# CH7 Accounting

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The unit contribution margin is computed by:
subtracting the variable cost per unit from the sales price per unit.
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The contribution margin ratio explains the percentage of each sales dollar that contributes towards:
fixed costs and generating a profit.
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CVP analysis assumes all of the following EXCEPT that:
inventory levels will increase.
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To compute the unit contribution margin, ________ should be subtracted from the sales price per unit.
all variable costs
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Managers can quickly forecast the operating income by multiplying ________ and then subtracting fixed costs.
projected sales revenue by the contribution margin ratio
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Managers can quickly forecast the total contribution margin by multiplying the projected:
sales revenue by the contribution margin ratio.
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Which of the following represents the excess of the selling price per unit of a product over the variable cost of obtaining and selling each unit?
Unit contribution margin
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Contribution margin ratio is computed by dividing:
contribution margin by sales revenue.
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On a contribution margin income statement, to what is contribution margin equal?
Sales revenues minus variable expenses
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The contribution margin ratio is computed by:
dividing contribution margin per unit by the sales price per unit.
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The formula used to find the number of units that need to be sold in order to breakeven or generate a target profit is:
(fixed expenses + operating income) Ã· contribution margin per unit.
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The formula used to find the sales revenue (sales in dollars) needed in order to breakeven or generate a target profit is:
(fixed expenses + operating income) Ã· contribution margin ratio.
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To find the breakeven point using the shortcut formulas, you use zero for the:
operating income.
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The formula used to find the sales revenue (sales in dollars) needed in order to breakeven or generate a target profit is:
(fixed expenses + operating income) Ã· contribution margin ratio.
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The formula used to find the number of units that need to be sold in order to breakeven or generate a target profit is:
(fixed expenses + operating income) Ã· contribution margin per unit
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Which of the following is TRUE when using the income statement approach to finding breakeven?
Sales revenue - variable expenses - fixed expenses = operating income
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On a CVP graph, the total cost line intersects the total revenue line at which of the following points?
The breakeven point
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Which of the following is NOT an approach used to calculate the breakeven point?
The balance sheet approach
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The breakeven point may be defined as the number of units a company must sell to do which of the following?
Generate a zero profit
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Sales below the breakeven point indicate a ________, whereas sales above the breakeven point indicate a ________.
loss; profit
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On a CVP graph, the horizontal line intersecting the vertical y-axis at the level of total cost represents:
total fixed costs.
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On a CVP graph, the line that begins at the origin represents:
total sales revenues.
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On a CVP graph, the intersection of the sales revenue line and the variable expense line is known as:
none of the above
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Which of the following is an underlying assumption of the cost-volume-profit graph?
Volume is the only cost driver.
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The area to the right of the break-even point and between the total revenue line and total expense line represents:
expected profits.
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The Sweet Factory produces and sells specialty fudge. The selling price per pound is \$20, variable costs are \$12 per pound, and total fixed costs are \$6,000. How many pounds of fudge must The Sweet Factory sell to breakeven?
...
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Which of the following statements is TRUE if the sales price per unit increases while the variable cost per unit and total fixed costs remain constant?
The contribution margin increases and the breakeven point decreases.
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Which of the following statements is TRUE if the variable cost per unit decreases while the sales price per unit and total fixed costs remain constant?
The contribution margin increases and the breakeven point decreases
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Which of the following statements is TRUE if the fixed costs increase while the sales price per unit and variable costs per unit remain constant?
The contribution margin stays the same and the breakeven point increases.
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If the sale price per unit decreases and variable costs remain the same, what will be the effect on the contribution margin ratio?
It will decrease.
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Which of the following statements is TRUE if the variable cost per unit increases while the sale price per unit and total fixed costs remain constant?
Breakeven point in units increases.
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Which of the following statements is TRUE if total fixed costs decrease while the sale price per unit and variable costs per unit remain constant?