Question

QUESTION 1

1. If fixed costs are $45,000 and the total costs are $60,000 at an activity level of 6,000 units, variable costs are:

		$10.00 per unit
		$7.50 per unit
		$5.00 per unit
		$2.50 per unit

QUESTION 2

1. The contribution margin is equal to:

		Revenues - fixed costs
		Revenues - variable costs
		Fixed costs + Variable costs
		Fixed costs - Variable costs

QUESTION 3

1. When other factors remain constant, an increase in variable costs:

		Increases the number of units needed to earn profits
		Decreases the number of units needed to earn profits
		Has no effect on the number of units needed to earn profits
		Has none of the above effects

QUESTION 4

1. Everclean Company cleans draperies. It charges $75 to clean a full-size drape, and its variable and fixed costs are $45 per drape and $8,000 per year respectively. Given this data, how many drapes must the company clean to break even?

		134
		267
		300
		320

Answer 1

Question 1 :
Total costs	$        60,000.00
(-) Fixed costs	$        45,000.00
Variable costs	$        15,000.00
(/) Activity level	6000
Variable cost per unit	$                   2.50	per unit

Question 2 :
After deducting variable costs from the revenue, the amount which is left is known as contribution margin
Answer : Revenues - variable costs
Question 3 :
When the variable cost increase, the contribution margin decreases and thus it Increases the number of units needed to earn profits
Answer : Increases the number of units needed to earn profits
Question 4 :
Break-even point = Fixed costs / ( Selling price - Variable cost per unit ) = 8000 / ( 75 - 45 ) =	267