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Questions and Answers
The CVP income statement classifies costs:
The CVP income statement classifies costs:
- as variable or fixed and computes contribution margin (correct)
- as variable or fixed and computes gross profit
- by function and computes a gross profit
- by function and computes a contribution margin
Contribution margin is the amount of revenue remaining after deducting:
Contribution margin is the amount of revenue remaining after deducting:
- fixed costs
- contra-revenue
- cost of goods sold
- variable costs (correct)
Concord's CVP income statement included sales of 3500 units, a unit selling price of $300, unit variable cost of $180, and fixed expenses of $110,000. Net income is:
Concord's CVP income statement included sales of 3500 units, a unit selling price of $300, unit variable cost of $180, and fixed expenses of $110,000. Net income is:
- $420,000
- $310,000 (correct)
- $520,000
- $1,050,000
The contribution margin ratio is:
The contribution margin ratio is:
Sales mix is:
Sales mix is:
What is the key factor in determining sales mix if a company has limited resources?
What is the key factor in determining sales mix if a company has limited resources?
The margin of safety ratio:
The margin of safety ratio:
The degree of operating leverage:
The degree of operating leverage:
Which cost is NOT charged to product under variable costing?
Which cost is NOT charged to product under variable costing?
Net income under variable costing is contribution margin less:
Net income under variable costing is contribution margin less:
Net income under absorption costing is higher than net income under variable costing:
Net income under absorption costing is higher than net income under variable costing:
Only direct materials, direct labor, and variable manufacturing overhead costs are considered product costs when using:
Only direct materials, direct labor, and variable manufacturing overhead costs are considered product costs when using:
Companies recognize fixed manufacturing overhead costs as period costs when incurred when using:
Companies recognize fixed manufacturing overhead costs as period costs when incurred when using:
Bramble Corp. sells 5720 units of Product A and 7280 units of Product B annually. The sales mix for Product A is:
Bramble Corp. sells 5720 units of Product A and 7280 units of Product B annually. The sales mix for Product A is:
Concord Corporation has two divisions; Sporting Goods and Sports Gear. The sales mix is 80% for Sporting Goods and 20% for Sports Gear, as determined by total sales dollars. The contribution margin ratio for Sporting Goods is 25%, while for Sports Gear it is 60%. The weighted-average contribution margin ratio is:
Concord Corporation has two divisions; Sporting Goods and Sports Gear. The sales mix is 80% for Sporting Goods and 20% for Sports Gear, as determined by total sales dollars. The contribution margin ratio for Sporting Goods is 25%, while for Sports Gear it is 60%. The weighted-average contribution margin ratio is:
Study Notes
CVP Income Statement
- Classifies costs as variable or fixed, calculating contribution margin.
Contribution Margin
- Represents revenue left after deducting variable costs.
Net Income Calculation
- Given 3,500 units sold at $300 unit price and $180 unit variable cost, net income is $310,000.
- Formula used: (Unit Selling Price - Unit Variable Cost) x Units Sold - Fixed Expenses.
Contribution Margin Ratio
- Calculated by dividing contribution margin by total sales dollars.
Sales Mix
- Defined as the relative percentage of a company's total product sales.
Key Factor in Sales Mix
- The contribution margin per unit of limited resource is critical when resources are restricted.
Margin of Safety Ratio
- Indicates the percentage decline in sales a company can withstand before incurring losses.
Degree of Operating Leverage
- Computed by dividing total contribution margin by net income, assessing earnings volatility.
Variable Costing
- Does not include fixed manufacturing overhead in product costs.
Net Income under Variable vs. Absorption Costing
- Variable costing includes contribution margin less fixed manufacturing overhead and fixed selling/admin expenses.
- Absorption costing yields higher net income than variable costing when production exceeds sales.
Product Costs in Variable Costing
- Only direct materials, direct labor, and variable manufacturing overhead are considered product costs.
Fixed Manufacturing Overhead Costs
- Recognized as period costs under variable costing.
Sales Mix Example
- Bramble Corp. sells 5,720 units of Product A and 7,280 of Product B; Product A’s sales mix is 44% calculated by dividing its units sold by total units sold.
Weighted-Average Contribution Margin Ratio
- For Concord Corporation with a sales mix of 80% sporting goods (25% contribution margin) and 20% sports gear (60% contribution margin), the weighted-average contribution margin ratio is 32%.
- Formula: (Sales Mix x Contribution Margin for each product).
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Description
Test your knowledge on key concepts from Chapter 19 of managerial accounting. This quiz focuses on the classification of costs and contribution margin calculations. Explore your understanding of income statements and their implications in business decision-making.
