Question

en Parcial Multiple Choice: (22 points) cates the percentage of each sales dollar that is available to cover fixed 1. Which of the fol Which of the following costs is an example of fixed cost a. Hourly wages of machine operators b. Plant manager salary c. Direct materials d.-Direct labor 2. Which ratio indicates the percentage costs and to provide a profit? a. Margin of safety ratio 6. Contribution margin ratio c. Costs and expenses ratio d. Profit ratio 3. The point where the profit line intersec Where the profit line intersects the horizontal axis on the profit-volume chart represents: a. The maximum possible operating loss. b. The maximum possible operating income. c. The total fixed costs. .d. The break-even point. 4. The relative distribution of sales among the various products sold by a business is termed as: a. Business's basket of goods. b. Contribution margin mix. c. Sales mix. d. Product portfolio. The difference between the current sales revenue and the sales at the break-even point is called the a. Contribution margin. b. Margin of safety. c. Price factor. d. Operating leverage. 6. Cost-volume-profit analysis cannot be used if which of the following occurs? a. Costs cannot be properly classified into fixed and variable costs b. The total fixed costs change

Answer 1

Ans. 1	Option B
	Direct materials and direct labor are totally variable costs. Plant manager salary is an
	overhead and if salary is paid as an overhead then it is considered a fixed cost.
	Hourly wages of machine operators is based on activity (hours) so it is also a variable
	cost.
Ans. 2	Option B
	Contribution margin ratio is difference between sales ratio and variable cost ratio.
	Contribution margin ratio is the sum of fixed cost and profit.
Ans. 3	Option D
	Break even is the level of activity on which the firm does not generate profit or occur any loss.
	On the break even point the profit line intersects the horizontal exis.
Ans. 4	Option C
	In the case of various products sold, the distributions are made on the basis of sales mix.
Ans. 5	Option B
	Margin of safety is the excess of current sales on break even sales.
Ans. 6	Option A
	In Cost - volume - profit analysis, variable costs are subtracted from sales first the result is known
	as contribution margin. Then fixed costs are subtracted from contribution margin to find out the
	net income.
	If costs are not properly classified into fixed and variable, then it is impossible to prepared a
	Cost - volume - profit income statement.