Home » Quizzes » Cost, volume and profit relationships » Multiple choice questions (MCQs) quiz Cost, volume and profit relationships (CVP analysis) Multiple choice questions (MCQs) quiz Posted in: Cost, volume and profit relationships (quizzes) By: Rashid Javed | Updated on: August 25th, 2024 /26 Chapter: Cost, volume and profit relationships (CVP analysis)Quiz type: Multiple choice questions (MCQs) quizNumber of questions: 26Estimated time required: 15 - 20 minutesPassing score: 60%Your result will be displayed at the end of the quiz. 1. The amount by which an item contributes towards covering fixed cost and providing for profit is known as: gross profit gross margin contribution margin net margin 2. Contribution margin = ? Sales - Fixed expenses Sales - Selling expenses Sales - Admin. expenses Sales - Variable expenses 3. If the amount of contribution margin is not enough to cover all fixed expenses, the business will: suffer a loss earn a profit neither earn a profit nor suffer a loss be closed 4. Consider the following information:Sales revenue: $12,000Variable manufacturing expenses: $3,000Variable marketing and admin. expenses: $1,000Fixed manufacturing expenses: $1,500Fixed marketing and admin. expenses: $500Based on the above information, the contribution margin is: $9,000 $8,000 $10,500 $10,000 Computation:Contribution margin: [$12,000 – ($3,000 + $1,000)] = $8,000 5. A contribution margin income statement is usually used by: tax agencies and banks customers and suppliers creditors and investors internal management 6. Which one of the following is correct about the break even point of a company? Revenue is greater than the total of variable and fixed expenses Revenue is less than the total of variable and fixed expenses Revenue is equal to the total of variable and fixed expenses None of the above 7. Which of the following is the correct formula of break even point? Total fixed expenses/Total contribution margin Total fixed expenses/Contribution margin per unit Total variable expenses/Contribution margin per unit Total variable expenses/Total Contribution margin 8. Which of the following statements is correct about variable costs? Variable costs vary on per unit basis but remain the same in total as the level of activity changes Variable costs vary on per unit basis as the level of activity changes Variable costs vary in total in direct proportion to changes in the level of activity Variable costs remain the same in total as the level of activity changes 9. Which of the following statements is correct about fixed costs? Fixed costs vary on per unit basis as well as in total as the level of activity changes Fixed costs remain the same on per unit basis but vary in total as the level of activity changes Fixed costs vary in total as the level of activity changes Fixed costs vary on per unit basis but remain the same in total as the level of activity changes 10. Which of the following is a correct formula to calculate contribution margin ratio (CM ratio)? Contribution margin/Sales Contribution margin/Variable cost Contribution margin/Fixed cost Sales/Contribution margin 11. If contribution margin ratio is 0.3 then contribution margin percentage will be: 3% 30% 0.3% 0.03% 12. If selling price per unit is $100 and contribution margin percentage is 30% then contribution margin will be: $70 $30 $7 $3 13. If the selling price is $32 per unit, the variable cost is $24 per unit, and total fixed cost is $320,000, what will be the break even point in units? 10,000 units 13,333 units 40,000 units 5,714 units Computation:Break even point in units = Fixed cost/Contribution margin per unit= $320,000/$8*= 40,000 units*$32 – $24 = $8 14. If sales are $500,000, variable costs are $200,000, and fixed costs are $260,000, what is the contribution margin percentage? 52% 48% 40% 60% Computation:Contribution margin percentage = [($500,000 – $200,000)/$500,000] × 100 = 60% 15. US Company sells product X. Some selected data is given below:Selling price per unit of product X: $16Variable cost per unit of product X: $12Total fixed cost: $160,000Based on the above information, how many units of product X would be required to sell to earn an operating profit of $20,000? 11,250 units 20,000 units 45,000 units 15,000 units Computation:No. of units required to sell = (Fixed cost + Target profit)/contribution margin per unit= ($160,000 + $20,000)/$4*= 45,000 units*$16 – $12 = $4 16. If contribution margin ratio is 0.4 and total fixed cost is $280,000, the break even point in dollars will be: $700,000 $112,000 $812,000 $1,120,000 Computation:Break even point in dollars = Fixed cost/CM ratio= $280,000/0.4= $700,000 17. If total fixed cost is $8,000 and break even point is 4,000 units, the contribution margin per unit will be: $0.5 $50 $20 $2 Computation:Contribution margin per unit = Fixed cost/Break even point in units= $8,000/4,000 units= $2 18. If contribution margin percentage is 25% and contribution margin per unit is $500, the selling price per unit will be: $1,250 $125 $2,000 $1,500 Computation:Selling price per unit = Contribution margin per unit/CM ratio= $500/0.25= $2,000 19. If break even point in units is 2,000 units and fixed cost is $50,000, the contribution margin per unit will be: $25 $4 $0.04 $250 Computation:Contribution margin per unit = Fixed cost/Break even point in units= $50,000/2,000 units= $25 20. Margin of safety = ? Actual or budgeted sales - Contribution margin Actual or budgeted sales - Gross margin Actual or budgeted sales - Fixed cost Actual or budgeted sales - Break even sales 21. If actual sales are $25,000, break even point in dollars is $15,000, and variable cost is $12,000, the margin of safety will be: $10,000 $40,000 $13,000 $27,000 Computation:Margin of safety = Actual or budgeted sales – Break even sales= $25,000 – $15,000= $10,000 22. If actual sales are $50,000, variable cost is $15,000, and margin of safety is $20,000, the break even sales will be: $35,000 $30,000 $65,000 $70,000 Computation:Margin of safety = Actual sales – Break even salesorBreak even sales = Actual sales – Margin of safety= $50,000 – $20,000= $30,000 23. If margin of safety is $5,000, break even point is $20,000, and fixed cost is $50,000, the actual sales will be: $15,000 $30,000 $25,000 $45,000 Computation:Actual sales = Break even sales + Margin of safety= $20,000 + $5,000= $25,000 24. Which of the following is a correct formula to compute the degree of operating leverage? Gross margin/Net operating income Net operating income/Contribution margin Net operating income/Fixed cost Contribution margin/Net operating income 25. If sales revenue is $300,000, variable cost is $120,000, and fixed cost is $80,000, what is the operating leverage? 4.0 1.8 0.8 1.2 Computation:Operating leverage = Contribution margin/Net operating income= *$180,000/$100,000**= 1.8*Contribution margin = Sales – Variable cost= $300,000 – $120,000= $180,000**Net operating income = Sales – Variable cost – Fixed cost= $300,000 – $120,000 – $80,000= $100,000 26. If degree of operating leverage is 3, a 15% increase in sales revenue will increase the operating income by: 5% 0.2% 45% 30% Computation:Percentage increase in operating income = Degree of operating leverage × Percentage increase in sales= 3 × 15%= 45% 0% Restart quiz Help us grow by sharing our content ♡

2 Comments onCost, volume and profit relationships (CVP analysis) Multiple choice questions (MCQs) quiz this quiz is so tough and conceptual quiz.

I want multiple choices questions on cost volume profit analysis