fixed expense, then the break-even point in sales dollars is:

A)F/[(P-V)/P]. B) F/[Q(P-V)/P]. C) F/(P-V). D) F/[Q(P-V)].

18.The contribution margin ratio is 30% for the Honeyville Company and the break-even point in sales is $150,000. If the company's target net operating income is $60,000, sales would have to be:

A)$210,000. B) $350,000. C) $250,000. D) $200,000.

Use the following to answer questions 27-28:

Jackson Company's operating results for last year are given below:


27.If the company's fixed expenses decrease by 20% next year, the break-even point will change from its previous level by:

A)150 unit increase. C)150 unit decrease.
B)no change in the break-even point. D)360 unit decrease.

28.If the company wants to increase its total contribution margin by 40% over last year, it will need to increase its sales by:

A)$26,400. B) $38,400. C) $24,960. D) $17,160.

29.Korn Company sells two products, as follows:

Fixed expenses total $300,000 annually. The expected sales mix in units is 60% for product Y and 40% for product Z. How much is Korn's expected break-even sales in dollars?

A)$300,000 B) $475,000 C) $544,000 D) $420,000

31.At a sales level of $190,000, Bliss Company's gross margin is $15,000 less than its contribution margin, its net operating income is $30,000, and its selling and administrative expense is $70,000. At this sales level, its contribution margin would be:

A)$115,000. B) $ 85,000. C) $160,000. D) $100,000.

Part 2
Use the following to answer questions 9-11:

Janos Company, which has only...
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