# Variable Cost and Contribution Margin

Pages: 5 (836 words) Published: September 7, 2013
Name: __________________________ Date: _____________

1.| Which of the following is not another name for the term manufacturing overhead?| A)| Factory overhead|
B)| Pervasive costs|
C)| Burden|
D)| Indirect manufacturing costs|

2.| Which one of the following is an example of a period cost?| A)| A change in benefits for the union workers who work in the New York plant of a Fortune 1000 manufacturer.| B)| Workers' compensation insurance on factory workers' wages allocated to the factory.| C)| A box cost associated with computers.|

D)| A manager's salary for work that is done in the corporate head office.|

3.| Given the following information: Raw materials inventory, January 1| \$ 30,000| Raw materials inventory, December 31| 60,000|
Work in process, January 1| 27,000|
Work in process, December 31| 18,000|
Finished goods, January 1| 60,000|
Finished goods, December 31| 48,000|
Raw materials purchases| 1,500,000|
Direct labor| 690,000|
Factory utilities| 225,000|
Indirect labor| 75,000|
Factory depreciation| 600,000|
Direct materials used is|
A)| \$1,590,000.|
B)| \$1,530,000.|
C)| \$1,500,000.|
D)| \$1,470,000.|

4.| If the cost of goods manufactured is less than the cost of goods sold, which of the following is correct?| A)| Finished Goods Inventory has increased.|
B)| Work in Process Inventory has increased.|
C)| Finished Goods Inventory has decreased.|
D)| Work in Process Inventory has decreased.|

5.| Sales are \$500,000 and variable costs are \$350,000. What is the contribution margin ratio?| A)| 43%.|
B)| 30%.|
C)| 70%.|
D)| Cannot be determined because amounts are not expressed per unit.|

6.| Barcelona Bagpipes produces two models: Model 24 has sales of 500 units with a contribution margin of \$40 each; Model 26 has sales of 350 units with a contribution margin of \$50 each. If sales of Model 26 increase by 100 units, how much will profit change?| A)| \$5,000 increase.|

B)| \$17,500 increase.|
C)| \$22,500 increase.|
D)| \$35,000 increase.|

7.| Which of the following would be the least controllable fixed costs?| A)| Property taxes.|
B)| Rent.|
C)| Research and development.|
D)| Management training programs.|

8.| Which concept answers the following question: “If budgeted revenues are above breakeven and decline, how far can they fall before the break-even point is reached?”| A)| Contribution margin.|

B)| Relevant range of operations.|
C)| Target margin.|
D)| Margin of safety.|

9.| Fields Corporation has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Fields incurs \$2,220,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. The weighted-average contribution margin ratio is| A)| 37%.|

B)| 40%.|
C)| 43%.|
D)| 50%.|

10.| In 2010, Masset sold 3,000 units at \$500 each. Variable expenses were \$350 per unit, and fixed expenses were \$200,000. What was Masset's 2010 net income?| A)| \$250,000|
B)| \$450,000|
C)| \$1,050,000|
D)| \$1,500,000|

11.| A company can sell all the units it can produce of either Product A or Product B but not both. Product A has a unit contribution margin of \$16 and takes two machine hours to make and Product B has a unit contribution margin of \$30 and takes three machine hours to make. If there are 1,000 machine hours available to manufacture a product, income will be| A)| \$2,000 more if Product A is made.|

B)| \$2,000 less if Product B is made.|
C)| \$2,000 less if Product A is made.|
D)| the same if either product is made.|

12.| Vazquez Company's cost of goods sold is \$350,000 variable and \$200,000 fixed. The company's selling and administrative expenses are \$250,000 variable and...