Question

Multiple Choice (2 points each) 1. Which of the following equations is equivalent to the contribution margin ratio? a. 1- (Variable Costs/ Sales) b. (Variable Costs-1) Sales c. (Sales - 1)/Variable Costs d. Sales x (1 - Variable Costs)/ Variable Costs 2. Which of the following statements best explains the concept of "relevant range"? All costs behave in the same manner, regardless of the level of production. Management focuses mainly on how costs behave within the levels of production that are reasonably likely to occur. Over a large enough range of production, all costs are generally considered fixed. a. b. c. er a small enough range of production, all costs are generally considered variable. Use the following information to answer the next two questions: Speedy Shipping is a trucking comnany thatt ra n snorts
Need help with 1 and 2 if correct will rate

Answer 1

1. Equation for contribution margin ratio –

The correct option is – A.

Contribution margin ratio = 1 – (variable costs/sales)

Contribution margin = sales – variable cost

Contribution margin as a percentage to sales = 1 – variable cost as a percentage to sales

Variable cost as a percentage to sales = variable cost/sales

Hence, contribution margin ratio = 1- (variable costs/sales)

1. Concept of ‘Relevant Range’ –

The correct option is – b

The management focuses mainly on how costs behave within the levels of production that are reasonably likely to occur.

The relevant range refers to the levels of production including the minimum and maximum levels over which the company aims to estimate the behavior of various cost components.

Variable cost per unit remains constant over a relevant range.

Fixed cost per unit varies with various production levels in the range.

Total fixed remains constant over a relevant range.

Total variable cost changes with levels of production in the relevant range.