Which of the following is an assumption that is NOT made in most cost-volume- profit calculations?

1.   Which of the following is an assumption that is NOT made in most cost-volume- profit calculations?

A.   Selling price, variable expense per unit, and fixed expense per unit do not change throughout the relevant range.

B.  There is no change in inventory levels.

C.  In a multiproduct company, the sales mix does not change.

D.  The selling price is constant.

2.   On a cost-volume-profit graph, the break-even point is located:

A.   at the origin.

B.   where the total revenue line intersects the volume axis.

C.   where the total expenses line intersects the dollars axis.

D. where the total revenue line intersects the total expenses line.

3.   If a company increases advertising by $500,000, this will cause net operating income to increase if the resulting increase in sales dollars is greater than:

A. $500,000.

B.  $500,000 divided by the percentage increase in advertising.

C.  $500,000 divided by the degree of operating leverage.

D. $500,000 divided by the contribution margin ratio.

4.   Once the break-even point is reached:

A. the total contribution margin changes from negative to positive.

B. net operating income will increase by the unit contribution margin for each additional item sold.

C.  variable expenses will remain constant in total.

D.  the contribution margin ratio begins to decrease.

5.   Which of the following is true regarding the contribution margin ratio of a single product company?

A.   As fixed expenses decrease, the contribution margin ratio increases.

B.   The contribution margin ratio multiplied by the variable expense per unit equals the contribution margin per unit.

C. If sales increase, the dollar increase in net operating income can be computed by multiplying the contribution margin ratio by the dollar increase in sales.

D. The contribution margin ratio increases as the number of units sold increases.

6.   Assuming that the unit sales are unchanged, the total contribution margin will decrease if:

A.   fixed expenses increase.

B.   fixed expenses decrease.

C. variable expense per unit increases.

D. variable expense per unit decreases.

7.   To obtain the break-even point in terms of dollar sales, total fixed expenses are divided by which of the following?

A.   Variable expense per unit.

B.   Variable expense per unit/Selling price per unit.

C.   Fixed expense per unit.

D. (Selling price per unit - Variable expense per unit)/Selling price per unit.

8.   A company increased the selling price for its product from $5 to $6 per unit when total fixed expenses increased from $100,000 to $200,000 and variable expense per unit remained unchanged. How would these changes affect the break-even point?

A.   The break-even point in units would increase.

B.   The break-even point in units would decrease.

C.   The break-even point in units would remain unchanged.

D. The effect cannot be determined from the information given.

9.   The ratio of fixed expenses to the unit contribution margin is the:

A.   break-even point in unit sales.

B.  profit margin.

C.  contribution margin ratio.

D.  margin of safety.

10.   The margin of safety is equal to:

A.   Sales - Net operating income.

B.   Sales - (Variable expenses/Contribution margin).

C. Sales - (Fixed expenses/Contribution margin ratio).

D. Sales - (Variable expenses + Fixed expenses).