Variable Cost and Contribution Margin
CHAPTER 1 – COST VOLUME PROFIT-
MULTIPLE CHOICE QUESTIONS
1. CVP analysis can be used to study the effect of:
A. changes in selling prices on a company 's profitability.
B. changes in variable costs on a company 's profitability.
C. changes in fixed costs on a company 's profitability.
D. changes in product sales mix on a company 's profitability.
E. All of these.
2. The break-even point is that level of activity where:
A. total revenue equals total cost.
B. variable cost equals fixed cost.
C. total contribution margin equals the sum of variable cost plus fixed cost.
D. sales revenue equals total variable cost.
E. profit is greater than zero.
3. The unit contribution margin is calculated as the difference between:
A. selling price and fixed cost per unit.
B. selling price and variable cost per unit.
C. selling price and product cost per unit.
D. fixed cost per unit and variable cost per unit.
E. fixed cost per unit and product cost per unit.
4. Which of the following would produce the largest increase in the contribution margin per unit?
A. A 7% increase in selling price.
B. A 15% decrease in selling price.
C. A 14% increase in variable cost.
D. A 17% decrease in fixed cost.
E. A 23% increase in the number of units sold.
5. Which of the following would take place if a company were able to reduce its variable cost per unit?
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E
6. Which of the following would take place if a company experienced an increase in fixed costs?
A. Net income would increase.
B. The break-even point would increase.
C. The contribution margin would increase.
D. The contribution margin would decrease.
E. More than one of the above events would occur.
7. Assuming no change in sales volume, an increase in company 's per-unit contribution margin would:
A. increase net income.
B. decrease net income.
C. have no effect on net income.
D. increase fixed costs.
E. decrease fixed costs.
8. A company that desires to lower its
MULTIPLE CHOICE QUESTIONS
1. CVP analysis can be used to study the effect of:
A. changes in selling prices on a company 's profitability.
B. changes in variable costs on a company 's profitability.
C. changes in fixed costs on a company 's profitability.
D. changes in product sales mix on a company 's profitability.
E. All of these.
2. The break-even point is that level of activity where:
A. total revenue equals total cost.
B. variable cost equals fixed cost.
C. total contribution margin equals the sum of variable cost plus fixed cost.
D. sales revenue equals total variable cost.
E. profit is greater than zero.
3. The unit contribution margin is calculated as the difference between:
A. selling price and fixed cost per unit.
B. selling price and variable cost per unit.
C. selling price and product cost per unit.
D. fixed cost per unit and variable cost per unit.
E. fixed cost per unit and product cost per unit.
4. Which of the following would produce the largest increase in the contribution margin per unit?
A. A 7% increase in selling price.
B. A 15% decrease in selling price.
C. A 14% increase in variable cost.
D. A 17% decrease in fixed cost.
E. A 23% increase in the number of units sold.
5. Which of the following would take place if a company were able to reduce its variable cost per unit?
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E
6. Which of the following would take place if a company experienced an increase in fixed costs?
A. Net income would increase.
B. The break-even point would increase.
C. The contribution margin would increase.
D. The contribution margin would decrease.
E. More than one of the above events would occur.
7. Assuming no change in sales volume, an increase in company 's per-unit contribution margin would:
A. increase net income.
B. decrease net income.
C. have no effect on net income.
D. increase fixed costs.
E. decrease fixed costs.
8. A company that desires to lower its